Recovery of Losses with NPB Financial

Jeffrey Pederson, PC represents those suffering losses with NPB Financial Group.  Please contact us if you suffered losses with an NPB broker from investments made during the time period of 2012 through 2014.  Regulators have recently alleged supervisory lapses at NPB.  Call 1-866-817-0201 to speak to a private attorney about potential rights of recovery.

Regulators with the Financial Industry Regulatory Authority, FINRA, the regulator that acts under the oversight of the SEC and has primary authority in overseeing securities brokerages, have recently brought a regulatory action against NPB for significant supervisory lapses.  NPB settle these charges without admitting or denying fault.

The allegations by FINRA are that from June 2012 through May 2014, NPB failed to: (i) establish, maintain, and enforce adequate procedures for the review of email, (ii) NPB failed to review the email of the firm’s president, chief executive officer, and chief compliance officer, and (iii) it failed to adequately enforce its own procedures regarding the use of non-firm email addresses, such as G-mail or AOL, by its brokers in violation, a regulatory rule violation designed to prevent fraud.

The shortcomings are all violations of rules designed to prevent fraud by its brokers.  Brokerage firms are required to review the written communications of its brokers to make sure that all recommended investments, even those an NPB broker recommends away from NPB, are appropriate.  The requirement that brokers utilize e-mail that passes through the brokerage is also important for cyber security to prevent accounts from being accessed by hackers.

Supervisory lapses likely contributed to the recently discovered misdeeds of John Oldham, an NPB broker from Wisconsin, who consented to allegations that he had engaged in improper fee sharing and allocation of responsibilities in the sale of REITs and other alternative investment products.  These lapses likely also led to the misdeeds of Stephen Kipp.

Jeffrey Pederson PC specializes in the handling of individual or group actions against securities brokerage firms.  Call to explore your rights.

Rights for Lisa Lowi Investors

Lisa Lowi has been sued 35 times  over the past three years for recommending unsuitable investments to her investors at Janney Montgomery Scott and RBC Capital Markets.  Unsuitable investments are investments that carry more risk than an investor is willing to take, such moderate to high risk investments for a retired investor.  Lowi has recently been barred from the securities industry from failing to comply with a regulatory investigation into her offering unsuitable investments.  If you are an investor of Lowi’s please call toll-free at 1-866-817-0201 for a free consultation with an attorney

In 2017, FINRA, the regulator that oversees securities brokers, was conducting an investigation of Lowi in connection with customer complaints and arbitration claims alleging, among other things, unsuitable trading.

On September 7, 2017, FINRA staff sent Lowi’s attorney a written request for testimony concerning the unsuitable securities allegations. As stated in Lowi’s attorney’s email to FINRA staff on October 11, 2017, and by this agreement, Lowi acknowledges that she received FINRA’s request and simply decided not appear for on-the-record testimony.  This is viewed as conceding the violation.

FINRA Rules require that brokers subject to FINRA’s jurisdiction provide information, documents and testimony as part of a FINRA investigation. FINRA rules provide that “[a broker] in the conduct of its business shall observe high standards of commercial honor and just and equitable principles of trade.” By refusing to appear for on-the-record testimony as requested pursuant to FINRA Rule 8210, Lowi violates FINRA Rules 8210 and 2010.

Jeffrey Pederson PC is a private attorney protecting the rights of investors and recovering investment losses nationwide.

Wells Fargo Losses

If you suffered losses with Wells Fargo in ETP investments or other investments that you understood to have only low to moderate risk, please call 1-866-817-0201 for a free and confidential consultation with an attorney.

Wells FargoFINRA, the regulator that oversees securities brokerages, ordered Wells Fargo on Monday to pay investors $3.4 million after its advisers recommended “unsuitable” investments known as volatility-linked products that were “highly likely to lose value over time.”

Wells Fargo pushed its investors into these investments, volatility-linked ETPs, as hedges, to protect against a market downturn. In fact, these investments are unsuitable for such a strategy.  The investment are, in reality, “short-term trading products that degrade significantly over time,” regulators said, and “should not be used as part of a long-term buy-and-hold” strategy.  The recommendation of such unsuitable investments is a form of negligence, and could be seen as reckless enough to be considered fraud.

Volatility-linked ETPs are complex products that most investors do not understand and, as such, they rely upon their adviser, who should be a trained professional, to understand.   Certain Wells Fargo representatives mistakenly believed that the products could be used as a long-term hedge on their customers’ equity positions to help safeguard against a downturn in the market. In fact, volatility-linked ETPs are generally short-term trading products that degrade significantly over time and should not be used as part of a long-term buy-and-hold investment strategy.

FINRA issued Regulatory Notice 17-32 shortly after announcing the settlement with Wells Fargo to remind firms of their sales practice obligations relating to these products. Wells Fargo had previously been on notice to provide heightened supervision of complex products such as ETPs in Regulatory Notice 12-03, and were advised, along with all other brokerages, to assess the reasonableness of their own practices and supervision of these products.

FINRA found, “Wells Fargo failed to implement a reasonable system to supervise solicited sales of these products during the relevant time period.”  The complete news release of the FINRA action can be found at the following link.

Investment Fraud of Marlon Cole, Legend

We are investigating the potential investment fraud actions of Marlon Cole of Legend Securities.  Please call 1-866-817-0201 for a free and confidential consultation with a private attorney specializing in the representation of investors.

Mr. Marlon Cole has also Spartan Capital, Fordham Financial, E.J. Sterling and Blackbook Capital.  He has recently been the subject of scrutiny by securities regulators.  He recently entered into a settlement agreement with FINRA, one of these regulators where Cole neither admitted nor denied the allegations against him.

The allegations against Cole are that from April 2013 through October 2014, while Cole was associated with Legend Securities, FINRA alleges that Cole engaged in excessive trading, unsuitable trading, and unauthorized trading. Specifically, Cole engaged in excessive trading in the investment accounts of six senior citizen investors that had trusted Cole as their broker.

One way to prove that an account was traded excessively is through the cost/equity ratio, the level of costs of an account per year as a percentage of the value of the account.  Turnover, the number of times the account was sold and purchased, also serves to measure illicit activity.  During the Relevant Period, Cole’s trading generated cost-to-equity ratios ranging from 29.82% to 589% and turnover rates ranging from 6.01 to 63.39. Such costs and turnover rates were inconsistent with the objectives of the senior investors, yet generated steady commissions for Cole.

Under FINRA Rule 2111, a registered representative must have a reasonable basis to believe, that a recommended securities transaction or investment strategy is suitable for a customer. Relevant to Cole’s trading here, the Rule prohibits excessive trading and trading that lacks a reasonable basis in light of a customer’s investment objectives and risk tolerance.

Rule 2111 also requires that where a representative controls an account, a series of recommended transactions, even if suitable by themselves, is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile.

When the costs in an account are so high that there can be no expectation of a reasonable return, no rational investor would knowingly agree to them.   That is what happened in the present matter.  The six customers here had investment objectives of growth and income or speculation. The sales charges for the six customers were in the form of both commissions and markups and mark-downs.  Both were excessive in light of the profiles.

This is not the first time Cole has been alleged to have engaged in securities fraud.  In 2011, Cole entered into a similar settlement with the Alabama Securities Commission.  That settlement centered on allegations that Cole “engaged in dishonest or unethical practices” including unauthorized trading in a customer account.

 

Losses with Stuart Pearl of Ameriprise

If you have been the victim of unauthorized securities trades or been recommended unsuitable securities by your financial advisor, please call 1-866-817-0201.  We are interested to investors suffering losses with Stuart Pearl.  Mr. Pearl has recently entered into a regulatory settlement where he neither admits or denies the following:

investingstockphoto 1On May 14, 2015, Stuart Pearl used discretion to liquidate positions in six different securities with a total principal amount of approximately $20,000, on behalf of a senior investor. Although the investor had authorized Pearl to execute these liquidations in discussions that took place prior to May 14, 2015, Pearl failed to speak with the investor again on May 14, 2015, to confirm the investor’s authorization to make these sales.

Pearl’s use of discretion as described was without prior written authorization from the investor, and without prior written acceptance of the account as discretionary from his firm, Ameriprise. By virtue of the foregoing, Pearl violated NASD and FINRA rules.

In June 2010, two other customers of Pearl, who were retired and both in their 70s, opened a joint brokerage account with him at Ameriprise. The new account documentation provided that securities could be purchased on margin, a process or lending money to buy securities that involves a great deal of risk.

At the time they opened their account, the investors had an investment objective of “growth and income,” a risk tolerance of”conservative/moderate” and limited experience with trading on margin. They also had a combined annual income of $30,000, a liquid net worth of$500,000 and investable funds of $400,000.

Between September 2011 and March 2012, Pearl recommended that the investors purchase four securities valued at approximately $122,000 on margin. Prior to making those purchases, the customers bad no margin debt balance in their account. As a result of those investments, the investors experienced a significant increase in their margin debt balances in relation to their available funds and their account was subject to seven margin calls during the relevant period, where the parties must deposit funds into their account to pay the outstanding loan or risk liquidation of their portfolio.  The recommendation to purchase such investments utilizing margin was unsuitable and in violation of FINRA and NASD rules prohibiting unsuitable recommendations.

Ameriprise had a duty to oversee the transactions of Pearl and should be responsible for the lack of supervision given Pearl.

More information on this matter can be found in the October 10, 2017 issue of InvestmentNews.

Network 1 Financial ETF Losses

From August 2010 to September 2015 Network 1 Financial failed to establish and enforce a supervisory system reasonably designed to supervise advisor sales of complex investments such as leveraged, inverse, and inverse-leveraged exchange-traded funds (ETFs).  These are the regulatory findings that Network 1 neither denies or admits.  This issue has impacted over one hundreds securities accounts at Network 1.  If you are a Network 1 investor please call 1-866-817-0201 for a free and confidential consultation.

Non-Traditional ETFs are complicated investment vehicles suitable for only a small section of the investing public.  Such ETFs are designed to return a multiple of an underlying index, Such as the Russell 2000, S&P 500 or VIX, the inverse of that benchmark, or both, over the course of a day.

The performance of such ETFs over periods of time longer than a single trading session be very volatile and be substantially risky.  The results, as FINRA states, “can differ significantly from the performance . . . of their underlying index or benchmark during the same period of time.”

FINRA, the regulator of securities brokerages in the United States, has warn brokerages and their advisors that NonTraditional ETFs “are typically not suitable for retail investors who plan to hold them for more than one trading session, particularly in volatile markets.”

Approximately 29 Network 1 financial advisors/brokers traded such ETFs in 167 customer accounts. These representatives executed 645 ETF transactions totaling approximately $48 million in possibly unsuitable trades.

Transactions in Non-Traditional ETFs during the referenced period, Network 1 Financial had inadequate supervisory procedures regarding the suitability and supervision of Non-Traditional ETFs transactions.

 

Loss Recovery from H. Beck

Investors with H. Beck may have grounds for recovery for investment losses in ETFs and other investments.

H. Beck recently consented to a settlement with regulators.  The settlement stated that from at least July 2008 until June 2013, H. Beck failed to properly supervise the sale of nontraditional ETFs and failed to properly supervise the recommendations made by its financial advisors. As a result, H. Beck violated NASD Rules 2310, 3010(a) through (b), and 2110, and FINRA Rules 2111, 3110(a)-(b), and 2010.

Between 2008 and 2011, H. Beck’s financial advisor James Dresselaers recommended to the Firm’s customer, EB, investments in several nontraditional exchange-traded funds (“ETFs”) and stocks issued by companies in the metals and mining sector. These recommendations were unsuitable for EB, a professional athlete with no investment experience, a moderate risk tolerance, and an investment objective of long-term growth. EB suffered losses of more than $1.1 million on these investments.

NASD Rule 3010(a)-(b) and FINRA Rule 3110(a)-(b) require every investment brokerage to establish and maintain a system and procedures to supervise the activities of its financial advisors that is reasonably designed to achieve compliance with securities laws and regulations and applicable NASD/FINRA rules.

FINRA rules require that financial advisors only recommend investments to suitable investors.  So if an investment poses too much risk, or possesses other characteristics that are inconsistent with the wants and needs of the investor, it is a violation to recommend that investment to such an investor.  This is commonly referred to as a “suitability” violation.

This is not the first time H. Beck has been penalized by regulators over non-traditional investments.  In March 2015, H. Beck was censured and fined $425,000 for failing to properly supervise the sale of unit investment trusts (UITs), failing to properly supervise the preparation of account reports sent to investors, and failing to enforce its own written supervisory procedures relating to financial advisors’ outside email accounts, which is a significant protection against fraud. Dresselaers also has a history of customer disputes.   This is concerning since Dresselaers is listed as the top executive at H. Beck.

Such regulatory findings and prior disputes evidence wide-spread supervisory problems at H. Beck and support private claims by investors.

Morgan Stanley $13 Mil. UIT Sanctions

The Financial Industry Regulatory Authority (FINRA) announced today, September 25, 2017, that it has sanctioned Morgan Stanley Smith Barney LLC approximately $13 million for UIT violations by its advisors and for failing to supervise its advisors’ short-term trades of unit investment trusts (UITs).

A UIT is an investment vehicle similar to a mutual fund but with some key differences.  It is an investment company that offers units in a portfolio of securities; however, unlike a mutual fund, it terminates on a specific maturity date. UITs impose a variety of charges, including a deferred sales charge and a creation and development fee, that can total approximately 3.95 percent for a typical 24-month UIT. This can be a significant cost.  A registered representative, or advisor, who repeatedly recommends that a customer sell a UIT position before the maturity date and then “rolls over” those funds into a new UIT, an action that can also be described as “churning,” causes the customer to incur increased and unnecessary sale charges over time.

FINRA found such actions in thousands of customer accounts. FINRA further found that Morgan Stanley failed to adequately supervise advisor sales of UITs by providing insufficient guidance to supervisors regarding how they should review such transactions to detect improper short-term UIT trading, failing to implement an adequate system to detect and deter such abuse, and failing to provide for supervisory review of rollovers prior to execution. Morgan Stanley also failed to conduct training for advisors specific to these UIT issues.

Susan Schroeder of FINRA said, “Due to the long-term nature of UITs, their structure, and upfront costs, short-term trading of UITs may be improper and raises suitability concerns. Firms must adequately supervise representatives’ sales of UITs –including providing sufficient training –and have in place a system to detect potentially unsuitable short-term UIT rollovers.”

In assessing sanctions, FINRA has recognized Morgan Stanley’s cooperation in having initiated a firmwide investigation that included, among other things, interviewing more than 65 firm personnel and the retention of an outside consultant to conduct a statistical analysis of UIT rollovers at the firm; identified customers affected and establishing a plan to provide remediation to those customers; and provided substantial assistance to FINRA in its investigation.

Todd Jones of J.P. Morgan investment fraud

If you have suffered investment losses while investing with J.P. Morgan financial advisor Todd Jones, you may be entitled to a recovery.  Mr. Jones has recently been accused of committing fraud in a large number of his investors’ accounts.  Call 1-866-817-0201 for a free and confidential consultation.

Invest photo 2The regulatory action was initiated by FINRA concerning unauthorized trades by Jones in certain high risk investments.  The FINRA regulatory settlement identifies that in July 2015, while registered with J.P. Morgan, Jones made trades in his investors’ accounts without permission in the accounts of 12 firm customers and mismarked most of the trades as “unsolicited,” which means that the trade was made at the request of the investor.

While many investors believe that their financial advisor or stock broker can make trades as he/she sees fit, regulations require that there must actually be verbal authority from the account owner contemporaneous to the trade.  Absent such verbal authorization, there must written authority.

On July 6 and 7, 2015, Jones exercised discretion to purchase a total of $208,714 of VelocityShares 3x Long Crude Oil (UWTI) in the accounts of 12 firm clients. This investment was not only unauthorized, the investment was also a very risky investment that is designed to multiply the gains or losses of the underlying holdings by three.

None of the 12 clients, had provided Jones with written permission to exercise such trades in their brokerage accounts.  Regulatory rules provides in relevant part that, “No… registered representative shall exercise any discretionary power in a customer’s account unless such customer has given prior written authorization to a stated individual or individuals and the account has been accepted by the member . . .” .

The trades likely enriched Jones by thousands of dollars while putting his clients in financial jeopardy.

Though Jones appears to be out of the securities industry, FINRA impose a fine and a four-month suspension.  Jones neither confessed or denied the allegations.

 

Diones LaCerte Investment Fraud Investigation

We are currently investigating the actions of Colorado Springs broker Diones LaCerte.  Ms. LaCerte was most recently a financial advisor for Morgan Stanley.  If you information or would like to discuss a potential claim that you have concerning Ms. LaCerte, please call 303-300-5022 in Colorado or 1-866-817-0201 outside of Colorado to speak to a Colorado licensed attorney.

Ms. LaCerte has recently been alleged by FINRA regultators to have committed significant fraud. Between July 1,2012 and December 31,2014, LaCerte engaged in an unsuitable pattern of short-term trading of Unit Investment Trusts (“UITs”) in 107 of her customers’ accounts.  This is a significant type of fraud perpetrated on a large number of investors.   Diones LaCerte settled the charges without admitting or denying fault.

The actions of LaCerte constitute an unsuitable pattern of short term trading of UITs in 107 customer accounts. This is similar to churning an account.  Short term trades of a high commission and high cost investment puts the advisor’s financial gain ahead of that advisor’s investors.

UITs typically carry significant upfront charges, such as costs and commissions, and as with mutual funds, short-term trading of UITs is generally improper. During the Relevant Period, in connection with these 107 customer accounts, LaCerte repeatedly recommended that the customers purchase UITs and then sell these products well before their maturity dates.

The primary issue brought by FINRA concerns the selling of UITs less than two years after purchase.  The majority of the UlTs that LaCerte recommended had maturity dates of at least 24 months. Nevertheless, LaCerte repeatedly recommended that her customers sell their UIT positions less than one year after purchase. Indeed, the average holding period for the UITs purchased in these customers’ accounts was less than 300 days. In addition, on more than 100 occasions, LaCerte recommended that her customers use the proceeds from the short-term sale of a UIT to purchase another, similar UIT. LaCerte’s recommendations caused the customers to incur unnecessary sales charges, and were unsuitable in view of the frequency and cost of the transactions.

Diones LaCerte has a significant history of customer complaints prior to the current regulatory action.  The CRD of Ms. LaCerte, the record a financial advisor has with FINRA regulators, indicates that she has received many customer complaints concerning the sale of unsuitable investments, and these complaints have led to five investor lawsuits brought or threatened in the past three years.