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Losses in Inverse VIX ETNs and ETFs

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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.

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.

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.

blog_gulf_mexico_oil_rigOil 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.  This tax consequence is referred to as CODI.  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.

Kelly Clayton Althar

Kelly Clayton Althar has been barred from the securities industry for excessive trades and recommending and purchasing investments that were too high of a risk for the broker’s investors.

The allegations to which Althar consented, without admitting or denying fault, are that between April 2011 and March 2014 the broker made unsuitable recommendations and engaged in excessive trading in two accounts held by an elderly customer.  Althar engaged in high volume trading to generate commissions and over concentrated a client’s accounts in risky securities, despite the fact that the client was close to retirement and wanted only low risk investments. Althar’s trading decimated the client’s accounts, which constituted the bulk of her net worth and retirement savings.

During the Relevant Period, Althar often purchased, sold, and subsequently repurchased the same security in CN’s accounts within a short period oftime. For example, on December 26, 2012, Althar purchased 696 shares of American Capital Agency Corp. (“AGNC”), a REIT, for $21,559.09 and sold those shares, at a loss, two months later on February 28,2013, for $21,298.50. He then re-purchased 782 shares of AGNC two months later after the price had risen, for $26,756.36. and then sold those shares, at a significant loss, six weeks later for $18,619.03. On those four trades, on which CN lost over $8,000 in a matter ofmonths, Althar generated over $3,000 in commissions.

A link to the AWC can be found at the following link.

Althar had previous pled no contest to a charge for felony grand theft and was sentenced to a 30-day work program and 36 months probation.

 

Ameritas Broker Theft and Other Losses

If you have suffered losses, believe funds are missing from your account, or had funds stolen while with Ameritas Investment Corp., please call the Law Offices of Jeffrey Pederson at 1-866-817-0201 for a free consultation with an attorney.

We are currently investigating losses and missing funds of Ameritas investors due to inadequate supervision of Ameritas brokers.  Ameritas recently submitted an AWC, a settlement with regulators, in which the firm was censured and fined $50,000. Without admitting or denying the findings, the firm Stock handcuffsconsented to the sanctions and to the entry of findings that it failed to adequately monitor and otherwise supervise a registered representative’s activities. The findings stated that the firm did not detect that the representative changed a customer’s address of record to the address of the representative’s branch office, and then requested disbursements from the customer’s account to the new address of record. The customer did not authorize either the address change or the disbursement of funds. As a result, the firm sent funds from the customer’s account to the branch office, where the representative misappropriated the money. The firm’s supervisory systems and procedures at the time were not sufficient to adequately monitor its representative’s requests to change the customer’s address of record without her knowledge and to disburse funds to her new address.

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.

David B. Tysk of Ameriprise Investment Loss

If you suffered investment loss with David B. Tysk please call 1-866-817-0201 for a free consultation.

David Tysk, financial advisor for Ameriprise in Eden Prairie, MN, was fined $50,000 and
suspended from association with any FINRA member in any capacity for one year. The
Invest photo 2NAC affirmed the findings in the OHO decision and increased the sanctions. The sanctions
were based on findings that Tysk altered computer notes of customer contacts after the
customer complained about the suitability of a recommendation.

The findings stated that Tysk knew or should have known the importance of customer-related notes in the event of complaints. Tysk’s concealed alterations of his notes did not comply with the clear import of the document-retention policies in his member firm’s code of conduct. Tysk failed toinform the firm of the alterations when he provided a copy of the notes to be produced in discovery during an arbitration proceeding.

The customer became suspicious of the notes and requested further discovery to determine whether the notes had been altered after he lodged his complaint with the firm. Tysk and his firm opposed the requests. In a meeting to prepare for the arbitration hearing, Tysk finally disclosed to the firm that he had altered the notes. At the conclusion of the arbitration hearing, the firm and Tysk were sanctioned for violating arbitration discovery rules.

A copy of the NAC decision can be found at the following link.

Investors with Bonanza Creek Losses

Bonanza Creek has suffered deep declines lately but investors purchasing Bonanza Creek as part of their moderate to conservative portfolio may have recourse.  Please call 1-866-817-0201 for more information.

Shares of Bonanza Creek Energy were battered Wednesday, July 13, after the Colorado oil and gas producer disclosed it had hired a financial specialist to help it explore alternatives, including a restructuring.

Bonanza Creek, said it had retained Perella Weinberg Partners, a New York firm known for working with financially troubled companies to avoid bankruptcy or planning for bankruptcy.

The market didn’t react well to the news. Shares of Bonanza Creek, which closed at $2.28 on Tuesday, plunged to as low as $1.14 before crawling back to end trading Wednesday at $1.44 a share, a 36.8 percent decline.

Shares of the company had traded above $60 in August 2014, a few months before Saudi Arabia said it would no longer limit its production to support prices. That set off a steep descent in oil prices from above $100 a barrel to briefly under $30 when Iranian producers re-entered the market, forcing prices down even further.

Oil is now back around $45 a barrel. But lenders are reducing the credit they are willing to extend to producers given the lower value of their oil and gas reserves.

Bonanza Creek said in late May that the amount it could borrow under its credit agreement was cut from $475 million to $200 million. That was a problem because the company had borrowed $288 million, leaving it with a deficit of $88 million.

Bonanza Creek, like many petroleum producers, initially turned to the equity markets to help it stay afloat. The company raised more than $200 million in a secondary offering back in February 2015 to investors willing to pay $26 a share.

The Denver Post of July 14, 2016 provided information for this post.

Loss Recovery for Geneos Wealth Management

The brokerage based in Centennial, Colorado entered into multiple Acceptance, Waiver and Consent agreements, where it neither admitted nor denied regulatory allegations, that may indicate inappropriate handling of investor accounts.

If you lost funds dealing with Geneos representatives and believe the losses were due to wrongdoing please call 1-866-817-0201 for a free consultation.

The Securities and Exchange Commission has settled with Geneos, along with two other brokerage firms, over charges that the three breached their fiduciary duties to clients and generated millions of dollars of improper fees in the process.   Combined, the three firms were required to pay in excess of $15 million with the April 2018 settlement.  Allegations concern high-cost mutual funds.  

Geneos also entered a settlement agreement for alleged wrongdoing, with FINRA on October 30, 2015 concerning the sale of limited partnership investments by its brokers.  The brokerage consented to the sanctions and to the entry of findings that it failed to supervise representatives at a branch office in Draper, Utah who were participating in the execution of securities transactions, namely investments in the form of limited partnership interests, as part of their disclosed outside advisory activities.

The findings stated that the Geneos Invest photo 2representatives’ participation included, but was not limited to, meeting with and recommending the underlying securities to customers, providing customers with copies of the private placement memorandum and related paperwork, assisting customers with completing the investment paperwork, accepting the completed paperwork and investment funds, and receiving compensation. The firm also failed to record the transactions on its books and records.

One issue with the recommendation of such investments is the fact that such investments are highly aggressive and only suitable for limited numbers of investors who are willing to take such high risks with their savings.  Representatives have a compelling reason to sell such high risk investments due to the significantly higher commissions that such investments pay.  A firm selling such investments has a duty to verify the suitability of such investments and may have legal liability when such investments are sold to investors who were only willing to take moderate risks.

A link to the AWC can be found at the following: http://disciplinaryactions.finra.org/Search/ViewDocument/63683

 

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.