Tag Archives: arbitration

Attention Investors of John Maccoll

John C. Maccoll, who was a registered representative of UBS Financial Services and an investment advisor, is charged both criminally and civilly with defrauding at least 15 of his brokerage clients, most of them elderly and retired, in a scheme that lasted for at least a decade.  If you were an investor with Maccoll please call 1-866-817-0201 for a free and confidential consultation.  Representation will be on a contingency fee basis.

Maccoll’s career goes back 40 years.  Prior to being with UBS he spent years working as a brokerguy in handcuffs for Morgan Stanley.  We believe that he used his scheme not only at UBS but also at Morgan Stanley.

According to the SEC, he used high-pressure sales tactics to convince his brokerage customers to invest in what he described as a “highly sought after” private fund investment. The victims were convinced to sell their retirement accounts or borrow against them and make out checks to Maccoll.

The actions of Macoll are commonly referred to as “selling away.”  This is common.  A broker will either try to sell an investment of a confidant who will pay him a premium, or sometimes make up the investment completely.  Brokerage firms are required to have mechanisms in place to detect and stop such trading practices.

One customer’ defrauded invested her life savings and money from her deceased husband’s life insurance payout, which she intended to use to pay for college expenses for her three children, adding that Maccoll knew that the funds invested in his customers’ accounts were for retirement or college expenses.

Charles Bloom of Chelsea Financial

Please call 1-866-817-0201 if you were an investor with Charles Bloom of Chelsea Financial.  Bloom operated primarily in the West Palm and Royal Palm areas of Florida, but likely has investors nationwide.  We have reason to believe that Bloom engaged in a pattern of inappropriate behavior in the portfolios of his investors.

In October 2017, FINRA, the regulator that oversees securities brokers, commenced an investigation into allegations that Bloom engaged in an unsuitable pattern of trading in at least three customer accounts.

All securities brokers are required to know their investors and only recommend investments Invest photo 2that are consistent, or suitable, with the investors risk tolerance and investment objectives, among other things.  Brokers have many incentives to recommend investments that are too risky or otherwise unsuitable for investors.  This motivation can lead to large losses by an investor.  As such, the recommendation of unsuitable investments is considered to be a form of fraud.

In connection with the FINRA investigation, on June 21, 2018, FINRA sent a request to Bloom for on-the-record testimony. Brokers are required to cooperate with FINRA investigations into misconduct.  As stated in a phone call with FINRA staff on July 3, 2018, Bloom acknowledges that he received FINRA’s request and would not cooperate.

Ultimately, Bloom surrendered his license and accepted a bar from the securities industry as a result of the allegation.  However, this allegation is just the latest in a long list of allegations.  The record  of Bloom shows prior regulatory actions, a 20-day suspension, and two customer suits.  This raises the question of why Bloom was hired and why he was not given appropriate supervision in light of his history.

We represent investors in securities industry arbitration proceedings across the country.  Please call for a free and confidential consultation.

 

Recovery of CLO Losses

CLO (Collateralized Loan Obligation) investors may have recovery avenues for their losses.  These complex investments are only suitable for the most sophisticated investors willing to assume the high risk of these investments.  Investors who are less sophisticated or who seek only investments or looking for only moderate risk investments cannot legally be sold these investments.  For a consultation, please call 1-866-817-0201.

The financial industry is governed by rules concerning whether certain investments can be sold to investors.  One such limitation is that securities broker, financial advisors and investment advisors may only sell investments that are suitable, or investments that are consistent with an investors level of sophistication, investment objectives and tolerance for risk.  Complex investments that carry a high risk potential are unsuitable for your average investor looking for growth or income with a tolerance for moderate risk.

investingstockphoto 1As identified by FINRA, the Financial Industry Regulatory Authority, a CLO is very complex and risky investment.   A CLO is a security made up of loans to corporations that usually have relatively lower credit ratings. Leveraged buyouts, in which a private equity firm typically borrows money to purchase a controlling stake in a company, are a common for CLO loans. After the loans are made, they’re sold off to a manager, who bundles them together and then manages the consolidations, buying and selling loans as he or she sees fit.

A CLO manager raises money to buy the loans by selling debt and equity stakes to outside investors in slices of the total collection according to risk level.

FINRA gives an example to demonstrate how tranches work.  Think of everyone who owns a piece of the loan pool as standing in a long line. Those at the front of the line would get repaid first if any of the loans in the pool go into default, but they receive lower interest payments than those at the back of the line. The people further back are paid more for taking a greater risk that they would not be repaid in the event of losses in the underlying loan pool.

Typically, a CLO includes both debt tranches and equity tranches. The debt tranches are similar to bonds – they have credit ratings and offer regular coupon payments for a period of several years. Interest rates may be set or “floating,” meaning they vary with prevailing interest rates.

Debt tranches have first dibs on payments from the underlying loans, though here again, there are important differences within the group. Senior tranches have a higher-priority claim to payments (and receive lower interest payments) than junior tranches (which receive higher interest payments).

Equity tranches are the riskiest piece of the CLO puzzle. They have no credit ratings, are last in line for payment, and thus are the first to suffer losses if the underlying loan portfolio falters. Though equity tranche investors are simply paid whatever cash is left over after the debt investors have received their interest payments, they typically earn a higher return than debt tranche investors do.

FINRA is not alone.  The Wall Street Journal has also identified these investments as risky and complex.  The Journal points out that the race to provide higher returns has led to an even greater sales of such investments, and that such investments hit a record in 2017.

Unless you are a very sophisticated investor willing to speculate the money invested in CLOs, you should seek legal representation for losses sustained.

Attention Investors of Mark Solomon

If you were one of the investors of Mark Solomon please call 1-866-817-0201 for a free and confidential consultation.   We believe that Mr. Solomon, whose office is in Wynnewood, Pennsylvania, inappropriately sold real estate investments and that his employer, M Holdings, inappropriately supervised Solomon and allowed the sales to occur.

Invest photo 2From December 16, 2014 through December 29, 2014, on behalf of a commercial real estate limited partnership, Solomon solicited and sold limited partnership interests (the “offering”) to seven investors for a total of $1,400,000.  However, before soliciting and selling interests in the offering on behalf of the commercial real estate limited partnership, Solomon did not provide to M Holdings the notice required. Solomon first provided written notice of his sales activity to M Holdings on August 31, 2015 after responding to inquiries made by a regulator during an examination of M Holdings.

The financial industry regulator, FINRA, brought an action against Solomon for the sales of the investments.  Solomon entered into a settlement where he agreed to a one year suspension from the securities industry.

M Holdings ultimately is responsible for the sale of the investments.  Brokerage firms are responsible for the supervision of the private securities sales of their brokers even when the sales are away from the firm.  FINRA brought action for the inadequate supervision of Solomon by M Holdings.    M Holdings was censured and agreed to pay a $135,000 fine.

 

Fifth Third Annuity Fraud

If you were recommended the purchase or sale of an annuity by Fifth Third you may have been the victim of fraud.  We represent investors nationwide and are available to discuss whether you are a victim and entitled to compensation.  Please call 1-866-817-0201 for a free and confidential consultation.

Invest photo 2The Financial Industry Regulatory Authority (FINRA) in a statement on May 8, 2018 stated that it has fined Fifth Third Securities $4 million and required the firm to pay approximately $2 million in restitution to customers for failure to accurately consider and describe costs and benefits of variable annuity (VA) exchanges, and for recommending exchanges without a reasonable basis to believe they were suitable for customers.  While the FINRA action focused on variable annuities, the exchange or early liquidation of any annuity is possibly a violation.

Variable annuities are complex and expensive investments commonly marketed and sold to retirees or those saving for retirement. Exchanging one annuity with another involves a comparison of the complex features of each security. Accordingly, annuity exchanges are subject to regulatory requirements to ensure that brokers have a reasonable basis to recommend them, and their supervisors have a reasonable basis to approve the sales.  Failure to do so can cost investors hundreds of thousands of dollars and cause the investor savings to become unnecessarily illiquid.

Brokerage firms, like Fifth Third, have been on notice of this problem and other problems with annuities for years.  FINRA has warned of the limited suitability of these investments and that they should only be sold to limited types of investors and has done so more than once..  In fact, variable annuities and variable life insurance is so prone to fraud, FINRA has specific rules concerning these products.

FINRA found that Fifth Third failed to ensure that its registered representatives obtained and assessed accurate information concerning the recommended annuity exchanges. It also found that the firm’s registered representatives and principals were not adequately trained on how to conduct a comparative analysis and truthfully sell the annuities.

As a result, the firm misstated the costs and benefits of exchanges, making the exchange appear more beneficial to the customer. By reviewing a sample of annuity exchanges that the firm approved from 2013 through 2015, FINRA found that Fifth Third misstated or omitted facts relating to the costs or benefits of the annuity recommendation or exchange in approximately 77 percent of the sample.  For example:

  • Fifth Third overstated the total fees of the existing VA or misstated fees associated with various additional optional benefits, known as riders.
  • Fifth Third failed to disclose that the existing VA had an accrued living benefit value, or understated the living benefit value, which the customer would forfeit upon executing the proposed exchange.
  • Fifth Third represented that a proposed VA had a living benefit rider even though the proposed VA did not, in fact, include a living benefit rider.

FINRA found that the firm’s principals ultimately approved approximately 92 percent of VA exchange applications submitted to them for review. However, in light of the firm’s supervisory deficiencies, the firm did not have a reasonable basis to recommend and approve many of these transactions.

In addition, FINRA found that Fifth Third failed to comply with a term of its 2009 settlement with FINRA. In the 2009 action, FINRA found that, from 2004 to 2006, Fifth Third effected 250 unsuitable annuity exchanges and transactions and had inadequate systems and procedures governing its annuity exchange business. For more than four years following the settlement, the firm failed to fully implement an independent consultant’s recommendation that it develop certain surveillance procedures to monitor VA exchanges by individual registered representatives.

As a result, the firm misstated costs and benefits of VA exchanges — and in some cases omitted critical information altogether — making the exchanges appear more beneficial to customers in 77 percent of the exchanges Finra reviewed for the period of 2013 through 2015. For instance, Fifth Third transgressions included telling customers that the new VA contracts being marketed had living rider benefits guaranteeing minimum payments to customers and their beneficiary when none existed, Finra said.

LPL Losses in Unregistered Securities

LPLLPL Financial will pay up to $26 million to settle charges that its representatives sold unregistered securities to clients over the past 12 years.  This includes the payment not only of a certain amount for certain unregistered securities, it also includes a payment of 3% simple interest on the investments.

The settlement covers a variety  of unregistered securities, including private placements and certain municipal bonds.  There are also certain stocks, corporate bonds and structured investments that may be covered.

Securities can only be legally sold to investors if the securities are either registered or qualify to be exempt from registration.  Otherwise, the sale is in violation of not only federal securities laws, but also state securities laws.

LPL agreed to the settlement after an investigation by the North American Securities Administrators Association (NASAA).  The NASAA found that its customers were sold unregistered and non-exempt securities since October 2006, according to an announcement.

LPL Financial, the largest U.S. independent broker-dealer by revenue, said it will pay a $499,000 fine to each of the 52 U.S. states and territories if they choose to participate in the deal. California has chosen not to participate, LPL said.

Investors will likely be faced with a decision on whether or not to enter into the agreement or pursue and action of their own.  We assist investors in the claim evaluation and assist investors to maximize their recoveries.

Help for investors of Larry Boggs

Please call 1-866-817-0201  to discuss your rights if you invested with Larry Martin Bogs, formerly of Wedbush and Ameriprise.  Discussions will be confidential and initial consultations are free of charge.

On January 5, 2018, the regulator overseeing securities brokerages, FINRA issued a press release.   An AWC, a regulatory settlement agreement containing factual findings, was issued in which Boggs was barred from association with any FINRA member firm in all capacities.   This would include a bar from all securities brokerages in the United States.

Without admitting or denying the findings,Boggs consented to the sanction and to the entry of findings that he engaged in excessive and unsuitable trading in customer accounts. The findings stated that Boggs used his control over the customers’ accounts to excessively trade in them in a manner that was inconsistent with these investors’ investment objectives, risk tolerance and financial situations.

Boggs engaged in a strategy that was predicated on short-term trading of
primarily income-paying equity securities that were identified on a list of recommended
securities by his member firm. Boggs would typically buy or sell these securities based on
whether they were added to or removed from this list, and would frequently liquidate
positions that increased or decreased by more than 10 percent.

The findings also stated that Boggs improperly exercised discretion in these accounts without written authorization from the customers or the firm. The findings also included that Boggs caused the firm’s books and records to be incorrect by changing the investment objectives and risk tolerance for several of these customers in order to conform to his high-frequency trading strategy, even though the customers’ investment objectives and risk tolerance had not actually
changed.

Investors of Mark Kaplan of Vanderbilt

We are currently looking to speak to investors of Mark Kaplan of Vanderbilt Securities.  Please call 1-866-817-0201 is you have suffered investment losses.  We believe there is potential for certain investors to recover these losses.

Between March 2011 and March 2015 , Mark Kaplan of Vanderbilt Securities engaged in investment churning and unsuitable excessive trading in the brokerage accounts of a senior customer. We believe that such actions were likely widespread and impacted many of Kaplan’s investors.  Kaplan willfully violated federal securities laws and FINRA regulations by such actions.

Invest photo 2Kaplan has been known for years by Vanderbilt to have problems in his handling of investor accounts.  Morgan Stanley terminated Kaplan in 2011 for his alleged improper activity in Kaplan’s customer accounts.  Additionally, Kaplan has been the subject of seven separate customer lawsuits concerning improper securities transactions.

A recent regulatory action by the Financial Industry Regulatory Authority (“FINRA”) alleges that Kaplan took advantage a 93-year-old retired clothing salesman who had an account with Kaplan.   This investor not only placed his complete reliance in Kaplan but was also in the beginning phases of dimensia.

The investor opened accounts at Vanderbilt Securities with Kaplan during March 2011.  As of Match 31, 2011, the value of the investor’s accounts was approximately $507,544.64. Social Security was the investor’s only source of income during the Relevant Period. Kaplan exercised control over the accounts.  The investor relied on Kaplan to direct investment decisions in his accounts, contacting Kaplan frequently.

The investor was experiencing a decline in his mental health.  In 2015, a court granted an application by the investor’s nephew to act as his legal guardian and manage his financial affairs.

During the Relevant Period, Kaplan effected more than 3,500 transactions in the investor’s accounts, which resulted in approximately $723,000 in trading losses and generated approximately $735,000 in commissions and markups for Kaplan and Vanderbilt. Kaplan never discussed with the investor the extent of his total losses or the amount he paid in sales charges and commissions.

More can be learned about such excessive trading at the warning page for the SEC.

Please call the number above to determine if you have also been taken advantage of and your rights for recovery.

 

Attention Investors of Western International

If you lost money investing with Western International, please call 1-866-817-0201.  The initial consultation with an attorney is free.  Jeffrey Pederson represents investors nationwide in securities brokerage disputes.

NYSE pic 2Western recently entered into a regulatory settlement where it neither admitted not denied the following facts.  Those facts are that from January 1, 2011 to November 5, 2015 (the “Relevant Period”), Western failed to establish, maintain and enforce a supervisory system to ensure that representatives’ recommendations regarding certain ETFs (exchange traded funds) and also failed to comply with certain securities laws in the sale of these ETFs.

In addition, Western allowed its representatives to (1) recommend Non-Traditional ETFs without performing reasonable diligence, the required level of investigation into the investments, to understand the risks and features associated with the investments, and (2) recommend NonTraditional ETFs that were unsuitable, either due to the known high level of risk in the investments or inherent complexity, for certain customers based on their ages, investment objectives and financial situations.

Non-Traditional ETF’s, such as the ETFs that were sold by Western, are designed to return a multiple of an underlying index or benchmark, such as the VIX or S&P, the inverse of that index or benchmark, or both, over the course of a day. As a result, the performance of Non-Traditional ETFs over periods of time longer than u single trading session “can differ significantly from the performance of their underlying index or benchmark during the same period or time.” Because of these risks and the inherent complexity of these products, FINRA has advised broker-dealers and their representatives that Non-Traditional ETIls “are typically not suitable for retail investors who plan to hold them for more than one trading session, particularly in volatile markets.”

We have spoken to a number of investors who have suffered similar losses and believe that such investments were intended for highly sophisticated investors only, such as hedge fund managers, and could not be legitimately sold to retail investors.  So if your were investing for retirement and were sold such investments, you likely have grounds for recovery.

Losses in Inverse VIX ETNs and ETFs

NYSE pic 1

Investments connected to the VIX index were known to be highly speculative.

We are a firm that specializes in investor loss recovery.  Investors of Inverse VIX Exchange Traded Notes (ETNs) and Inverse VIX Exchange Traded Funds (ETFs), including VelocityShares Daily Inverse VIX Short-Terms ETN (XIV), the ProShares Short VIX Short-Term Futures ETF (SVXY), and the LJM Partners’ Preservation and Growth fund (LJMIX and LJMAX) may have grounds for the recovery of their losses.

If you were sold an Inverse VIX ETN please call 1-866-817-0201 for a free and confidential consultation with an attorney.

These investments were suitable for very few investors.   The sale of unsuitable investments is a form of negligence and possibly fraud.   These investments carry such a high level of risk and are so complicated that they were likely not suitable for any retail (non-institutional) investor.   “Unless you were a hedge fund manager you should not have been sold these funds.” If you were recommended such investments as part of a retirement savings portfolio you have grounds to recover your losses.  The makers of these funds have acknowledged that the fund was for hedge fund managers only, and not individual investors.

Starting on February 2 and continuing through February 6, investors saw portfolios implode due to investments in obscure products that tracked market volatility.  Such investments tracked the VIX index.  The VIX index is a complicated monitor of investment market volatility or “investor fear.”  An “inverse VIX” investment is an investment that benefits from stable markets but loses value quickly in times of volatility.  The losses in the inverse VIX investments mounted quickly until NASDAQ halted the trading of these investments on February 6, with some suffering losses of almost all value in just a few days.

For example, VelocityShares XIV plummeted 80 percent in extended trading on February 5, 2018.  This is a security issued by Credit Suisse this tracks the inverse of the VIX index tracking market volatility.  As the market rose and sank the value of XIV dropped sharply.  Such sudden drops have a cascading impact that can lead to margin calls and other losses.

Of particular concern, though any sale of such an investment to a retail investor is concerning, are investors who purchased such shares through the following brokerage firms:  Credit Suisse, Fidelity, Merrill Lynch, and Wells Fargo.

The dramatic losses was foreseeable to securities brokerages, often referred to as securities “broker-dealers.”  The regulator that oversees broker-dealers, FINRA, the Financial Industry Regulatory Authority, issued its latest warning in a string of warnings on October 2017 to broker-dealers about VIX and inverse VIX investments.  FINRA identified such investments speculative and warned the “major losses” could result from such investments from a failure to understand how such investments work.  For example, many are short-term trading vehicles that can degrade over time.

FINRA also warned all financial advisers that VIX ETNs may be unsuitable for non-institutional investors and any investor looking to hold investment as opposed to actively trading the investment.   While this warning occurred in October 2017, similar warnings were issued in 2012.  That same month, FINRA fined Wells Fargo for unsuitable recommendations of similar volatility investingstockphoto 1funds.

FINRA stated in 2012 in a Regulatory Notice, RN 12-03, that heightened supervision is required of any broker who sells such complex investments, and specifically identified the need for brokerage firms to oversee any recommendation of an investment based upon the VIX.

While all short VIX trading is suspect and potentially recoverable, the following investments are of particular concern:  XIV, SVXY, VMIN, EXIV, IVOP, LJMIX, LJMAX, XXV, and ZIV.

FINRA is conducting sweep investigations of all brokerages that sold any and all of these investments to retail investors.  ‘The sweep is part of Finra’s continuing focus on the suitability of sales of complex products, including leveraged and volatile products, to retail customers,’ stated FINRA.

In addition to suitability, there is also concern that due diligence by these brokerages should have revealed that the index was subject to manipulation.  This was recently reported by the Financial Times of London.  A scholarly report from researches at the University of Texas in 2017 identified the mechanism for manipulating the VIX.  FT reports that the Securities and Exchange Commission is currently investigating such allegations.

Investors suffering losses in such investments may have valid claims despite the warnings contained in the prospectus.  These investments should not have been offered to any retail investors.

PedersonLaw has represented investors in similar actions in most of the 50 states either directly or pro hac vice.