Tag Archives: financial advisor

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.

Binary options recovery scams

The Financial Industry Regulatory Authority (FINRA), in a press release on March 16, 2017 warned investors against companies or persons that approach victims of binary options fraud claiming that, for an up-front fee, they can help them recover the sums invested or the losses incurred on unlawfully operating trading platforms.  Investors should verify that they are dealing with a licensed attorney or regulator prior to engaging in such recovery efforts.

As stated in the release by FINRA, binary options are inherently risky all-or-nothing propositions. When a binary option expires, it either makes a pre-specified amount of money, or nothing at all, in which case the investor loses his or her entire investment.  These options may be fraudulent and sold on illegitimate securities boards, but participation in such options may open an investor to further victimization.

FINRAAfter an individual has participated in such investment activity, fraudulent individuals obtain investor information from the illegitimate boards selling the options and then calls the investors, and can further be spotted with the following hallmarks during the :

  • urgent correspondence and high-pressure calls that specifically refer to your binary options accounts;
  • claims that the caller is with, or acting at the behest of, U.S. government agencies; and
  • subsequent correspondence with official-looking documents that make it look as if money is available, and can be recovered for a fee.

FINRA cautions investors that some of these offers may be fraudulent because it is often very difficult to track down the person or group that has scammed them.

“Following a significant loss, investors may be anxious to get back at least some of their money. This can leave them vulnerable to follow-up frauds that add to existing losses with devastating financial consequences,” said Gerri Walsh, FINRA’s Senior Vice President of Investor Education.

The FINRA release can be found at the following link.

Losses with First Financial Equity (FFEC)

If you have suffered investment losses with First Financial Equity Corp. (“FFEC”) please call for a free consultation with an attorney at 1-866-817-0201.  Recent actions of FINRA, the financial industry regulator, indicate that investors may have been harmed by the actions of this firm.

FFEC and its chief compliance officer entered into a settlement with FINRA regulators  on March 8, 2017 concerning the lapses in supervision.  The alleged lapses allowed a variety of different fraudulent activity to occur throughout FFEC and in particular the Scottsdale, Arizona branch.  FINRA asserted that the chief supervisor of FFEC, the chief compliance officer, had not adequately supervised and that the firm did not have adequate supervisory procedures.

The most obvious result of the lack of supervision is the 26 customer complaints of broker John Schooler.  These complaints, many of which evolved into arbitration lawsuits, involved his inappropriate trades in oil & gas investments and TIC investments.

One issue alleged to be a result of the inadequate supervision is the sale of unsuitable ETFs.  Unsuitable securities are those which are not consistent with the wants and needs of an investor.  Usually, an investment is unsuitable if it puts at risk funds not earmarked for risk, or otherwise is inconsistent with who the client is as an investor.

In the case of FFEC, its brokers recommended and invested its customers in aggressive ETFs, including leveraged and inverse ETFs.  Such investments are known to be high risk, yet the brokers recommended the investments to individuals who did not express a desire for high risk investments.  Worse, many of these investments were purchased by the FFEC brokers for accounts where the brokers were given discretion and not given the required supervisory review.

To ensure suitability, FFEC brokers were required to obtain sufficient information about their investors to evaluate the investments that would be suitable.  The settlement states that this was not done.

Another issue alleged to have been caused by the lack of supervision is churning/excessive trading.  This occurs any time trades are made which the costs and fees are of an amount that the trades benefit the adviser more than the investor.

Southeast Investments, N.C. and Frank Black

We represent investors and have successfully pursued Southeast Investments and Frank Black to judgment.  The arbitration resulted in a nearly full award of investment losses plus an award of attorney fees.  To speak to a lawyer for a free and confidential consultation about losses with Southeast or Black please call 1-866-817-0201.

Black and Southeast are in trouble again.   This time by FINRA regulators.  FINRA’s Department of Enforcement alleges that Respondent Southeast Investments, acting through Respondent Frank Harmon Black, and Black violated FINRA Rules 8210, 4511, and 2010 in the provision of false documents to FINRA and giving false testimony in a regulatory interview during an investigation into whether the Firm had conducted required inspections of branch offices.

One of the false documents was a list of 43 branch inspections Black claimed he performed, including the dates he purportedly conducted the inspections. Respondents also provided five false branch office inspection checklists that Black claimed he completed during the inspections. Enforcement also alleges that for more than five years Respondents failed to ensure that Southeast preserved all business-related emails by permitting registered representatives to use private email providers.

Under an “honor system” set up by Respondents, registered representatives were obligated to send copies of their emails to the Firm to review and retain. For this conduct, Southeast is charged by FINRA regulators, pursuant to FINRA documents, with willfully violating Section 17(a) ofthe Securities Exchange Act of 1934 and Exchange Act Rule 17a-4. Southeast and Black are also charged with violating NASD Rule 3110 and FINRA Rules 4511 and 2010.

The resulting penalty was just short of a quarter million dollars.  Frank Black was expelled from the securities industry.

The FINRA order can be found at the following link.

Jeffrey Pederson is a private attorney representing investors, having represented investors in FINRA arbitrations across the country.  Please call for a consultation if you have lost funds as a result of actions you suspect may be inappropriate.

 

Vincent Bee Payne

On February 2, 2017, Vincent Bee Payne entered into an AWC with FINRA, the Financial Industry Regulatory Authority.  FINRA is the regulator that oversees financial advisers.

The FINRA allegations, which Payne neither admits or denies, are that he falsified signatures without permission on certain insurance documents and subscription agreements.  The actions took place in July and August 2014.

The actions were motivated, as alleged in the AWC, by an attempt to secure commissions and to prevent his employer from reassigning the accounts.  The signatures were for three different customers and were done without the consent of his customers.

Payne entered the securities industry in May 2012 as an Investment Company Products/ Variable Contracts Representative at Farmers Financial Solutions, LLC (“Farmers Financial”), where he remained registered until his termination in March 2015.

From January 2011 through March 2015, Payne also was appointed as an insurance agent with Farmers Insurance Group of Companies (“Farmers Insurance”), a Farmers Financial affiliate. Payne obtained his Series 6 (Investment Company and Variable Contracts Products Representative) and Series 63 (Uniform Securities Agent State Law) licenses on June 25,2012 and July 9,2012, respectively.

FINRA Rule 2010 requires that an advisor, such as Payne, in the conduct of his business, “shall observe high standards of commercial honor and just and equitable principles of trade.” Signing a customer’s name to a document without proper authority constitutes forgery, and forgery is inconsistent with this Rule

The FINRA AWC can be found at the following link.

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.

First Financial Equity Corp. Losses

Please call for a free consultation with an attorney if you suffered losses First Financial Equity Corp., particularly if you suffered losses in ETF or annuity investments.

First Financial Equity, a securities brokerage firm headquartered in Scottsdale, Arizona, as identified by FINRA in February 2017, entered in a regulatory settlement with FINRA regulators concerning allegations that financial advisers were receiving excessive commissions and selling unsuitable ETF investments and annuities.  The suit also revealed that systemic problems existed in the supervising of the advisers that would prevent such violations.

A FFEC broker who typifies the problems at FFEC is John Schooler.  This FFEC broker has 26 customer complaints.  Such complaints generally evolve into arbitration lawsuits against the firm.  The complaints against Schooler involve TIC, oil/gas and other inherently aggressive investments.

Under the terms of the Offer of Settlement with FINRA, the firm consented to, without
admitting or denying the same, the entry of the following findings. The findings
stated that First Financial Equity failed to establish, maintain, and enforce an adequate supervisory system, including written procedures, designed to ensure that the firm’s sales of leveraged and inverse ETFs (nontraditional ETFs) complied with applicable securities laws, and
NASD and FINRA rules.

The findings also stated that First Financial Equity failed to establish, maintain,
and enforce an adequate supervisory system and written procedures related to the sale
of multi-share class variable annuities and to maintain records supporting customer
suitability determinations with respect to variable annuity purchases.

Leveraged and inverse ETF are a high risk investment that pays advisers a high commission.  This creates a problem in that it provides motivation for advisers to recommend such investments to investors not seeking high risk.  Such suitability violations are in violation of FINRA rules in addition to the anti-fraud provision of federal and most state securities laws.

 

The firm failed to provide sufficient training to its registered representatives and principals on the sale and supervision of multi-share class variable annuities. The findings also included that the firm failed to implement a reasonable supervisory system and procedures to supervise variable annuity exchanges.

Dougherty & Company Investment Losses

 

The Financial Industry Regulatory Authority (FINRA) announced in January 2017 that it resolved a regulatory action against Dougherty & Company LLC, headquartered in Minneapolis, Minnesota.  We believe that this action exposed supervisory problems within Dougherty and may entitle investors of certain investments recovery for investment losses.  Please call 1-866-817-0201 for a free consultation with an attorney

Dougherty entered into a settlement agreement with FINRA regulators, where Dougherty did not did not admit or deny fault, but agreed to a censure, a fine of $140,000, and required to pay $78,910 in restitution to a customer.  The action stems from the allegation that for more than four years, Dougherty did not adequately supervise a securities broker who initiated hundreds of trades for elderly customers without contacting them, thus lacking appropriate authorization, and unsuitably recommended dozens of transactions to those customers. Unsuitable recommendations are investment recommendations that were of higher risk than the investor agreed to assume.

The settlement agreement contained certain findings of fact, and those findings stated that Dougherty assigned the primary responsibility for supervising broker trading activity to a supervisor who was also responsible for supervising numerous other brokers and handling his own customers’ accounts. The supervisor’s supervision of the broker in question was not subject to adequate firm oversight or specific direction. Instead, Dougherty inappropriately relied on the supervisor’s discretion and judgment, which the supervisor did not exercise appropriately.

The findings also stated that the firm did not have supervisory tools that were reasonably designed to detect financial adviser or broker misconduct.  FINRA stated that while the supervisor received daily trade blotters and certain monthly exception reports, data generated by a brokerage firm that identifies the investments recommended by a broker and warns of potentially inappropriate investment recommendations, the firm did not provide exception reports addressing short-term trading or margin usage by the financial adviser to the supervisor.

Additionally, the firm’s exception reports designed to identify inappropriate recommendations to elderly customers excluded accounts in the name of a trust, regardless of the age of the settlor or trustee.  Such shortcomings are important because the broker’s trading activity in two of the accounts at issue did not appear on those exception reports because of the existence of a trust.

The findings also included that the firm failed to respond appropriately to warning signs about the broker’s business, such as a dramatic increase in his commissions without a commensurate change in the number of accounts that he handled or the type of products that he sold. In sum, the firm’s system of supervision was not reasonably designed under the circumstances to prevent violations of securities laws and rules, including rules governing trading without customers’ approval and unsuitable recommendations.

The full AWC can be found at the following link.

Jeffrey Pederson PC is a private law firm that has helped hundreds of investors successfully recover similar losses.

 

Charles Fackrell Fraud

If you were an investor with Charles Fackrell and believe you may be a victim of his fraud, or simply wish to know your rights, please call 1-866-817-0201 for a free consultation with an attorney.

LPLFackrell,  a former LPL adviser based in North Carolina, was sentenced by a federal court to more than five-years in prison for running a $1.4 million Ponzi scheme that operated under the name “Robin Hood.”

The former adviser pleaded guilty to one count of securities fraud in April and was sentenced last week to 63 months in jail.

From May 2012 to December 2014, Fackrell ran his Ponzi fraud, misusing funds from at least 20 investors. He was a registered broker with LPL during that time.

Fackrell “used his position of trust to solicit victim investors and steer them away from legitimate investments to purported investments with” various “Robin Hood” named entities, according to the U.S. Attorney’s office. “These were entities [Mr.] Fackrell controlled and through which he could access the victim’s funds.”

Promising guaranteed annual returns of 5% to 7%, Mr. Fackrell “solicited his victim investors by making false and fraudulent representations, including that the investors’ money would be invested in, or secured by, gold and other precious metals,” according to the U.S. attorney. In fact, Mr. Fackrell spent only a fraction of investor money on such assets, the government claims, and diverted over $700,000 back to his investors in the fashion of a Ponzi scheme.

He used the balance of the money to cover personal expenditures, including hotel expenses, groceries and medical bills, and to make purchases at various retail shops and to make large cash withdrawals.

Information for this post was found at investmentnews.com.

Levi David Lindemann Ponzi Victims

Stock handcuffsAs reported in Investmentnews.com, Levi David Lindemann, a Minnesota-based investment adviser has received a six-plus-year prison sentence for stealing from clients and perpetuating a Ponzi scheme.

The 40-year-old adviser, Lindemann, was sentenced to 74 months in prison by a Minnesota federal court, after having pled guilty earlier this year to federal mail fraud and money-laundering charges.

Mr. Lindemann owned and operated Gershwin Financial Inc., which did business under the name Alternative Wealth Solutions, between 2009 and 2014.

“Lindemann abused his position of trust as a financial adviser to steal from his clients, including the elderly ” Mike Rothman, Minnesota’s commerce commissioner, said. “Lindemann defrauded his victims by promising to put their money in legitimate, safe investments when he actually used the funds to pay for personal expenses and Ponzi-type payments to other clients to cover up and continue his fraud.”

According to Mr. Lindemann’s guilty plea, he solicited funds from roughly 50 investors and said he would “use the invested funds to buy secured notes or other legitimate investment vehicles.”

If you are a victim of Lindemann or some other Ponzi scheme, please call 1-866-817-0201 to speak to a private attorney on a free and confidential basis to discuss your rights in private litigation.