Tag Archives: Dallas

Investment Professionals, Inc. (IPI)

If you have suffered investment losses with Investment Professionals, Inc. (IPI) and believe that it may be due to mismanagement, please call 1-866-817-0201 for a free and confidential attorney consultation.

Invest photo 2IPI has recently agreed to pay a fine to the Massachusetts Attorney General for violations of the suitability rule.  This rule requires a financial adviser to not recommend investments that are of a higher risk than an investor either wants or is financially able to take.  The allegations were that IPI was recommending risky investments to seniors who could not afford to take such risks. Though the action was brought by Massachusetts, the systemic nature is a good indication that such violations are occurring in other states as well.

IPI’s business model is based upon partnering with community banks so that the bank’s existing depository customers can be used to provide revenue to IPI and additional revenue to the bank. Though IPI is based in San Antonio, Texas, it engages in such partnerships around the country.

Networking agreements between IPI and their bank partners reveal a referral program where bank employees of its partner banks refer bank customers to IPI financial advisers for monetary incentives. In exchange for allowing IPI representatives convenient access to bank customers, IPI’ s bank partners receive “rent,” or commonly referred as a kickback, which is a percentage of the sales that IPI representatives earn from selling products at bank branches.

While IPI and their bank partners profit from their networking arrangements, the pervasive sales culture emphasizing and rewarding the volume of production at the expense of compliance with policies and procedures, suitability, and oversight means that certain senior citizen bank customers have been harmed .

As identified in the regulatory complaint, IPI has partnered with the following. banks and credit union in Massachusetts: Eastern Bank, Mutual Bank, East Boston Savings Bank, Edgartown National Bank, The Cooperative Bank, and Homefield Credit Union.  Between January 2014 and June 2016, the top ten IPI representatives working out of Massachusetts community banks received approximately 2,208 customer referals. Approximately forty-five percent ( 45%) of these bank referrals to IPI financial were referrals of semor citizens, those individuals aged 65 or older. Approximately fourteen percent (14 %) of those referred invested in market-linked certificates of deposit (“MLCDs”) and approximately thirty-nine percent (39%) invested in annuities. Eastern Bank, is IPI’s largest partner in Massachusetts. Eight of the top ten highest producing IPI representatives in the stat work at Eastern Bank branches.

IPI’s aggressive sales contests exist against a backdrop of lax supervision from offices located in Texas and Kentucky that management personal at IPI identified as “not adequate.” Although IPI’s own policies and procedures prohibit “activities that are designed to reward sales for a particular financial product or family of products” and prohibit activities that “would only serve as a luxury” to representatives, in 2016 IPI rewarded the top ten percent of the previous year’s highest-producing representatives with a trip to Turks and Caicos. In 2015, IPI held a sales contest approved by IPI’ s President and CEO whereby representatives who achieved sales of products up to $150,000.  This served as motivation to put seniors in inappropriate investments.

Kris Etter of IMS Securities

If you have suffered investment losses with Kris Etter of IMS Securities, particularly if you suffered losses in UDF, please call 1-866-817-0201 for a free consultation with an attorney.  We have suit filed against IMS and are currently investigating whether other claims may exist.

It is believed that Etter had an undisclosed conflict of interest in his recommendations of UDF.  Upon information and belief, Mr. Kris Etter sold a substantial amount of UDF to his clients and is the son of Todd Etter.  Todd Etter is the Chairman of UDF IV, one of the top officers of the company.  Mr. Todd Etter also serves as Chairman of the general partner of UDF I and UDF II and Executive Vice President of the general partner of UDF III.  This creates a substantial conflict of interest in UDF recommendations by Kris Etter.

Kris Etter and IMS also failed to properly investigate UDF before recommending it, likely because of the Etter conflict and the heightened commission paid by UDF.  IMS is one of the top four leading sellers of UDF IV in the United States.

The bottom fell out for UDF when it was revealed in December 2015 to be a Ponzi scheme. The offices were raided by the FBI, received a Wells notice, unable to release quarterly reports and was ultimately delisted for a time. Reasonable investigation into the investment of other financial firms revealed that the illegitimacy of the investment. Had IMS done sufficient due diligence it would have likewise discovered that the investment was not suitable for any investor. Instead, IMS and Etter turned a blind eye to the problems of UDF and instead focused on the profits that it was receiving from this high commission product.

The individual ultimately in charge of all IMS offices is the CEO of IMS, Jackie Wadsworth.  Ms. Wadsworth has seven customer complaints naming her for insufficient supervision of representatives under her oversight. These complaints largely concern the inappropriate recommendation by her representatives of unsuitable variable annuity and REIT investments, just like the investments sold clients of Kris Etter and IMS.

As reported in Investmentnews.com in August 2016, the balance sheet of IMS is tilted heavily toward high-commission products like variable annuities and non-traded REITs. Approximately 86% of its revenue of IMS in 2015 came from commissions from such products.

Oil / Gas Investment and Tax Loss

Oil StockSome Energy, Oil and Gas investments can only legally be sold to a limited section of the investing public.  If you suffered losses we may be able to  help.  Contact us at 303-300-5022 or 1-866-817-0201 (toll-free) for a free consultation.

Oil and gas investors do not have to sit and watch their life savings diminish.  These investors have rights though many are unaware of the recourse they have for such losses.

Many investors have received high pressure sales of oil and gas investments.  Brokers and other investment professionals like to sell these types of investments because they usually pay a very high commission.  These commissions can be 10 to 20 times higher than the commission on your average stock sale.  The high commissions will often cause these individuals to ignore the rules in the sale of such investments. The two rules that are usually ignored are those concerning accreditation and suitability.

Oil and gas limited partnerships can generally only be sold to “accredited” investors.  Such investors are individuals whose liquid net worth, their net worth excluding their home, is in excess of $1 million. The second rule that is commonly violated in the sale of such investments is the suitability rule.  Oil and gas investments are known by investment professionals to generally be very high risk investments.  Investments need to be consistent with the level of risk that an investor is willing or able to take.  For example, a person approaching or in retirement or who cannot otherwise afford to take high levels of risk with their investments could not legally be offered an oil and gas investment.

Likewise, an individual who expresses a desire for conservative or moderate investments would not be a suitable investor. There are many other rules that can potentially be violated in the sale of oil and gas investments.

Problems exist not just with the investment losses, but also with the tax consequence of investing in these companies.  A detailed description is found in the following Link to Forbes.   In short, these investments are partnerships.  When debt is defaulted upon by a partnership, and the lender “writes off” the debt, the write off means that the owners (the investors) are taxed as if they received the amount written off as income.  Considering some limited partnerships defaulted on billions in loans, the tax obligation of investors is substantial.

If you have any questions, please feel free to give us a call.  These rules apply no matter if you invest in individual oil or gas investments or invest through a mutual fund or master limited partnership (MLP).

Common oil and gas investments we see recoverable losses include Linn Energy (“LINE” or “LNCO”) and more information can be found at www.jpedersonlaw.com/blog/linn-energy-losses/, Williams Companies (“WMB”), Penn West Petroleum (“PWE”), BP Prudhoe Bay Royalty Trust (“BPT”), Breitburn Energy Partners, LP (“BBEP”), Hawthorne, SandRidge Energy, Williams Ridgewood Energy, Apco, Atlas Energy, Midstates Petroleum, Peabody Energy, Resolute Energy, XXI Energy, Nobel, Permian Basin, and Breitling Energy.  Some of these losses may be recoverable by class action while others may require individual FINRA arbitration suits.

More information on SandRidge can be found at this link.

Oil Stock IIJeffrey Pederson is an attorney who works with investors to recover losses in FINRA arbitration and has represented investors in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut , Florida, Hawaii, Illinois, Indiana, Massachusetts, Montana, New Jersey, New Mexico, New York, North Carolina, Maryland, Minnesota, Missouri, Montana, North Dakota, Rhode Island, Texas, Utah, and Wyoming, in FINRA arbitration actions against securities brokerage firms for unsuitable investments.  Please call for a confidential and free consultation.

Austin Morton

The Financial Industry Regulatory Authority charged Austin Morton, a former Edward Jones broker located in eastern Oklahoma, with the theft of $36,000 from an 83-year-old man with dementia.  It is alleged that this theft was motivated by outstanding gambling debts of Morton.

Wall Street photo 2Morton is alleged to have taken more than $22,000 that the elderly investor left in Morton’s car after the investor liquidated his retirement account.  The FINRA complaint asserts that in September 2016 the investor was in the car of Morton after having lunch with Morton.

A month later the Edward Jones broker filled out a signed blank check from the customer for another $22,000.  Morton defended the action saying that the transfer of funds to him was a loan and that the investor was a personal friend.  Part of the funds were asserted by the broker to be for medical expenses which are alleged to have never occurred.

The FINRA complaint states, “[I]n 2016 Morton incurred close to $130,000 in losses from Online [gambling site], the primary online horse racing wagering facility with which he placed bets at the time.”  The complaint goes on to say, “[I]n September 2016 alone, the month in which he committed his first act of conversion, Morton made 38 separate deposits into his Online [gambling] account, totaling more than $17,300.”

Finra charged Morton with both conversion of funds and an unrelated charge of engaging in undisclosed outside business activity. These are substantial charges that could result in a bar from the securities industry.

On his FINRA BrokerCheck record, a form of his CRD record, Morton denied his employer’s termination charges stating, “gentleman [the alleged victim] [is] a long time family friend,” and that the investor “was no longer a client,” the broker wrote.

A copy of the complaint can be found at the following link.

Recovery of ARCP Losses

If you have suffered losses in ARCP, please call 1-866-817-0201 to speak to an attorney about potential recovery of your losses.

guy in handcuffsThe Department of Justice and the Securities Exchange Commission on September 8, 2016 charged the former chief financial officer of American Realty Capital Properties Inc., (“ARCP”) a large traded REIT now known as Vereit Inc., with overstating the financial performance of the company by purposefully inflating a key metric used by analysts and investors to assess ARCP.

According to the SEC’s complaint, ARCP’s former CFO, Brian S. Block and then chief accounting officer Lisa McAlister devised a scheme to manipulate the calculation of the REIT’s adjusted funds from operations, or AFFO, a non-GAAP measure used when the company provided earnings guidance.

Block was arrested Thursday morning on conspiracy, securities fraud, and other charges at his home in Hatfield, Pa., according to a statement from the U.S. Attorney’s Office for the Southern District of New York.

McAlister pled guilty on June 29, 2016 to one count of conspiracy to commit securities fraud and other offenses, including one count of securities fraud, one count of making false filings with the SEC, and one count of making false statements in a matter within the jurisdiction of the executive branch of the U.S. government. The securities fraud and false filings charges each carry a maximum prison term of 20 years. The conspiracy and false statements charges each carry a maximum prison term of five years.

Jeffrey Pederson, PC represents investors in the recovery of investment losses through fraud and mismanagement.  Most cases resolve by means of FIRNA arbitration.

Information for this post obtained from Investmentnews.com.

Shamrock Asset Management

If you were invested in F-Squared or AlphaSector while with Shamrock Asset Management, please call Pederson Law for a free consultation.  The toll-free number is 1-866-817-0201.

Shamrock Asset Management is a Dallas, Texas investment adviser.  Advertisements made by Shamrock and its advisers inappropriately inflated the investment returns of certain investments.  As a result, Shamrock received a cease and desist order from the SEC.  The relevant parts of the order are as follows:

“From July 2011 through October 1, 2013, in reliance on F-Squared’s false statements, Shamrock’s AlphaSector advertisements falsely stated that: (a) assets had been invested in the AlphaSector strategy from April 2001 to September 2008; and (b) the track record had significantly outperformed the S&P 500 Index from April 2001 to September 2008.

“In fact, no client assets had tracked the strategy from April 2001 through September 2008. In addition, F-Squared miscalculated the historical performance of AlphaSector from April 2001 to September 2008 by incorrectly implementing signals in advance of when such signals actually could have occurred. Shamrock took insufficient steps to confirm the accuracy of F-Squared’s historical data and other information contained in the materials. In addition, Shamrock did not obtain sufficient documentation that substantiated F-Squared’s advertising claims in the materials.

“As a result of this inaccurate compilation of historical data by F-Squared, Shamrock advertised the AlphaSector strategy by using hypothetical and back-tested historical performance that was inflated substantially over what performance would have been if FSquared had applied the signals accurately. 4. As a result,

“Shamrock violated Section 206(4) of the Advisers Act and Rule 206(4)-1(a)(5) thereunder by publishing, circulating, and distributing advertisements that contained untrue statements of material fact. Shamrock likewise did not make and keep true, accurate and current records or documents necessary to form the basis for or demonstrate the calculation of the performance or rate of returns that it circulated and distributed, as required by Section 204(a) of the Advisers Act and Rule 204-2(a)(16) thereunder.”

Investor Recovery of Breitling Energy Losses

Investors in Breitling Energy may have lost their investment but are not without recourse to recover their losses.  The misdeeds and mismanagement of Breitling Energy are things that the investor’s brokerage should have spotted if sufficient due diligence was done.  Investors seeking more information can call toll-free 1-866-817-0201 for a free consultation.

guy in handcuffsThe thinly veiled fraud was recently exposed by the SEC that reasonable investigation should have exposed previously.  The Breitling Energy fraud includes interlocking companies, bad science, fake financials and an massively effective public relations campaign that turned a tech entrepreneur with a shaky record, Breitling CEO Chris Faulkner, into the “Frack Master.”

But the complaint implies that the scheme that took years of planning and execution, but basic components of the fraud were easily discoverable, such as the background of Faulkner and the tens of millions of dollars stolen by Faulkner.

The SEC account starts in 2009 when Faulkner ran a website data hosting company. At that point, “he had never managed, run, operated, or even worked in an oil-and-gas business.”

Despite this, many brokerage firms either ignored this information or failed to uncover such an important piece of information for its investors.

The Law Offices of Jeffrey Pederson, PC has helped investors recover losses for the failure of due diligence by securities brokerage firms.  Please call the number above for more information.

For more information on the Breitling Energy fraud see the following link.

UDF Losses

If you invested in UDF, you have rights and should call 1-866-817-0201 for a free consultation with a lawyer.

The FBI on Thursday, February 18, 2016 raided the Grapevine, TX, in suburban Dallas, offices of large real estate investment trust, United Development Funding IV (“UDF”).  Allegations have circulated that investors have suffered losses at UDF as the result of Ponzi activity.  Shares of UDF on that day toppled 54% before trading was stopped.

FBI

As of October 16, 2016,  United Development Funding IV (“UDF IV” or the “Trust”) released more bad news.  It announced in a press release that it received a written notification letter from NASDAQ indicating that the Nasdaq Hearings Panel (“Panel”) had determined to delist the shares of UDF iV from Nasdaq.  The Trust has not filed its Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Form 10-K”) and its Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30, 2016 (the “2016 Forms 10-Q” and collectively with the 2015 Form 10-K, the “Reports”) by October 17, 2016, the deadline by which the Trust was to file all Reports in order to regain compliance with Nasdaq Listing Rule 5250(c)(1).  This despite repeated assurances by the Trust to its investors that it would file such documents.

A disproportionate number of investors come from a small number of independent brokerages.  This could mean that the sale of the investment was influenced by inappropriate means, such as heightened commissions.  Many of the recommendations were also unsuitable, a fraudulent activity of recommending a security when the security is in contradiction to the wants and needs of the investor.

The brokerage firms we believe sold

Accordingly, the trade halt that has been in place since February 2016 will be converted to a trading suspension effective at the open of business on October 19, 2016.  While this suspension will occur at the open of business on October 19, 2016, the Trust currently plans to appeal the Panel’s determination to delist the Trust’s shares, although no assurance can be given regarding whether the Panel will grant the appeal or whether the appeal will ultimately be successful in preventing the delisting of the Trust’s shares.  As stated in the notification letter from Nasdaq, following the suspension of trading of the Trust’s shares on Nasdaq, the Trust’s shares may trade on the over-the-counter market.

On October 13, 2016, the Trust informed Nasdaq that it would be unable to meet the previously granted extended deadline of October 17, 2016 for filing the 2015 Form 10-K and the 2016 Forms 10-Q, as a result of the Trust’s auditors requiring more time to complete the audit.  In addition, the Trust informed Nasdaq that the Trust has received a “Wells Notice” from the staff (the “Staff”) of the U.S. Securities and Exchange Commission’s (“SEC”) Division of Enforcement stating that the Staff has made a preliminary determination to recommend that the SEC file an enforcement action against the Trust alleging violations of certain provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.

Certain individuals associated with the Trust and its advisor also received similar Wells Notices.  A Wells notice is a notice from SEC regulators indicating that a preliminary investigation of UDF IV has recommended a likely enforcement action for violation of securities laws.

UDF has seen its stock price fall 81% in the months after a hedge fund alleged it was operating for years like a Ponzi scheme.

“The FBI is lawfully present and conducting law enforcement activity” at the UDF offices, said FBI spokeswoman Allison Mahan.

UDF has previously defended itself saying that the Ponzi charges are untrue and that it is the victim of individuals spreading rumors in hopes of shorting the REIT.   Claiming in a filing with the Securities and Exchange Commission that the REIT was the victim of this type of securities trading scheme known as a “short and distort.”  However, UDF also disclosed in December that it had been the subject of a fact-finding investigation by the SEC since April 2014.

The FBI’s presence at UDF headquarters further decimated the company’s share price, which fell  Thursday, February 18, to $3.20 per share after the FBI activity at company headquarters was reported. As recently as two months ago, UDF shares were trading at $17.20.

UDF IV had total assets of $684 million, the vast majority of which, $513.2 million, were notes receivable, according to its quarterly report from November. Notes receivable for related parties was $69.6 million, according to the report.

Earlier this month, hedge fund manager Kyle Bass revealed that he was shorting UDF. “UDF is using new investor money to pay existing investors,” he wrote. “UDF Management is misleading investors and is preying on ‘Mom and Pop’ retail investors.”

UDF investors should speak with an attorney to know their rights.

 

Sources for this report include Investmentnews.com and Wsj.com.

 

 

 

Redonda Russell

broker in handcuffsWe are investigating the actions of former stockbroker/financial advisor Redonda Russell and potential liability of her former employer, First Command Financial.  For information, call the Law Offices of Jeffrey Pederson toll-free at 1-866-817-0201,

Ms. Redonda Russell, a former Ft. Worth, Texas financial advisor is believed to have stolen $316,000 from her investors.  She misused a medallion notary stamp to perpetuate her fraud so her fraud could be conducted electronically. In her scam, she closed 18 client accounts, eight of which were inactive. That made the fraud harder to detect.   She also took funds from clients which she referred to as “loans.” Russell worked for First Command Financial for more than two decades.  She pled guilty to charges of wire fraud in August 2014.   She was facing up to 20 years in prison and $250,000 fine but it is believed that the plea will mean she will serve only one year in prison.

Brokerage firms have stringent regulatory requirements that they must meet to protect investors from brokers misappropriating funds.  We have represented investors in a substantial number of similar claims concerning broker conversion and theft.

Losses at LPL Financial

LPLIf you have lost money with LPL you may be entitled to recovery of some or all of your losses.  Please call 1-866-817-0201 toll-free to speak to a lawyer for more information.

In May 2016, LPL broker Brian David Smit of Sioux Falls, South Dakota was barred from the securities industry.  This was pursuant to an agreement reached between Smit and FINRA regulators, an agreement referred to as an “AWC.”  The allegations concerned the sale of unapproved private securities.  His record also reflects that Smit was under investigation for such sale when he left LPL.  The sale of unapproved investments is a matter of concern since it is commonly a vehicle for fraud.

On May 6, 2015, the Financial Industry Regulatory Authority Inc. (“FINRA”), ordered LPL Financial to pay $11.7 million in fines and restitution for what it deemed “widespread supervisory failures” related to sales of complex investment products.  Such products are suitable for only a limited portion of the investing public and FINRA prohibits the sale of such products to investors to whom such investments would not be suitable.

From 2007 to as recently as April 2015, LPL failed to properly supervise sales of certain complex investments, including certain exchange-traded funds (“ETFs”), variable annuities and nontraded real estate investment trusts (“REITs”), and also failed to properly deliver more than 14 million trade confirmations to customers, according to the regulator.

LPL did not have a system in place to monitor the length of time customers held securities in their accounts or to enforce limits on concentrations of those complex products in customer accounts, FINRA said.  Such issues can lead to the sale of unsuitable investments and put such portfolios in a position of greater risk than the investor may have wanted or could afford to take.

The systems that LPL had in place to review trading activity in customer accounts were plagued by “multiple deficiencies,” Finra said. The firm failed to generate proper anti-money laundering alerts, for instance, and did not deliver trade confirmations in 67,000 customer accounts, according to the settlement letter.

The regulator also charged the firm for failing to supervise advertising and other communications, including brokers’ use of consolidated reports.

The penalty includes a $10 million fine and restitution of $1.7 million to customers who were sold certain exchange traded funds (“ETFs”). FINRA said the firm may pay additional compensation to ETF purchasers “pending a review of its ETF systems and procedures.”  As such, investors should speak to an attorney to maximize recovery of losses.

Content from this post from Investmentnews.com.