Tag Archives: financial advisor

WFG Investor Loss Recovery

WFG has recently been identified and fined as the result of allegations that its supervision of its brokers is lacking.  To speak to an attorney to discuss your rights please call 1-866-817-0201 for a free and confidential consultation.

FINRA asserts that during 2012 and 2013, senior personnel at WFG were aware of red flags that one of its brokers in its San Antonio office, who FINRA only identifies as “MB,” was engaged in unsuitable trading with respect to low-priced securities, which generally carry a high level of risk. Notwithstanding their knowledge of these red flags, the Firm consistently failed to take adequate supervisory steps to ensure that MB’s sales of low-priced securities to his customers were suitable.

Unsuitable investments are investments a broker recommends that are either more aggressive than an investor’s risk tolerance, inconsistent with an investor’s objectives, too risky given an investor’s financial condition, too complicated for an investor given the investor’s lack of investment sophistication, or otherwise inconsistent with the wants and needs of an investor.  There are many incentives that a broker may have for recommending unsuitable investments, but the most common is that risky investments often pay a higher commission.

Brokerage firms have a duty to ensure that only suitable investments are sold.  FINRA’s action alleges that WFG failed to respond appropriately when it should have been aware that a broker was recommending unsuitable investments.

For instance, in August 2012, the Firm held a meeting at WFG’s headquarters that was attended by senior supervisory and compliance personnel, as well as a supervisor FINRA identifies only as “WG,” MB’s direct supervisor. During this meeting, compliance personnel noted that MB was unsuitably concentrating his customers’ portfolios in low-priced securities. WG was instructed during this meeting not to permit MB or other representatives in the San Antonio branch office to purchase any more positions in a specific security, LB, on behalf of their clients.

WG, however, failed to enforce this directive. In fact, MB continued to sell low-priced securities, including LB, in his WFG and RIA (investment advisory) accounts. The Firm and its personnel also failed to follow up appropriately on red flag information that they learned about MB’s sale practices during this meeting.

ln September 2012, the Firm conducted an inadequate inspection of MB’s branch office in San Antonio. The Compliance Manager assigned to conduct this audit, JA, another supervisor, had participated in the August 2012 meeting. Notwithstanding his knowledge of potential sales practice violations involving low-priced securities, the audit conducted by JA related only to non-sales practice issues, such as the review of change of address requests and a check of controls over the receipt of incoming mail.

During this audit, JA did not review: (1) advisory activity by representatives in this branch office, including MB, (2) trading in low-priced securities, including LB; or (3) suitability of transactions recommended or executed in this branch office. In January 2013, the Firm held another meeting at its headquarters with senior supervisory and compliance personnel, as well as WG and MB. During this meeting, compliance personnel raised continuing concerns about ongoing unsuitable trading in low-priced securities in MB’s accounts and about undisclosed complaints against MB from his time with his previous employer.

Ultimately, FINRA censured the firm and ordered it to pay a $150,000 fine for their supervisory lapses.  Such lapses in supervision can make the firm responsible for other broker misdeeds.  If you suffered a loss, call toll-free 1-866-817-0201.

Illinois/Chicago Muni Bond Loss Recovery

Jeffrey Pederson is licensed in the federal courts for the Northern and Central Districts of Illinois, and has aided investors nationwide in the recovery of investment losses, such as muni bond losses.  Please call 1-866-817-0201 for a free and confidential consultation with an attorney.  We are currently investigating the potential recovery for losses in muni bonds issued by both Illinois and Chicago.

The risks of these bonds were foreseeable for years.  Financial professionals have a duty to only recommend investments that are consistent with the level of risk the investor both wants and can withstand.  Those either looking for retirement income or non-speculative investments may possibly have a claim if recommended either the Illinois or Chicago bonds.

Illinois bonds have long been at risk since the state has not had an approved budget in over two years.  The state currently has over $14 billion in unpaid bills.  This comes in the wake of similar financial problems in the territory of Puerto Rico.  In Puerto Rico, financial problems led to bankruptcy and caused thousands of investors to lose their life savings when they were led to believe that they were invested in “safe” municipal bonds.

Chicago is also on the verge of bankruptcy.  For years, the return on Chicago bonds were known to be too good to be true.  In 2014, the city’s debt was downgraded to junk status given the massive debts owed to four of its pension funds. This led to a widespread selloff in Chicago muni bonds.

Chicago Mayor Rahm Emanuel, in response, instituted a record property tax increase for city residents. Bills in 2016 will be, on average, 13% higher. The increased ‘revenue’ to the city is being used to help fix the four pension funds’ large underfunded status.

The Mayor’s plan to fix the $20 billion public pension shortfall was ruled unconstitutional. The restructuring plan was passed by the state legislature in 2014, but was struck down due to the state’s constitution, which has a clause that forbids the reduction of public pensions.

David Lerner Associates REIT Investigation

David Lerner Associates agreed to pay a $650,000 fine for the sale of unsuitable REITs to its investors and other violations.  Very little of the fine will compensate investors for their losses.  Instead, investors suffering losses contact a private attorney.  For a free, confidential consultation, investors can call Jeffrey Pederson at 1-866-817-0201.

LandmarkThe non-traded REITs at issue in the regulatory action were REITs now known as Apple Hospitality REIT investments.  The offerings included are Apple 7, Apple 8 and Apple 9.

Suitability violations are for the recommending of investments that are too risky, complicated or volatile for an investor considering the investors objectives, risk tolerance and investment sophistication.  Non-traded REITs such as Apple are generally only suitable for only a limited slice of the investing public.  Investors, including those looking for either stability, income, low risk, preservation of capital or liquidity from this investment, were likely inappropriately sold this investment.

The agreement to settle the charges was in the form of a consent order entered into with New Jersey regulators.  Of the fine, $100,000 went to pay for costs and $50,000 was to pay for investor education programs.

More information on the fine and the regulatory action can be found at the following link.

Investigation of Harold Stephen Pomeranz

Invest photo 2Harold Stephen Pomeranz of Stifel Nicolaus of New York entered into a regulatory settlement with FINRA regulators to settle charges against him.  Though Pomeranz neither admitted or denied fault, FINRA asserted the following factual findings and assessed a deferred fine of $5,000 and suspended from association with any FINRA member in any capacity for three months.

Pomeranz consented to the sanctions and to the entry of findings that he
recommended a number of unsuitable short-term unit investment trust (UIT) transactions
in an elderly customer’s account. The findings stated that the UITs Pomeranz recommended
to the customer had maturity dates of 24 months, and carried initial sales charges ranging
from approximately 2.5 percent to 3.95 percent. Yet the average holding period for the UITs Pomeranz recommended was less than 14 months. Moreover, on numerous occasions,
Pomeranz recommended that the customer use the proceeds from the short-term sale
of a UIT to purchase another UIT with similar or even identical investment objectives.
Pomeranz’s recommendations to purchase and sell UITs on a short-term basis caused the
customer to incur unnecessary sales charges and were unsuitable in view of the frequency,
size and cost of the transactions.

Securities brokers are not allowed to charge commissions and costs that are excessive in relation to the average equity in the portfolio.  So when a broker makes trades in products that have costs of 3 to 4% it only takes a few before those trades become excessive and in violation of the duties owed the investor.

Attention Investors of Voigt Cullen Kempson III

Pederson, PC is investigating the actions of V. Cullen Kempson III currently of American Portfolios and previously of Commonwealth Financial Network.   Kempson has previously settled charges of unauthorized trading in the account of a deceased investor and is currently facing felony weapons charges.  To speak to an attorney for a free and confidential consultation please call 1-866-817-0201.  

A recent settlement agreement Kempson enter into with FINRA regulators agrees to the 30-day suspension for making a large number of unauthorized trades in the account of an investor Kempson knew was deceased.  In the agreement, referred to as an AWC, Kempson neither admits nor denies fault.

The alleged facts are that in February 2007, A Kempson investor opened two investment Invest photo 2advisory accounts with Kempson at the Firm. At the time, the investor signed an agreement with the Firm granting Kempson discretionary trading authority, the ability to make securities trades without first contacting the investor.  A broker must contact an investor prior to the making of trades unless the broker has been granted authority by the investor in writing to make trades in an account.

On June 13, 2015, the investor passed away. Although Kempson was aware of the investor’s death since at least June 29,2015, Kempson did not inform his Firm of the investor’s death and continued to effect trades on a discretionary basis in the accounts.

Between June 29,2015 and April 5, 2016, Kempson effected a total of 40 trades in the deceased individual’s accounts.  FINRA Rule 2010 requires members to observe high standards of commercial honor and just and equitable principles of trade. After the investor passed away, Kempson had no written authority to conduct any trades in the investor’s accounts. FINRA charged that, by effecting 40 trades in a deceased customer’s accounts, Kempson violated FINRA Rule 2010.

Additionally, in February 2017, Kempson was charged on felony weapons charges for the unlawful possession of a weapon.  As stated in his CRD, he case is in front of the New Jersey Superior Court in Essex Vincinage.  He has asserted that he is not guilty.

Attention investors of William McWilliams

Jeffrey Pederson PC is investigating and interested in speaking to investors of William H. McWilliams, formerly of Raymond James and currently of Stifel Nicolaus.  This is in wake of a regulatory AWC entered into by William McWilliams with FINRA that alleges unauthorized trading by McWilliams.  FINRA is the regulatory agency that oversees investment brokers.

FINRA alleged that from August 2014 through December 2014, McWilliams exercised discretionary trading authority without obtaining prior written authorization from the customers and the Firm at least 28 times in eight customer accounts. As a result of such conduct, McWilliams violated regulatory rules NASD Rule 2510(b) and FINRA Rule 2010.  These are rules that all securities brokers must follow.

NASD Rule 2510(b) mandates, “No member or registered representative shall exercise any discretionary power in a customer’s account unless such customer has given prior written authorization to a stated individual or individuals and the account has been accepted by the member, as evidenced in writing by the member or the partner, officer or manager, duly designated by the member, in accordance with Rule 3010.”

NASD Rule 2510(d)(I) states, that the written authorization requirement does not apply to “discretion as to the price at which or the time when an order given by a customer for the purchase or sale ofa definite amount ofa specified security shall be executed, except that the authority to exercise time and price discretion will be considered to be in effect only until the end ofthe business day on which the customer granted such discretion, absent a specific, written contrary indication signed and dated by the customer.”

FINRA Rule 2010 requires associated persons to observe high standards of commercial honor andjust and equitab!e principles oftrade.

During the Relevant Period, while employed at Raymond James, McWilliams exercised discretionary trading authority in response to customer liquidation requests at least six times in four Firm customer accounts without obtaining prior written authorization from the customers and without having the accounts accepted as discretionary accounts by Raymond James.

McWilliams also inappropriately exercised discretion at least 22 times in four other customer accounts. ln these instances, McWilliams failed to discuss the subject trades with the customers on the day ofthe transaction and the Firm prohibited the use ofdiscretion in these circumstances. By virtue ofexercising discretion in the accounts of eight customers without written authorization, McWilliams violated NASD Rule 2510(b) and FlNRA Rule 2010.

Robert “Rusty” Tweed

Jeffrey Pederson PC is interested in speaking to investors of Robert “Rusty” Tweed as part of an investigation into the broker.  Tweed was previously with Cabot Lodge, Concorde Investment Services, and MAM Securities.  Please call 1-866-817-0201 for a free and private consultation with an attorney.  Many issues which may entitle investors to recovery against Tweed’s former employers, have been brought to light by a recent FINRA complaint against Rusty Tweed.  However, time is running on the ability to recover.

FINRA alleges in a complaint that between November 2009 and March 2010, Rusty Tweed obtained more than $ 1.6 million from his retail customers through a false and misleading private placement memorandum (“PPM”) he used to offer and sell interests in his Athenian Fund LP, a pooled investment fund that he both created and controlled.

Tweed drafted and circulated the private placement memo (PPM), a document that is supposed to provide investors with significant information to evaluate the investment, that misrepresented and failed to disclose material information to investors, and twenty three customers invested in the Fund without the benefit of complete and accurate information.

The misrepresentations included: (1) the total potential fees and costs associated with the Fund? (2) Tweed himself, and (3) the entities and individual who would ultimately have immediate control over the money that customers invested.

According to the Complaint, Tweed and the PPM misrepresented or failed to disclose to retail customers the following material facts:

a. First. Tweed and the PPM misrepresented the total potential costs of an investment in the Athenian Fund. opting to disclose certain costs and fees while oniitting others that would reduce any return on investment.

b. Second, Tweed and the PPM also failed to disclose that the omitted fees and costs were added only after Tweed discovered that arbitration (complaints) against him would prohibit him from opening a trading account for the Fund directly and require the use of a more expensive master fund structure.

c. Third, Tweed and the PPM failed to disclose that Tweed had replaced the Fund’s identified master fund with another entity controlled by an undisclosed person (ER). who would now have immediate control over the Fund’s assets. Tweed and the PPM likewise provided no information sufficient for investors to evaluate the risk ofentrusting their capital to ER and his company, such as relevant background. other business activities, and qualifications.

d. Fourth, Tweed and the PPM failed to disclose the additional management fees and perforniance allocations that arose when he granted control to ER and his management company, and Tweed’s own interest in those fees, which would further reduce any return on the retail investors’ capital.

As a result of these material misrepresentations and omissions. Athenian Fund investors could not evaluate the true costs and risks associated with the Fund, including those relating to the individual or the entities with immediate control over their capital.

 

Attention Investors of Jeffrey Dragon

FINRA alleges that over a two-year period, Jeffrey Dragon, a registered representative of Berthel Fisher & Co. Financial Services. Inc., generated more than $421,000 in concessions for himself and his firm. at the expense of his customers, by recommending and effecting a pattern of unsuitable short-term trading of unit investment trusts ( UITs ).

Invest photo 2Specifically, between January 1, 2013 and December 31, 2014 (the ‘UIT Period’ ) Dragon recommended to 12 customers – many of whom were seniors, unsophisticated investors, or both – that they liquidate UIT positions that they had held for only a few months, and which they had purchased on Dragon s recommendations, and then use the proceeds to purchase other UITs. Because each UIT purchased carried a new sales load, and because UITs are designed not to be actively traded, Dragon s recommendations were excessive and unsuitable.

Dragon’s recommendations to these customers were further unsuitable. in that he designed his recommendations to prevent his customers’ UIT purchases from qualifying for sales-charge discounts. Despite regularly recommending that customers purchase UITs in amounts that exceeded volume-discount “breakpoints” of $50,000 and $100.000. Dragon routinely structured their investments – by spreading the amounts over smaller purchases and multiple days – in order to avoid reaching those thresholds. By doing so. Dragon sought to increase his concessions at his customers’ expense.

Berthel allowed this activity to occur – and. in fact, profited from it – as a direct result of its inadequate system for supervising UIT trading. Throughout the UlT Period. Berthei’s only regular supervisory review of UIT recommendations and customer activity consisted of manual reviews of daily trade blotters that did not indicate either how long UIT positions had been held before liquidation or the source of funds used to purchase new UITs. Thus, Berthel’s supervisory system was not reasonably designed to prevent short-tenn and potentially excessive UIT trading.

Berthel’s supervisory system was also inadequate because it was not reasonably designed to prevent short-term and potentially excessive trading in mutual funds. As with UlTs. the firm’s supervisory system lacked any methods, reports, or other tools to identify mutual-fund switching or trading patterns indicative of other misconduct between January 1. 2013 and December 31, 2015 (the ‘ Mutual Fund Period’ ).

Likewise, Berthel’s supervisory system was not reasonably designed to censure that the firm’s UIT and mutual-fund customers received all sales-charge discounts to which they were entitled during the UIT Period and Mutual Fund Period, respectively. Instead. Berthel relied 2 on its registered representatives and its clearing firm to determine whether UIT and mutual-fund purchases should receive sales-charge discounts, and conducted no review or supension to determine i f those discounts were applied correctly.

This not only allowed Dragon s breakpoint-manipulation scheme to go unchecked, it also resulted in further injury to Berthel s customers: from 2010 through 2014, Berthel failed to detect that more than 2,700 of its customers’ UIT purchases did not receive applicable sales-charge discounts. As a result, Berthel customers paid excessive sales charges of approximately $667.000, nearly all of which was paid to Berthel and its registered representatives as dealer concessions.

Anne Marie Comcowich Loss Recovery

Anne Marie Comcowich, a Scranton, Pennsylvania area securities broker, has agreed to a sanction to resolve a FINRA investigation.  The underlying investigation concerned the unauthorized withdraw of funds, theft, from investor accounts.  Ms. Comcowich was previously with Prudential.

In 2017, while being investigated in connection with unauthorized withdrawals, Comcowich, through her lawyer, informed FINRA staff that she would not produce information and documents requested pursuant to FINRA Rule 8210. Comcowich thereby violated FINRA Rules 8210 and 2010.

By failing to participate in the regulatory action, Comcowhich received a bar from FINRA which Bull pictureprohibits her from working with any other securities brokerage.

Details of the FINRA action can be found in its AWC.  In the AWC, Comcowich neither admits nor denies the allegations.

Comcowich was suspected of processing 13 unauthorized withdrawals from customer accounts. In an email and follow up telephone call with FINRA staff on April 3, 2017, and by this agreement, Comcowich acknowledges that she received FINRA’s requests and will not produce the information and documents requested.  The actions of Comcowich are in violation FINRA Rule 2010 provides that “[a] member in the conduct of its business shall observe high standards of commercial honor and just and equitable principles of trade.” A violation of FINRA Rule 8210 is also a violation of FINRA Rule 2010.

Jeffrey Pederson is an attorney who has represented investors similarly victimized.  A limited number of attorneys have such experience in front of FINRA, where such cases would need to be brought.  Please call for a free and confidential consultation.

 

Invement losses with John Blakezuniga

John Blakezuniga, formerly of Vanguard Capital, recently entered into a settlement agreement with FINRA regulators, where he agreed to a fine but did not admit or deny fault, concerning alleged fraudulent activity in the portfolios of his investors.  Blakezuniga sometimes goes by the name of John Blake, sometimes by the name John Zuniga, and sometimes by John Blake-Zuniga.

Jeffrey Pederson, PC helps investors recover such losses.  For a free and confidential consultation with a lawyer, please call 1-866-817-0201.

As identified in the FINRA regulatory settlement, referred to as an AWC, between 2007 and 2013, Blakezuniga borrowed $775,000 (which he has not fully repaid) from two firm customers Invest photo 2in violation of the firm’s policy. As a result, Blakezuniga violated NASD Rules 2370 and 21 10 and FINRA Rules 3240 and 2010.

Blakezuniga separately violated FINRA Rule 2010 by falsely answering “no” to a question on the firm’s 2013 annual compliance questionnaire that asked if he had ever borrowed money from a customer.

In addition, from 2010 to 2014, Blakezuniga recommended approximately 1,280 transactions in inverse and inverse leveragedExchange Traded Funds (“nontraditional ETFs”) in 85 customer accounts without a reasonable basis for the recommendations. By doing so, Blakezuniga violated NASD Rule 2310 and FINRA Rules 2111 and 2010.

Borrowing funds from an investor/customer is fraudulent because of the discrepancy in the bargaining power between broker and investor.  The prohibition is codified in NASD and FINRA rules.  NASD Rule 2370 and FINRA Rule 3240′ generally prohibit registered representatives from borrowing money from any customer subject to limited exceptions and in accordance with firm procedures.

Likewise, lacking a reasonable basis for the recommendation of an investment is violative. NASD Rule 2310 and FINRA Rule 21113 require registered representatives to have reasonable grounds for believing that a recommendation is suitable for a customer based upon the customer’s disclosed security holdings and financial situation and needs. A violation ofthese rules also constitutes a violation of FINRA Rule 2010.