MetLife Variable Annuity Abuse

If you have suffered losses in a MetLife variable annuity or you believe MetLife misled you or sold you a variable annuity without warning you of the high costs or penalties associated with accessing your money, or convinced you to switch variable annuities, please call toll-freeMetLife Building 1-866-817-0201.

FINRA, the Financial Industry Regulatory Authority, has indicated the agency will seek a “significant fine” from MetLife’s broker-dealer unit as part of a probe into possible violations tied to variable annuities.  Of interest are potential violations “regarding alleged misrepresentations, suitability, and supervision in connection with sales and replacements of variable annuities and certain riders on such annuities.”

FINRA is the securities industry’s regulator guarding against abuses in the sale of retirement and savings products. FINRA informed Metlife on Sept. 25 that it would recommend disciplinary action.

This is unusual considering that a high level of variable annuity fraud and abuse has existed in the securities industry for more than a decade.  Despite this, regulatory fines for such fraud and abuse has been rare.  The large fine may be an indication of substantial wrongdoing.

Variable annuities are investment products that pay brokers a very high commission, are very expensive for investors and provide a service that is only appropriate for limited numbers of investors.  Some people who likely should never be invested in variable annuities include those approaching or in retirement, those who need income from their investments immediately, investors who do not understand how a variable annuity works, anyone with an IRA, or anyone not needing life insurance.

Abuse can also occur when investors are asked to replace, or “switch,” existing variable annuities with new variable annuities.  This can mean that the investor not only pays considerable exit penalties for the liquidation of the old annuity, but also incurs more illiquidity and new costs for the new annuity.  Since most annuities offer similar benefits and are of similar quality, such switching is often to benefit the broker rather than the investor.



UBS Willow Fund Losses


Please Call 1-866-817-0201 for a free consultation is you suffered losses in the UBS Willow Fund.

Two UBS subsidiaries agreed Monday, October 19, 2015, to pay $17.5 million to the Securities and Exchange Commission for failing to disclose that the UBS Willow Fund, a closed-end fund they advised, had changed its investment strategy to include risky credit default swaps.

Part of investor losses in the UBS Willow Fund be recoverable from the SEC and there may likely be a significant claim against UBS for the lack of suitability of these investments recommended by UBS.  The Willow Fund had a much greater risk than represented by UBS representatives.

Of the total $17.5 million fine, $13 million will be returned to harmed investors.  Currently, it is unknown what percentage of loss individual investors will recover.

The SEC found that UBS Willow Management violated the antifraud provisions of the federal securities laws and failed to supervise UBS Willow Management, a failure that allowed the transition, and ultimate losses, to occur.

According to the SEC’s order, UBS Willow Management, a joint venture between UBS Fund Advisor and an external portfolio manager, marketed the UBS Willow Fund of simply investing in distressed debt with a strategy simply reliant on the debt increasing in value.

From 2000 through 2008, UBS Willow Management invested and marketed the fund’s assets consistent with the distressed debt strategy.  However, this all changed in 2008 when the fund began to invest in ultra-high-risk credit default swaps.

Marketing material for the fund misrepresented the risk to investors.  Statements specifically misrepresented the exposure of the Fund to credit default swaps in the Fund.

The misrepresentations continued on until the liquidation of the Fund in 2012.

Investors in the fund should speak to an attorney.  While the level of compensation each individual investor may receive from the SEC recovery fund is currently unknown, an attorney can navigate the recovery process through the SEC and help the investor decide if other legal avenues exist for recovery.

We believe that other significant avenues for recovery exist.  Call the number above for more details.

Michael Donnelly of Coastal Equities

Stock handcuffs

If you have lost money with Michael Donnelly of Coastal Equities and/or Coastal Investment Advisors please call toll-free 1-866-817-0201 for a free consultation.

Michael Donnelly is a former stockbroker of Coastal Equities and former president of Coastal Investment Advisors Inc. in Wilmington, Del.  Donnelly admitted to defrauding 13 clients, many of whom were elderly, of almost $2 million over seven years from 2007 through August 2014.

Donnelly failed to invest the client funds he received. Instead, he used the money for business and personal expenses, such as rent, car payments, golf club memberships and his children’s private-school tuition.

He hid his scheme by providing clients false account statements. The SEC filed a civil complaint in federal district court in Philadelphia. Separately, the U.S. Attorney’s Office for the Eastern District of Pennsylvania filed criminal charges against Mr. Donnelly.

This matter is particularly egregious due to his targeting of elderly victims and his fiduciary status as an investment advisor.

While Donnelly agreed to pay restitution, we believe that the only way investors will see recovery is by contacted an attorney.  You may have avenues for recovery of which you may be unaware.


Signature Investors, Inc.

If you suffered losses with Signature Investors, please call toll-free 1-866-817-0201.  Signature Investors, Inc. entered into regulatory settlement agreement in which the firm was censured and fined $450,000.  These fines were in connection with allegations that Signature failed to supervise its brokers to prevent the sale of unapproved investments by its brokers.

Additionally, its broker Joseph Gregory Mitchell of Loudon, Tennessee, was assessed a deferred fine of $10,000 and suspended from association with any FINRA member in any supervisory capacity for seven months.

Without admitting or denying the findings, the firm and Mitchell consented to the sanctions and to the entry of findings that the firm failed to establish, maintain and enforce a reasonable supervisory system, including WSPs, regarding its registered representatives use of consolidated reports. The findings stated that Mitchell failed to enforce the firm’s policies and procedures related to client file reviews and branch audits by providing advance notice of which client files would be reviewed, as well as advance notice of unannounced branch audits to registered representatives. The firm made a consolidated reporting system available to its registered representatives that allowed the representatives to enter customized values for assets and accounts held away from the firm into a consolidated report. However, the firm did not have an adequate supervisory system to review the reports, including the accuracy of manually entered valuations provided to the customers. The firm’s procedures did not contain any reference to, or discussion of, supervising consolidated reports or the use of the system. In fact, the firm did not have a review process for the consolidated reports. The lack of procedures led to confusion among firm supervisors regarding who was responsible for reviewing the consolidated reports.


Jason Wade Cox

guy in handcuffsAs published in the Columbus Dispatch on October 16, 2015, in an article by Dean Narciso, an Edward Jones broker has been sentenced for stealing thousands of dollars from a disabled woman.

Jodene Beaver is an Ohio woman who struggled with physical and mental impairments most of her 56 years.  Though she received support from her family, she attempted to support herself working as a grocery-store greeter and other jobs and lived on her own.

But two months after her father died, Beaver put her complete trust in Jason Wade Cox, 39, a financial adviser her father had selected, concerning her bequest from her father’s estate.  This money was necessary sustain Beaver.

And that’s when Cox promptly began to steal thousands of dollars, transferring funds out of the original account and into Beaver’s private checking account and then blowing much of it on gambling. Cox eventually would drain Beaver’s entire inheritance, and then urge her to sell her condo and move into a bedbug-infested apartment.

Cox pled guilty to mail wire fraud and money laundering in connection with his theft of the Beaver funds, and was sentenced to five years in jail by a federal judge.

For the full story see the following:

If you have been a victim of Cox or other broker, please call toll-free 1-866-817-0201.

MLP Losses

We are investigating losses sustained by investors in Master Limited Partnerships (“MLP”).  This includes investments such as UBS ETRACS, Enbridge Energy Partners,  EV Enterprise Partners, and Eagle Rock Energy Partners.  If you have suffered such losses please call toll-free 1-866-817-0201.  MLPs are sometimes referred to as “SSPs” and other names.  There are limited types of investors to whom such investments could be legally sold.  Selling such high-commissioned investments when they contradict the objectives or needs of an investor, making them “unsuitable” for certain investors, is a form of fraud.

In August 2015, the SEC conducted an examination of firms selling MLPs.  Among other things, the SEC examinations revealed several significant deficiencies in the areas of suitability and supervision with respect to all of the examined firms’ recommendations and sales of MLPs to retail investors. Specifically, all of the examined firms:

• Failed to maintain and/or enforce adequate controls relating to determining the suitability of MLP recommendations; and

• Failed to conduct both compliance and supervisory reviews of registered representatives’ (“representatives”) determinations of customer suitability in the MLPs, as required by their internal controls.

MLPs have been increasingly marketed to retail investors, who have been interested in generating income in the low-yield interest-rate environment that has persisted since the financial crisis.  Additionally, MLPs may offer attractive attributes such as partial or full “principal protection” or exposure to a particular asset class.  MLPs often provide for payments determined by reference to other assets or indices and may be more complex than a simple debt instrument with a stated interest rate.  However, these investments have always been known to carry a high degree of risk.

A central aspect of a broker-dealer’s duty of fair dealing is the suitability obligation, which generally requires a broker-dealer to make recommendations that are consistent with the best interests of its customer.  So investments must be of the character and have the level of risk that is consistent with these wants and needs.  This “suitability” obligation is a requirement under the  antifraud provisions of the state and federal securities laws, and also requirement of a brokerage firm’s membership in FINRA. 


The FINRA also requires brokerage firms to supervise their associated persons, and the Exchange Act, the federal securities law, permits the SEC to sanction broker-dealers who fail reasonably to supervise, with a view to preventing violations of the state and federal securities laws by a person subject to their supervision.  In addition, FINRA has released guidance to help assess the adequacy of controls with respect to MLPs and complex products that members should include in their supervisory and compliance procedures.

Investigations show that these speculative and complex investments are routinely sold to income investors.  Additionally, income investors are not highly sophisticated investors and these complex investments are generally only suitable for highly sophisticated investors.




Redonda Russell

broker in handcuffsWe are investigating the actions of former stockbroker/financial advisor Redonda Russell and potential liability of her former employer, First Command Financial.  For information, call the Law Offices of Jeffrey Pederson toll-free at 1-866-817-0201,

Ms. Redonda Russell, a former Ft. Worth, Texas financial advisor is believed to have stolen $316,000 from her investors.  She misused a medallion notary stamp to perpetuate her fraud so her fraud could be conducted electronically. In her scam, she closed 18 client accounts, eight of which were inactive. That made the fraud harder to detect.   She also took funds from clients which she referred to as “loans.” Russell worked for First Command Financial for more than two decades.  She pled guilty to charges of wire fraud in August 2014.   She was facing up to 20 years in prison and $250,000 fine but it is believed that the plea will mean she will serve only one year in prison.

Brokerage firms have stringent regulatory requirements that they must meet to protect investors from brokers misappropriating funds.  We have represented investors in a substantial number of similar claims concerning broker conversion and theft.

Philip Mark Cain

Stock handcuffsWe are investigating the actions of former stockbroker/financial advisor Philip Mark Cain and potential liability of his former employer, H. Beck.  For information, call the Law Offices of Jeffrey Pederson toll-free at 1-866-817-0201,  In December, 2011, Cain was sentenced to 51 months in prison by a federal judge in Tucson after he pleaded guilty to counts alleging mail fraud. This fraud was in connection to taking money from investors who thought it would be used to purchase structured notes from Deutsche Bank.  The funds were never invested.  Instead, Cain deposited the money in his personal bank account. Cain used some of the money to repair classic autos. The cars were then auctioned for a total of about $978,000.

Brokerage firms have stringent regulatory requirements that they must meet to protect investors from brokers misappropriating funds.  We have represented investors in a substantial number of similar claims concerning broker conversion and theft.

Recovery for UBS Puerto Rico Funds

UBSIf you have suffered losses in Puerto Rico funds invested through UBS please call toll-free 1-866-817-0201.

As reported in Market Watch, the Financial Industry Regulatory Authority (FINRA) announced today that it has censured and fined UBS Financial Services Incorporated of Puerto Rico (UBS PR) $7.5 million for supervisory failures related to the suitability of transactions in Puerto Rican closed-end funds (CEF). In addition, FINRA ordered UBS to pay approximately $11 million in restitution to 165 customers who realized losses on their CEF positions.

FINRA found that for more than four years, UBS failed to monitor the combination of leverage and concentration levels in customer accounts to ensure that the transactions were suitable given the customers’ risk objectives and profiles creating suitability violations. The firm failed to implement a reasonably designed system to identify and prevent unsuitable transactions in light of the unique Puerto Rican economy, in which retail customers typically maintained high levels of concentration in Puerto Rican assets and often used those highly concentrated accounts as collateral for cash loans. Despite UBS PR’s knowledge of these common practices, it failed to adequately monitor concentration and leverage levels to identify whether certain customers’ CEF transactions were suitable in light of the increased risks in their existing portfolio.

Brad Bennett, FINRA Executive Vice President of Enforcement, said, “UBS of Puerto Rico operated in a unique economy and ultimately failed to tailor its supervisory systems to its specific business needs. Despite the fact the firm was very familiar with the unusual characteristics of its retail accounts, it did not supervise these transactions properly to prevent customers’ heightened exposure to risk.”

In this case, UBS solicited certain customers to open lines of credit collateralized by their securities accounts. If the customer’s account value fell below the required collateral level, the customer received a “maintenance call” and was required to deposit additional assets or liquidate securities to meet the call. Where an LOC is collateralized by a diversified account, a customer may have a variety of securities that s/he can liquidate to meet a maintenance call. However, the risk of investor loss is increased when an LOC is collateralized by a highly concentrated account – and due to the unique benefits of Puerto Rican assets for Puerto Rican residents, UBS PR customer accounts were typically highly concentrated in CEF shares. The market events of Aug. 2013 caused the value of many CEF shares to plummet, and customers who received maintenance calls were forced to realize substantial losses in order to meet them.

Equinox Securities Charged with Fraud

Equinox Securities and its brokers Stephen Michael Oliveira and Chris Blaine Palkowitsh were named respondents in a FINRA complaint alleging that the firm and Palkowitsh engaged in a manipulative, deceptive and fraudulent scheme by churning customer accounts. If you were a victim, or are uncertain if you are a victim, of Oliveira, Palkowitsh or Equinox please call 1-866-817-0201 to speak to a private attorney about your rights and ability to recover your losses.  The consultation is free and confidential.

The FINRA complaint alleges that the firm and Palkowitsh acted with intent to defraud and/or reckless disregard of their customers’ interests by seeking to maximize their own commissions. The trading in the customers’ accounts was, as evidenced by the high annualized cost-to-equity ratios and number of transactions, excessive in light of and inconsistent with the customers’ investment objectives and financial situations. None of the customers acquiesced or consented to the heavy level of trading in the accounts.

The effect was particularly pernicious because six of the eight accounts were individual retirement accounts that constituted the bulk of the customers’ retirement savings. After the customers sustained substantial losses, Palkowitsh placed their remaining equity at risk by concentrating each account in a low-priced security. As a result of the excessive trading and churning in the accounts, each of the customers suffered extensive losses and paid exorbitant fees and commissions to the firm and Palkowitsh.

As a result of their conduct, the firm and Palkowitsh willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, NASD Rules 2110 and 2120, and FINRA Rules 2010 and 2020.  Palkowitsh also failed to timely amend his U4 to disclose at least three federal tax liens.  The complaint also alleges that Palkowitsh made unsuitable recommendations to customers, which the firm is liable for, and lacked reasonable grounds for believing that the customers’ understood and were willing and able to assume the risk particular to having their accounts heavily concentrated in a single, low-priced security where a significant loss would effectively wipe out the customer’s entire principal in these accounts, many of which were the customers’ sole retirement accounts.

The complaint further alleges that the firm and Oliveira failed to adequately investigate and act upon the misconduct Palkowitsh committed over a lengthy period of time, and also failed to ensure that Palkowitsh acted in a manner that was compliant with applicable laws, regulations and rules. In addition, the complaint alleges that there were multiple red flags suggesting that Palkowitsh was excessively trading, churning, and generally making quantitatively and qualitatively unsuitable recommendations. These red flags were known to but not addressed by Oliveira, who was the firm’s chief executive officer (CEO), CCO and Palkowitsh’s supervisor, or, through Oliveira, by the firm. The firm and Oliveira failed to establish, maintain,and enforce a supervisory system and WSPs that were reasonably designed to achievecompliance with applicable securities laws and regulations.

Moreover, the complaint alleges that Oliveira was responsible for establishing and maintaining the firm’s supervisory systems and procedures and for establishing an adequate system and procedures to ensure that Form U4s of the firm’s representatives included all required disclosures and were updated in a timely manner. Oliveira failed to discharge those responsibilities adequately because the firm’s supervisory system and procedures were not reasonably designed to achieve compliance with applicable securities laws, regulations and rules. Oliveira failed to conduct any meaningful review and take any meaningful action to detect and prevent unsuitable recommendations. After Palkowitsh’s initial Form U4 was filed, Oliveira never inquired about his bankruptcies, judgments or liens; and, in particular, never inquired about whether his Form U4s was current and accurate.