Tag Archives: securities fraud

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 ).

Specifically, 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.

Mark Holt Loss Recovery

Mark Holt is a former stock broker currently serving a prison sentence for stealing the funds of his investors and sending false account documents.  The scheme victimized investors in Minnesota and likely elsewhere.  Due to the incarceration, investors seeking recovery will likely need to pursue Holt’s former employers by means of FINRA arbitration for loss recovery.

From August 2005 to February 2007, Holt was a registered representative of Geneos Wealth Management, Inc., which is both a securities brokerage and investment adviser. From February 2007 to November 2013, Holt was a registered representative of Harbour Investments, Inc., which is also a dually registered entity. Holt, 47 years old, is currently incarcerated at the Federal Correctional Institution in Oxford, Wisconsin.

guy in handcuffsDetails of the SEC action can be found in its release.

On August 14, 2014, Holt was sentenced to a prison term of 120 months followed by three years of supervised release and ordered to make restitution in the amount of $2,940,982.75.  The chances of these payments being made is not great considering Holt could be incarcerated for much of the next ten years.

The allegations are that from about September 2005 through Jan. 12, 2014, Holt “knowingly caused an email communication to be transmitted in interstate commerce via servers in Texas to a client in Minnesota that would give the client access to false account statements.”

The SEC and the criminal documents state that Holt “misappropriated [investor] funds by depositing client checks into a bank account he controlled and using these funds to pay for personal and business expenses. In furtherance of his scheme, Holt lulled his clients into believing that he had purchased various investments for them by sending fraudulent Morningstar client summaries and [...] a web-based portal, that displayed fraudulent account balances.”

“Holt made monthly payments to his clients that were intended to appear as interest or annuity payments,” in a classic Ponzi-type scheme.

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.

Investment Professionals, Inc. (IPI)

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

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

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

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

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

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

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

Kris Etter of IMS Securities

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

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

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

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

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

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

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 call:

  • 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.

Charles Lee Deremo

Cadaret, Grant & Co., Inc. of Syracuse, New York and Stockbroker Charles Lee Deremo of Apple Valley, Minnesota submitted a Letter of Acceptance, Waiver and Consent.

If you invested with either Cadaret or Deremo, please call 1-866-817-0201 for a free consultation with an attorney.

Cadaret was censured and fined $10,000 and Deremo was fined of $5,000,
suspended from association with any FINRA member, which is any stockbrokerage or financial advisory firm, in any capacity for 10 business days.

The firm and Deremo consented to the sanctions and to the entry of findings that the firm failed to enforce its own procedures and conduct an adequate suitability review of Deremo’s recommended investment strategy for a customer.  This is in violation of FINRA rules that require a brokerage firm to review recommendations of brokers to verify that the recommendations are suitable.

The findings, which were neither admitted nor denied, stated that the firm failed to identify that Deremo’s basis for the recommendation of a strategy for the customer may not have been suitable given the customer’s age, his investment objectives, his risk tolerance and the concentration of his investment. Moreover, the customer relied on monthly withdrawals from his variable annuity for living expenses.

The regulatory document giving more details of the underlying facts can be found with the following link.

If you believe you were also sold unsuitable securities, please call the number above for a free consultation on your legal rights and whether you have grounds for recovery.  Regulatory actions such as this can often expose the basis for additional private actions.

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.