Vincent Sciabica Investors

Investors of Vincent Sciabica may have recourse for their losses.  A recent regulatory action has revealed wide-spread negligence and possibly fraud in the accounts Sciabica’s investors.  If you are such an investor please call 1-866-817-0201 for a free and confidential consultation.

Regulators allege that during the period he was employed by Morgan Stanley, Vincent Sciabica engaged in an unsuitable pattern of short-term trading of UITs in approximately 360 customer accounts.  Sciabica entered into a settlement with regulators where he did not deny or confirm these allegations.

UlTs are investment companies that offer shares of a fixed portfolio of securities in a one-time public offering, and terminate on a specified maturity date. As such, they are not designed to be used as trading vehicles. In addition, UlTs typically carry significant upfront charges, and as with mutual funds that carry front-end sales charges, short-term trading of UITs is generally improper.  Trading of these investments is unwise because of the cost, but can unreasonably enrich the broker who recommends such a strategy.

During the period when he was employed by Morgan Stanley, in connection with these customer accounts, Sciabica repeatedly recommended that the customers purchase UlTs and then sell these products before their maturity dates. The majority of the UlTs that Sciabica recommended had maturity dates of at least 24 months and carried sales charges. Nevertheless, Sciabica continually recommended that his customers sell their UIT positions less than a year after purchase.

In addition, on more than 1,000 occasions, Sciabica recommended that his customers use the proceeds from the short-term sale of a UIT to purchase another UIT with similar investment objectives. Sciabica’s recommendations caused the customers to incur unnecessary sales charges, and were unsuitable in view of the frequency and cost of the transactions.

Sciabica left his employ with Morgan Stanley in 2014 while Morgan Stanley was investigating this wrongdoing.  The investigation of the Financial Industry Regulatory Authority (FINRA) began in November 2017.

 

Lawsuits Concerning Charles Frieda

If you suffered investment losses investing with Charles Frieda, formerly of Wells Fargo, Morgan Stanley and Citigroup, please call 1-866-817-0201.  Mr. Frieda has been found to have been reckless in his handling of investor portfolios, particularly in the recommendations of oil and gas investments.

Frieda recently entered into a regulatory settlement  agreement with FINRA, the regulator that oversees securities brokerages.

FINRA Rule 2111 provides that brokers “must have a reasonable basis to believe that a recommended . . . investment strategy involving a security or securities is suitable for the customer, based on the information obtained through reasonable due diligence of the [broker] to ascertain the customer’s investment profile.”

Oil Stock IIBetween November 2012 and October 2015, Frieda and another Wells Fargo representative recommended an investment strategy to more than 50 customers, which was a majority of their customers, causing the customers accounts to become significantly over-concentrated in a single sector of the overall market.

The over-concentration primarily involved four speculative oil and gas stocks. Due to the speculative nature of the recommended investments and the high level of concentration, this investment strategy was unsuitable and exposed customers to significant potential losses.

The regulatory settlement simply bars Frieda from the securities industry.  Recovery of losses requires investors to contact a private attorney.

During the relevant period, in many instances, Frieda failed to properly consider and failed to obtain accurate customer investment profile information to determine the suitability of his over-concentration strategy and the securities he recommended as part of that strategy.

The CRD of Frieda, the record kept by regulators concerning wrongdoing, shows that
Frieda has been sued more that 30 times in his short career.  Most of these suits concern the recommendation of unsuitable securities, such as the oil and gas securities for which he is currently under fire.

 

Jeffrey Pederson has represented investors across the country in similar suits to recover investment losses.  Please call for more information.

NEXT Financial Supervisory Problems

NEXT Financial Group recently entered into a regulatory settlement with FINRA, the regulator that oversees securities brokerages, concerning lapses in supervision that have allegedly led to fraud in investor accounts.  This is part of a continuing and ongoing series of supervisory lapses of NEXT to ensure that its brokers do not commit fraud or other misdeeds.  These lapses may serve as a basis for investors to recover losses.

On December 6, 2017, entered into its most recent regulatory settlement.  Under that settlement, NEXT was censured and received a $750,000 fine.  The current allegations leading to the action included the failure to monitor and control investment churning and inappropriate sales of variable annuities.  The size of the fine was do to the ongoing and continuing supervisory deficiencies and regulatory violations that NEXT continued to commit.  The supervisory problems extend not just to these investments but extend to other supervisory issues.  This is evidenced by the string of regulatory violations that NEXT has been accused over the past several years.

On November 22, 2011, FlNRA issued a Letter of Acceptance, Waiver and Consent (an “AWC” is a regulatory settlement ), in which NEXT was censured, fined $50,000 and ordered to pay $2,000,000 in restitution to investors for violations of FINRA Rule 2010 and NASD Rules 2110, 2310 and 3010 arising out of its sales of certain private offerings and related supervisory deficiencies.  Additionally, NEXT was censured and fined again for supervisory issues in 2010, 2011 and 2012.

In response to prior disciplinary actions, NEXT adopted new measures in an attempt to correct prior supervisory deficiencies. The new procedures, however, employed flawed methodologies and allowed misconduct to occur. The current regulatory action involves various supervisory and other violations during the period August 2012 through September 2015 that arose in part from NEXT’s inadequate response to prior FINRA disciplinary actions.

The primary violation in the current regulatory action occurred between May 2014 and September 2015 when NEXT used faulty exception reports, reports of potentially fraudulent activity, to detect excessive trading (commonly referred to as “churning”), failed to perform any review of those exception reports for a 14-month period, and allowed churning to continue due to inadequate oversight. The failure by some compliance personnel to fulfill their job duties was not detected due to an absence of procedures requiring follow-up on delegated supervisory tasks. These supervisory failures allowed a registered representative to excessively trade a senior investor’s accounts, resulting in losses of approximately $391,893.

NEXT had similar deficiencies between August 2012 and April 2014 concerning its supervision of variable annuities (VA). The Firm failed to have a surveillance system that monitored for problematic rates of exchange regarding VAs. In addition, NEXT also had inadequate exception reports, reports used to detect fraud, and NEXT’s procedures ignored risks associated with multi-share class VAs. The Firm also had information on its website.

Recovery of Woodbridge Loss

Landmark

Woodbridge investors believed real estate ensured the safety of their investments.

Investors of Woodbridge may have the ability to recover the losses they sustained.  Please call 1-866-817-0201 or 303-300-5022 for a free consultation with a private attorney concerning potential loss recovery.

Regulators have charged the Woodbridge Group of Companies with operating a Ponzi scam.  This creates liability on the part of those advisors selling Woodbridge.

There were glaring issues in these Woodbridge investments for an extended period of time.    These issues should have been discovered during reasonable due diligence by the brokers and agents selling the Woodbridge investments.  These investments should have been recognized as not being suitable for any investor.

The U.S. Securities and Exchange Commission (SEC) had been investigating Woodbridge since 2016.  Woodbridge, the Sherman Oaks, California-based Woodbridge, which calls itself a leading developer of high-end real estate, had been under the microscope of state regulators even longer.   The focus of these regulators was the possible fraudulent sale of securities.

On December 21, 2017,  the SEC charged the Woodbridge Group of Companies with operating a $1.2 billion Ponzi scheme that targeted thousands of investors nationwide.  “The only way Woodbridge was able to pay investors their dividends and interest payments was through the constant infusion of new investor money,” per Steven Peikin of the SEC.

Prior to the charge, in January 2017, the SEC served a subpoena on Woodbridge for relevant electronic communications.  Woodbridge failed to respond to this subpoena.  This left the SEC to seek court intervention to compel Woodbridge to produce potentially damaging documentation the SEC believes existed.  The SEC filed its allegation that Woodbridge is a Ponzi scheme within weeks of its access to Woodbridge’s documents.

Through court filings, the SEC states that Woodbridge “has raised more than $1 billion from several thousand investors nationwide” and it “may have been or may be, among other things, making false statements of material fact or failing to disclose material facts to investors and others, concerning, among other things, the use of investor funds, the safety of the investments, the profitability of the investments, the sales fees or other costs associated with the purchase of the investments.”

Shortly after the issuance of the order sought by the SEC Woodbridge declared bankruptcy.  This filing does not extinguish the rights of investors.  These investors have claims against the brokers and advisors selling the investments.

Woodbridge has additionally stated that it has also received inquiries from about 25 state securities regulators concerning the alleged offer and sale of unregistered securities by unregistered agents.

The Woodbridge Group of Companies missed payments on notes sold to investors the week of November 26, 2017, and December 5, 2017 filed chapter 11 bankruptcy.  The company blamed rising legal and compliance costs for its problems.

Woodbridge said it had settled three of the state inquiries and was in advanced talks with authorities in Arizona, Colorado, Idaho and Michigan when it filed for Chapter 11 protection.

The company’s CEO, Robert Shapiro, resigned on December 2  but will continue to be paid a monthly fee of $175,000 for work as a consultant to the firm.

Those at Woodbridge are not the only ones responsible for investor losses.  The Colorado Division of Securities is considering sanctions against investment advisor Ronald Caskey of Firestone, Colorado.  Caskey is the host of the Ron Caskey Radio Show.  James Campbell of Campbell Financial Group in Woodland Park, Colorado and Timothy McGuire of Highlands Ranch, Colorado are also the subject of regulatory investigations by the state regulator.  The Colorado Division of Securities has also begun investigating Jerry Kagarise of Security 1st Financial of Colorado Springs.  Another seller of Woodbridge in the Springs area is Carrier Financial.

These and other Colorado investment advisors have raised approximately $57 million from 450 Colorado investors.  Woodbridge continued to solicit investors through these advisors, in addition to radio and online ads, through October 2017, just prior to the bankruptcy filing.

While the regulatory actions will do little to compensate the damaged investors, these actions support private civil actions for recovery by investors.  We are investigating and in the process of bringing suit against Colorado investment advisors selling Woodbridge investments, and would like to share what we have learned with other investors in Colorado and nationwide.

Rueters is the source of some of the information contained herein.

Attention Investors of Michael Oromaner

If you have suffered losses investing with Michael  “Mike” Oromaner please call 1-866-817-0201 to speak to an attorney about your rights.  Oromaner has a long history of suits and regulatory actions concerning the unauthorized trading in the accounts of his investors.   If you have suffered losses you may be entitled to recovery from Oromaner’s former employers.

Regulatory rules provide that brokers may not exercise discretionary power in an investor’s account unless the investor has given prior written authorization and the account has been accepted by the member firm in writing as a discretionary account.

These rules also provide that a brokerage firm, in the conduct of his business, shall observe high standards of commercial honor and just and equitable principles of trade.  Oromaner exercised inappropriate discretion in the account of a single customer during a single year 41 times.

Respondent failed to obtain prior written authorization from this investor to exercise discretion in the account and employer did not approve the account for discretionary trading.

Because of this and other misdeeds, Oromaner is currently undergoing a two-year suspension from the securities industry.

Over the course of the career of Oromaner, he has been the subject of over 16 “disclosure events.”  A disclosure event is any lawsuit, bankruptcy, regulatory action, written investor complaint or other matter negatively reflecting on an advisor’s ability to handle the funds or recommend investments.  The 16 disclosure events of Oromaner is extremely high and raises the question of whether his employers were negligent in hiring him.

Please call if you wish to discuss potential recovery of your losses.

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.