Tag Archives: Colo. Fraud

GPB Loss Recovery

Investors of GPB or any GPB Capital investments, please call 1-866-817-0201 about potential loss recovery.  Initial consultations are free and confidential.  Jeffrey Pederson is a private attorney who has successfully represented investors nationwide in obtaining settlements or judgments for investment losses.

Information exists to support that GPB Capital was inappropriately sold by independent brokerage firms across the country.  These investments are now illiquid and essentially worthless.  These brokerages are liable for the losses of their investors.

Brokerages have duties to investors in the sale of investments such as GPB.  These investments were high-risk, and brokerage were only allowed to recommend the investments to

On August 17, 2018, the firm halted sales to review accounting.  The purported reason was to “integrate the high volume of recent acquisitions.”

On August 24, 2018, GPB announced that the fund will restate its 2015 and 2016 financial statements.  The adjustments were due to errors in income and the source of such income that came to light in audits done on the investments.

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Many GPB investors thought they were getting a safe investment.

On September 12, 2018, Massachusetts top securities regulator William Galvin started an investigation into the sales practices of independent stock brokerage firms in connection with the recommending of investments in GPB Capital Holdings.

GPB investments were always known to be very high risk.  As such, the investments were not suitable for a large portion of the investing public.  Brokers have a legal obligation to only recommend suitable investments.   The motivation for selling such risky investments to moderate investors is likely the result of the excessive commissions that were paid the brokers for such sales – commissions much higher than would be paid for the sale of suitable investments.

The Massachusetts Securities Division has information about one independent stock brokerage firm’s sales practices in connection with GPB sales, coming in the wake of GPB’s announcement that GPB has temporarily stopped bringing in new funds.  It has also suspended redemptions while it concentrates on accounting and financial reporting.

In addition, there is an issue with the failure to file financials.  Such a failure should have been discovered by any brokerage firm selling the investments and should have been a red flag of the extreme risk in the recommendation of the investments.  Two private GBP investments that are required because of their size to file financial statements with the Securities and Exchange Commission failed to meet filing deadlines.

These matters have led to a sweep by regulators of 63 broker-dealers that sell GPB, with the regulators requesting data on the extent of sales activity in Massachusetts, disclosure and marketing documents that the firms provide to investors on the solicitations and data on investor suitability.

“While my Securities Division’s investigation is in the very nascent stages, recent activity within GPB raises red flags of potential problems. These red flags, coupled with the fact that sales of private placements by independent broker-dealers have been an ongoing source of investor harm, have led to this investigation,” Galvin, the lead regulator, stated.

Galvin goes on to state, “I must also express my serious concerns regarding the expected proposal by the SEC to expand who can participate in private securities offerings. Without a strong fiduciary rule to prevent sales practice abuses, it is utter folly not to know that main street investors will be hurt.”

Investor Losses with Cadaret Grant

Investors suffering losses with Cadaret Grant may have recourse.  Please call 1-866-817-0201 for a free and confidential consultation.

Cadaret entered into a regulatory settlement with the Financial Industry Regulatory Authority on September 11, 2018.   Cadaret agreed to pay an $800,000 fine.  It also agreed to a censure and to review and change its policies to detect inappropriate sales practices by its brokers.  One focus was on the sale and exchanges of variable annuities.

Invest photo 2Cadaret failed to employ sufficient compliance personnel to adequately supervise its brokers.  Brokers have many incentives to recommend investments that are too aggressive or otherwise unsuitable for an investor.  Sufficient compliance personnel are needed and required by regulators to protect investors from this known risk.

All licensed securities brokers have a legal obligation to recommend only suitable investments.  Investments are all known to have a certain range of risk when recommended.  Certain investments are known to have higher risks than others.  Investments that can increase sharply in value can sometimes decrease equally as fast.  Investments can only be recommended when the risk the investment poses is consistent with the risk consistent with the investor.  For example, a retired individual should only be recommended investments with little to no risk.  So when such an individual loses 20% or more of portfolio value in a year, the portfolio was likely unsuitable when first recommended.

As a result of its insufficient compliance, Cadaret had only three compliance people overlooking weekly trades, or “blotter reviews.”  Such reviews are needed to detect over-concentration of portfolios, such as portfolios being invested too heavily in either one investment, a single industry, or being too heavily weighted in a single investment vehicle, such as stocks or annuities.  Such concentration is unsuitable because it greatly increases the level of risk in the portfolio.

The blotter review also protected investors from broker churning.  This is an action where a broker puts his/her own interest ahead of the investor.   Excessive trades are made that work more to generate commissions for the broker than to protect the interests of the investor.

Churning depends on the cost of the exchange.  With products such as variable annuities, churning can happen with a single exchange.  One of the issues faced by Cadaret is from the replacement of one variable annuity with another.  There are very few circumstances where variable annuity exchanges are justified.

Cadaret’s supervisory procedures also required examiners in the compliance department to conduct periodic inspections of branch offices to detect and prevent violations by registered representatives in those locations. However, Cadaret employed an insufficient number of compliance examiners for this purpose. For instance, in 2014, the Firm tasked three compliance examiners with inspecting over 400 geographically-disperse branches. As a result, these inspections were conducted in a manner not reasonably designed to identify violative activity.

Jeffrey Pederson has represented investors across the United States in suitability suits.  These suits are largely handled through FINRA arbitration.  Please call for consultation.