Smith Barney/Citigroup Falcon, MAT and ASTA Losses

August 24, 2015, Citigroup paid $180 million to the SEC to settle allegations that Smith Barney and Citigroup improperly sold high risk hedge funds known as MAT, ASTA and Falcon.  Investors should contact a private attorney if they have suffered such losses.  For a free consultation please call 1-866-817-0201.

The fraudulent actions alleged, and with Citi ultimately settled for $180 million, concern material misstatements and omissions made by Cit between 2002 and 2007 in the offer and sale of securities in two now-defunct hedge funds—the ASTA and MAT funds (“ASTA/MAT”) and the Falcon Strategies funds (“Falcon”).  The ASTA/MAT and Falcon funds were recommended and sold by two groups of individuals, the “financial advisers” of Smith Barney and the “private bankers” of Citigroup Private Bank (together, the “financial advisers”), to their advisory clients. The financial advisers were associated with respondent CGMI (Citigroup Global Markets). Both funds were managed by CAI, which acted through its employees, including an employee who had a primary role in creating the funds and serving as the funds’ manager during the relevant time period (the “fund manager”). Respondents raised approximately $2.898 billion from approximately 4,000 investors in ASTA/MAT and Falcon. In 2008, both funds collapsed resulting in billions of dollars in losses. From 2002 through 2008 (the “relevant period”), financial advisers and the fund manager misrepresented the funds’ risks and performance to advisory clients, who were told that the investments were “safe,” “secure,” “low-risk,” “bond substitutes” and suitable for traditional bond investors, despite statements in marketing documents that the funds should not be viewed as a bond substitute.

As alleged in the SEC Complaint, while the risk of principal loss was disclosed in written materials provided to clients, certain financial advisers and the fund manager orally minimized the significant risk of loss resulting from, among other things, significant high-risk aspects of the investments such as the funds’ investment strategy and use of leverage (the borrowing of money to make investments). The biggest risk told investors was ASTA/MAT adoption of a flat income tax by the federal government.  Financial advisers encouraged many of their advisory clients to sell portions of their bond portfolios, their safe holdings, in order to invest in the risky funds. In late 2007, financial advisers and the fund manager continued to offer and sell Falcon as a safe, low-risk investment, even though both funds—the Falcon fund was 20 percent invested in the ASTA/MAT fund—began experiencing increased margin calls and liquidity problems in the second half of 2007 that continued until the funds collapsed.  Moreover, the fund manager was involved in virtually all fund-related communications with the financial advisers and investors. The fund manager and the fund manager’s staff were responsible for drafting and reviewing offering materials for the funds, crafting sales pitches to investors, training CAI sales personnel (who, in turn, were responsible for marketing the funds to the financial advisers), drafting quarterly investor reports, disclosing interim fund performance.

The fund manager and other employees at CAI had significant influence over the information relating to the funds without review or oversight, including information relating to the funds’ risks and performance. CAI failed to ensure that the fund manager’s communications with investors and financial advisers concerning the ASTA/MAT and Falcon funds were accurate and not misleading.


Morgan Stanley, Scottrade Failing to Supervise Transmittals


If you have lost funds due to representative from Morgan Stanley or Scottrade misappropriating your funds, contact 1-866-817-0201. 

NYSE pic 1The Financial Industry Regulatory Authority (FINRA) stated in a release in August 2015 that it fined Morgan Stanley Smith Barney (Morgan Stanley) $650,000 and Scottrade $300,000 for failing to implement reasonable supervisory systems to monitor the transmittal of customer funds to third-party accounts. The two firms were cited for the weak supervisory systems by FINRA examination teams in 2011, but neither took necessary steps to correct the supervisory gaps. Brad Bennett, Executive Vice President and Chief of Enforcement, said, “Firms must have robust supervisory systems to monitor and protect the movement of customer funds. Morgan Stanley and Scottrade had been alerted to significant gaps in their systems by FINRA staff, yet years went by before either firm implemented sufficient corrective measures.”

With regard to Morgan Stanley, FINRA found that from October 2008 to June 2013, three registered representatives in two different branch offices converted a total of $494,400 from thirteen customers by creating fraudulent wire transfer orders and branch checks from the customers’ accounts to third-party accounts. For example, the representatives moved funds from multiple customer accounts to their own personal bank accounts or to banks that held the representative’s mortgage.

FINRA found that Morgan Stanley failed to implement a reasonable supervisory systems to review and monitor transmittals of customer funds through wire transfers from multiple customer accounts to the same third-party accounts and outside entities.The supervisory failures allowed the conversions to go undetected.

FINRA also found that Scottrade failed to establish a reasonable supervisory system to monitor wires. From October 2011 to October 2013, Scottrade did not obtain any customer confirmations for third-party wire transfers of less than $200,000, and Scottrade failed to ensure that the appropriate personnel obtained confirmations for third-party wire transfers of between $200,000 and $500,000. During that period, the firm processed over 17,000 third-party wire transfers totaling more than $880 million.

Both firms neither admitted or denied the charges, but consented to the entry of FINRA’s findings.


Merrimac Corporate Securities, Inc.

If you lost money as a result of investments or other business dealings with representatives of Merrimac Corporate Securities, Inc. please call 1-866-817-0201. 

In a release by the Financial Industry Regulatory Authority, Merrimac Corporate Securities, Inc. agreed to a $100,000 fine and the requirement to retain an independent consultant to review its policies, systems and procedures (written and otherwise), and training relating to outside business activities and private securities transactions, and adopt and implement the independent consultant’s recommendations. The NAC affirmed the sanctions following the firm’s appeal of an OHO decision, in which the firm argued that it lacked the ability to pay the stipulated fine. The sanctions were based on findings that the firm failed to establish, maintain and enforce reasonable WSPs, and failed to reasonably supervise the outside business activities and private securities transactions of two registered representatives who have since been barred from the industry. The findings stated that the representatives operated a company and sold investments away from the firm. The representatives solicited individuals to invest in their company and raised an aggregate amount of $4 million from those investors. The representatives arranged for investors, many of whom were firm customers, to hold investments in their company away from the firm’s clearing firm with non-broker-dealer custodians. One representative also solicited investments in a second outside business, of which he was an owner. The findings also stated that the firm failed to adequately implement its procedures regarding participation in outside businesses and private securities transactions, and failed to implement reasonable procedures regarding the use of outside custodians. The findings also included that the firm failed to follow up on “red flags” and adequately inquire into the representatives’ outside business activities and involvement in private securities transactions despite personal knowledge.

Municipal Bond Fund Loss

If you are invested in a U.S. municipal bond mutual fund, odds are they’re exposed to Puerto Rico’s deteriorating financial situation. But because the slow-motion train wreck has been chugging along for several years, with the U.S. commonwealth’s government publicly stating its intention to not pay its bond debt, the weekend’s news that Puerto Rico defaulted on its debt wasn’t a surprise.

This means the heightened risk of loss for municipal bond funds has been known for some time.  Like most investments, those with higher risks pay higher commissions to the brokers that sell them.  Recommending such municipal bond funds while failing to disclose this risk or to recommend such funds to someone who is trying to avoid risk is a form of fraud.  You may be entitled to recovery of your losses if you have been recommended such funds.  Please call 1-866-817-0201.


Merrill / RBC Broker Thomas Buck


If you have suffered losses with Merrill Lynch and RBC broker Thomas Buck, please call toll-free 1-866-817-0201 for a free consultation on your chances for recovery.

Mr. Buck had been Merrill’s top broker in Indiana, overseeing $1.3 billion in assets prior to being terminated in March 2015.

The Financial Industry Regulatory Authority Inc. has barred Mr. Buck, from associating with any Finra member firm, according to a posting to the regulator’s website on Tuesday, July 28, 2015.

Mr. Buck has been accused of trading in the accounts of investors without appropriate authorization, recommending unsuitable investments, misleading investors as to the fees for investments made, and charging investors excessive charges for investment services.

In addition to the FINRA action, Thomas Buck has been or is currently the subject at least 11 suits filed by investors.



Oppenheimer Broker Scott Eisler

NYSE pic 1Please call 1-866-817-0201 if you invested with Oppenheimer broker Scott Eisler.

According to the SEC, former Oppenheimer executive, Robert Okin, and a branch manager in the firm’s Boca Raton, Fla., office Arthur Lewis, failed to properly supervise the broker, Scott Eisler, and ignored significant warning signs as Eisler traded some 2.5 billion penny stock shares in illegal unregistered transactions. Mr. Lewis participated in or approved the sales, the SEC confirmed. The sales generated some $12 million in proceeds and $588,400 in commissions for Oppenheimer.

“In the face of red flags that their customer’s stock sales were not exempt from registration, Oppenheimer’s branch personnel allowed these unregistered transactions to occur,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement. “Okin, one of Oppenheimer’s senior-most executives, also failed to properly supervise by allowing these transactions to occur and failing to respond appropriately to the red flags suggesting violations of the federal securities laws.”

Information for this posting was obtained from


F-Squared AlphaSector

If you lost money in an F-Squared AlphaSector investment please call 1-866-87-0201.  F-Squared Investments is part of a $35 million fraud settlement brought by the SEC concerning AlphaSector.  As part of the settlement, F-Squared admitted in the settlement that it falsely advertised the exchange traded fund (ETF), recklessly made misleading or incorrect statements about the track record of the investments that inflated results by as much as 350%.  Executives, including the co-founder, were charged with making false  statements to investors.

Advertising stated that the strategy behind AlphaSector had been in use since 2001 but in fact the algorithm was not completed until 2008.  According to the SEC complaint, an F-Squared analyst used the algorithm, which was built by a 20-year-old college intern at the wealth-advisory firm, along with internal portfolio construction rules to calculate the hypothetical performance of a model portfolio going back nearly eight years.

The relevant F-Squared AlphaSector investments are as follows:

-Virtus Allocator Premium AlphaSector (VAAAX),

-Virtus Dynamic AlphaSector (EMNAX),

-Premium AlphaSector (VAPAX).

-Virtus AlphaSector Rotation (PWBAX), and

- Global Premium AlphaSector (VGPAX),

F-Squared is the largest company among a group of money managers that build portfolios out of ETFs, overseeing $25 billion in such assets at the end of September, according to data reported to research firm Morningstar Inc. ETFs are mutual funds whose shares trade on an exchange and usually are designed to track an index or benchmark.

F-Squared Investments were sold and marketed by brokerage firms including, but not limited to, the following: Ameriprise, LPL Financial; RBC Wealth Management; Raymond James Financial, Inc.; Schwab Institutional; Stifel Nicolaus; UBS Financial Services; and Wells Fargo Advisors.

Alabama Advisor Kenneth Rogers

Stock handcuffsIf you invested with Alabama advisor Kenneth Rogers, please call 1-866-817-0201.  The former investment advisor to Alabama Crimson Tide football star Kenneth Darby has been arrested for using $2.5 million in clients’ funds to buy two homes and for other personal expenses, the Alabama Securities Commission announced.

Rogers of Huntsville, Ala., was arrested by state officials on 10 counts of securities fraud and is being held on a $2 million bond, the commission says.

Rogers also used some of the money to pay earlier investors in a Ponzi scheme, the indictment says. Documents were forged by Rogers to facilitate some of the fraudulent transactions.

Rogers was sued last year by Darby, a star running back at Alabama University and a member of the Atlanta Falcons and the St. Louis Rams. Other members of Darby’s family were also part of the suit. They alleged that Rogers converted $2.4 million of their money to his own use, according to, an Alabama news website. Rogers’s attorney denied those claims.

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Mark Douglas Weindling

If you or a loved one has lost funds Mark Weindling or JHS Capital call 1-866-817-0201 or 303-300-5022 for more information.

Mark Douglas Weindling of Aurora, CO was barred from association with any stockbrokerage in any capacity. Without admitting or denying the findings, Weindling consented to the sanction and to the entry of findings that he failed to provide FINRA-requested documents and information involving an investigation into, among other things, the disclosures on a Form U5, a form a brokerage is required to file upon terminating a broker, filed by his former employing firm, JHS Capital, reporting that he had effected transactions within a deceased customer’s account and that he was aware of two separate journal requests containing the deceased customer’s forged signature.


Thomas J. Buck Complaints

If you have complaints concerning Thomas J. Buck please call 1-866-817-0201.

Multiple investors have filed customer complaints with Merrill Lynch and FINRA concerning veteran money manager Thomas J. Buck subsequent to his high-profile termination from Merrill Lynch in March.

According to FINRA (the Financial Industry Regulatory Authority), investors filed five customer complaints concerning Buck between March 23 and June 10, 2015, alleging unauthorized trading, excessive trading, unsuitable investments, misrepresentation and other improprieties dating back to 2006.

One of the customer complaints alleges that Buck engaged in “excessive trading and unsuitable investment recommendations from January 2006 to March 2015.”

Merrill Lynch discontinued Lynch’s employment on March 4  after 34 years with the firm. The firm stated in its form U5, the form provided to the regulators explaining the termination, that the termination was for multiple issues.  These issues are numerous but include the provision of inaccurate information to management during management reviews of Buck’s accounts.  The allegations also include mismarking trade order forms by Buck to misrepresent whether a trade was Buck’s idea or the investor’s idea, and providing information to clients that did not correspond to firm records.