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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.

 

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.

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.

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.

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.

Joseph Henry Murphy, B. C. Zeigler, RBC

On February 16, 2017, Wisconsin broker Joseph Henry Murphy of B. C. Ziegler and Company and formerly of RBC entered into an AWC settlement with FINRA Regulators.

As identified in FINRA regulatory findings, on February 11, 2015 Murphy exercised discretion in 27 non-discretionary accounts of his customers, placing a total of 80 transactions.  In the days leading up to the trades, Murphy had conversations concerning these transactions with his clients and the clients gave the broker express verbal approval for these trades and his proposed strategy, but Murphy did not receive authorization from these customers on the same day that he executed the transactions.  This is in violation of FINRA rules that require contemporaneous authorization for trades in non-discretionary accounts.

On October 27, 2015 he then again exercised discretion in 20 non-discretionary accounts, placing a total of 32 trades. Once again, in the days leading up to the trades, Murphy discussed these transactions with the clients and they gave Murphy express verbal approval for these trades and his proposed strategy, but he did not receive authorization from these customers on the same day that he executed the transactions.

On December 22, 2015 Murphy made 11 mutual fund transactions for a single customer after a short telephonic discussion with that customer. In that discussion neither the specific mutual funds nor the specific amounts that would be invested were expressly identified, and Murphy used his discretion to make those transactions. Murphy did not obtain written authorization, which is required for an account to be discretionary, from any of the 48 customers to exercise discretion in their accounts and RBC, the employer of Murphy at the time, did not approve these accounts for discretionary trading.

For these actions, Murphy received a 10-day suspension and a $5000 fine.

A link to the AWC of FINRA is found here.

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.

 

Losses with Matthew David Niederbaumer

Please call if you suffered losses with Matthew David Niederbaumer of Huron, South Dakota and employed by Thrivent Investment Management.

Mr. Niederbaumer submitted an AWC, a settlement agreement where a securities broker neither admits but cannot deny fault, in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for 10 business days.

Without admitting or denying the findings, Niederbaumer consented to the sanctions and to the entry of findings that he exercised discretion in executing transactions in connection with the sale and purchase of exchange-traded notes and funds in five of his customer’s accounts. The findings stated that while the customers consented to the transactions, Niederbaumer did not obtain the customers’ prior written authorization to exercise discretion in the accounts, and his member firm did not approve the accounts for discretionary trading.

Part of the concern in this matter is the fact that the trades involved exchange traded notes (ETN).  ETN investments carry a high commission and are high risk.  The possibility for abuse and improper intent is much more likely when such trades result in a commission higher than normal, and the chance that a customer would reject a recommended investment with such a high commission if consulted is greater.

The record of Mr. Niederbaumer’s compiled by FINRA can be found at the following link.