Tag Archives: Stockbroker fraud

Charles Bloom of Chelsea Financial

Please call 1-866-817-0201 if you were an investor with Charles Bloom of Chelsea Financial.  Bloom operated primarily in the West Palm and Royal Palm areas of Florida, but likely has investors nationwide.  We have reason to believe that Bloom engaged in a pattern of inappropriate behavior in the portfolios of his investors.

In October 2017, FINRA, the regulator that oversees securities brokers, commenced an investigation into allegations that Bloom engaged in an unsuitable pattern of trading in at least three customer accounts.

All securities brokers are required to know their investors and only recommend investments Invest photo 2that are consistent, or suitable, with the investors risk tolerance and investment objectives, among other things.  Brokers have many incentives to recommend investments that are too risky or otherwise unsuitable for investors.  This motivation can lead to large losses by an investor.  As such, the recommendation of unsuitable investments is considered to be a form of fraud.

In connection with the FINRA investigation, on June 21, 2018, FINRA sent a request to Bloom for on-the-record testimony. Brokers are required to cooperate with FINRA investigations into misconduct.  As stated in a phone call with FINRA staff on July 3, 2018, Bloom acknowledges that he received FINRA’s request and would not cooperate.

Ultimately, Bloom surrendered his license and accepted a bar from the securities industry as a result of the allegation.  However, this allegation is just the latest in a long list of allegations.  The record  of Bloom shows prior regulatory actions, a 20-day suspension, and two customer suits.  This raises the question of why Bloom was hired and why he was not given appropriate supervision in light of his history.

We represent investors in securities industry arbitration proceedings across the country.  Please call for a free and confidential consultation.

 

Recovery of CLO Losses

CLO (Collateralized Loan Obligation) investors may have recovery avenues for their losses.  These complex investments are only suitable for the most sophisticated investors willing to assume the high risk of these investments.  Investors who are less sophisticated or who seek only investments or looking for only moderate risk investments cannot legally be sold these investments.  For a consultation, please call 1-866-817-0201.

The financial industry is governed by rules concerning whether certain investments can be sold to investors.  One such limitation is that securities broker, financial advisors and investment advisors may only sell investments that are suitable, or investments that are consistent with an investors level of sophistication, investment objectives and tolerance for risk.  Complex investments that carry a high risk potential are unsuitable for your average investor looking for growth or income with a tolerance for moderate risk.

investingstockphoto 1As identified by FINRA, the Financial Industry Regulatory Authority, a CLO is very complex and risky investment.   A CLO is a security made up of loans to corporations that usually have relatively lower credit ratings. Leveraged buyouts, in which a private equity firm typically borrows money to purchase a controlling stake in a company, are a common for CLO loans. After the loans are made, they’re sold off to a manager, who bundles them together and then manages the consolidations, buying and selling loans as he or she sees fit.

A CLO manager raises money to buy the loans by selling debt and equity stakes to outside investors in slices of the total collection according to risk level.

FINRA gives an example to demonstrate how tranches work.  Think of everyone who owns a piece of the loan pool as standing in a long line. Those at the front of the line would get repaid first if any of the loans in the pool go into default, but they receive lower interest payments than those at the back of the line. The people further back are paid more for taking a greater risk that they would not be repaid in the event of losses in the underlying loan pool.

Typically, a CLO includes both debt tranches and equity tranches. The debt tranches are similar to bonds – they have credit ratings and offer regular coupon payments for a period of several years. Interest rates may be set or “floating,” meaning they vary with prevailing interest rates.

Debt tranches have first dibs on payments from the underlying loans, though here again, there are important differences within the group. Senior tranches have a higher-priority claim to payments (and receive lower interest payments) than junior tranches (which receive higher interest payments).

Equity tranches are the riskiest piece of the CLO puzzle. They have no credit ratings, are last in line for payment, and thus are the first to suffer losses if the underlying loan portfolio falters. Though equity tranche investors are simply paid whatever cash is left over after the debt investors have received their interest payments, they typically earn a higher return than debt tranche investors do.

FINRA is not alone.  The Wall Street Journal has also identified these investments as risky and complex.  The Journal points out that the race to provide higher returns has led to an even greater sales of such investments, and that such investments hit a record in 2017.

Unless you are a very sophisticated investor willing to speculate the money invested in CLOs, you should seek legal representation for losses sustained.

Attention Kenny Kim, IFG Investors

If you were an investor of Kyusun “Kenny” Kim of IFG, please call 1-866-817-0201 to speak to an attorney about your rights for recovery.  Most cases are handled on a contingency basis, where the attorney does not receive fees unless there is a recovery.

Mr. Kim has been accused by regulators  of systematically committing securities violations in the accounts of senior investors for the time period of 2006 through 2015.  He is accused of both of recommending unreasonably risky, or unsuitable investments, to senior investors, and of falsifying the documents of the investors to allow him to convey to his supervisors that the recommendations were suitable.

Invest photo 2As a broker, Mr. Kim’s actions are governed by the Financial Industry Regulatory Authority (FINRA).  FINRA has a suitability rule that requires that a broker have a reasonable basis for believing that a recommended transaction or investment strategy is suitable for the customer based on the customer’s investment profile, which includes, among other factors,
the customer’s age, financial situation and needs, investment experience, and risk
tolerance.

Kim was selling alternative investments to seniors.  Alternative investments are investment other than stocks, bonds and mutual funds.  They include REITs that do not trade on a stock exchange and structured notes.  Though structured notes may look like bonds or mutual funds, such investments contain a derivative component that make the investment extremely risky and speculative in nature.  An investor may need to speak to an attorney just to confirm an investment is actually a structured note.  Such recommendations were improper for investors with conservative or moderate risk tolerances.

Adding to the risk, Kim improperly recommended that many of the investors unreasonably concentrate their portfolios in these alternative investments.  This only increased the level of speculation in the portfolio.

This is only the latest chapter in a long history of regulatory actions and customer lawsuits.  FINRA has indentified 23 investor lawsuits, either filed or threatened, concerning Kim.

While Mr. Kim has been expelled from the securities industry, this does little to compensate investors who have lost their life savings.  Jeffrey Pederson has represented investors across the country in similar suits in front of FINRA.  Please call for a free and confidential consultation.

 

Christopher Wendel Investors

If you are an investor suffering losses with Christopher Wendel, please 1-866-817-0201 for a free consultation.  Mr. Wendel has been implicated in the improper sale of Woodbridge  notes and other securities violations.  Jeffrey Pederson has represented investors nationwide in cases concerning Woodbridge and other similar securities actions.

Wendel solicited investors to purchase promissory notes in Woodbridge Mortgage Investment Funds, a purported real-estate investment fund.  Wendel did not provide notice to SA Stone Wealth Management, his employer, prior to participating in these private securities transactions, nor did he obtain approval from SA Stone.  Despite the lack of notice, SA Stone had a duty to investigate and approve securities sales to prevent its representatives from “selling away.”

Invest photo 2Investment firms are liable for not following FINRA’s strict guidelines concerning the monitoring of representatives to ensure the representatives do not sell unapproved investments, such as Woodbridge.  Common knowledge within the securities industry is the fact that representatives often seeks to sell investments that are unapproved for either the higher commissions or illegal kickbacks that the investments provide.  The problem is that the increased compensation is because the investments either are financially unsound or, in some cases, based upon fraud.

Additionally, 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.

In 2018, FINRA found that Wendel violated FINRA Rules by providing a false written response and testimony concerning one of the private securities transactions.

This is not the first time Mr. Wendel has been accused of handling the funds of others improperly.  The record of Mr. Wendel shows the six private lawsuits have been initiated concerning his actions.  He has also previously been investigated by SA Stone for the sale of unapproved securities, a common form of fraud.  He was also terminated for the sale of securities that were unapproved by SA Stone.   We believe those securities were Woodbridge securities.  SA Stone apparently allowed several months to elapse before taking action concerning the sale of Woodbridge.

Recovering Woodbridge Losses of Peter Holler

If you were an investor with Peter Holler and invested in Woodbridge notes, please call 1-866-817-0201 about options to recover losses.

We believe Holler and his employer have the bulk of responsibility for these losses.  During the relevant period when Holler sold Woodbridge, which coincides with his time working for Securities Services Network (SSN), Holler solicited investors to purchase promissory notes in Woodbridge Mortgage Investment Funds, a purported real-estate investment fund. Ultimately, Holler sold approximately $1.39 million in Woodbridge notes to 19 individuals, nine of whom were SSN customers. He received $49,790 in commission in connection with these transactions.

Woodbridge has been identified as a $1.2 billion Ponzi scheme by the Securities and Exchange Commission (SEC ).  The allegations are that Woodbridge gave notes to investors for funds to be used as hard money loans to be used in the development of real property.  Instead the funds were co-mingled by Woodbridge and used to pay earlier investors.   Woodbridge became insolvent shortly after the SEC brought its action.

LandmarkRecovery from the Woodbridge bankruptcy may be difficult.  Woodbridge and its subsidiaries are in bankruptcy proceedings in federal court in Delaware.  The Woodbridge notes were largely unsecured despite assertions to the contrary by those soliciting the notes.  As a general rule, bankruptcy are where unsolicited claims are extinguished.  Holler and SSN had a duty to know these facts prior to investing an investors and disclosing to the investors this incredibly high risk of loss.

These Woodbridge investments were not properly reported to his employer and his employer either turned a blind eye or failed to do the requisite supervision to monitor against such outside business activity.  As a result, the investments were sold though they were not suitable to be sold to any investor.  This creates potential liability on the part of both Holler and SSN.

The regulator FINRA brought an action against Holler for his sale of Woodbridge.  This regulatory action echos the concern that the Woodbridge investments and their sale were not appropriately vetted.

FINRA rules state, “prior to participating in a private securities transaction, [a broker] shall provide written notice to the member with which he is associated describing in detail the proposed transaction and the person’s proposed role therein and stating whether he has received or may receive selling compensation in connection with the transaction.” FINRA Rule 3280(e) defines a private securities transaction as any securities transaction outside the regular course or scope of an associated person’s employment with a member. FIN RA Rule 20 I 0 requires associated persons, in the conduct or their business, to observe high standards of commercial honor and just and equitable principles of trade.

The record  of Holler indicates that he and his former employer, Securities Services Network, currently facing two investor suits over the sale of Woodbridge notes.   Both suits suits were filed subsequent to the bankruptcy of Woodbridge in December 2017.

Securities Services Network previously terminated Holler in August 2017 for the sale of Woodbridge notes.  BrokerCheck identifies that Holler was terminated because the Woodbridge sales were unapproved by the firm.  Despite this, Securities Services Network

We represent a number of investors across the country in obtaining recovery of Woodbridge losses.  Please call for a free consultation.

 

 

Rights for Lisa Lowi Investors

Lisa Lowi has been sued 35 times  over the past three years for recommending unsuitable investments to her investors at Janney Montgomery Scott and RBC Capital Markets.  Unsuitable investments are investments that carry more risk than an investor is willing to take, such moderate to high risk investments for a retired investor.  Lowi has recently been barred from the securities industry from failing to comply with a regulatory investigation into her offering unsuitable investments.  If you are an investor of Lowi’s please call toll-free at 1-866-817-0201 for a free consultation with an attorney

In 2017, FINRA, the regulator that oversees securities brokers, was conducting an investigation of Lowi in connection with customer complaints and arbitration claims alleging, among other things, unsuitable trading.

On September 7, 2017, FINRA staff sent Lowi’s attorney a written request for testimony concerning the unsuitable securities allegations. As stated in Lowi’s attorney’s email to FINRA staff on October 11, 2017, and by this agreement, Lowi acknowledges that she received FINRA’s request and simply decided not appear for on-the-record testimony.  This is viewed as conceding the violation.

FINRA Rules require that brokers subject to FINRA’s jurisdiction provide information, documents and testimony as part of a FINRA investigation. FINRA rules provide that “[a broker] in the conduct of its business shall observe high standards of commercial honor and just and equitable principles of trade.” By refusing to appear for on-the-record testimony as requested pursuant to FINRA Rule 8210, Lowi violates FINRA Rules 8210 and 2010.

Jeffrey Pederson PC is a private attorney protecting the rights of investors and recovering investment losses nationwide.

Loss Recovery from H. Beck

Investors with H. Beck may have grounds for recovery for investment losses in ETFs and other investments.

H. Beck recently consented to a settlement with regulators.  The settlement stated that from at least July 2008 until June 2013, H. Beck failed to properly supervise the sale of nontraditional ETFs and failed to properly supervise the recommendations made by its financial advisors. As a result, H. Beck violated NASD Rules 2310, 3010(a) through (b), and 2110, and FINRA Rules 2111, 3110(a)-(b), and 2010.

Between 2008 and 2011, H. Beck’s financial advisor James Dresselaers recommended to the Firm’s customer, EB, investments in several nontraditional exchange-traded funds (“ETFs”) and stocks issued by companies in the metals and mining sector. These recommendations were unsuitable for EB, a professional athlete with no investment experience, a moderate risk tolerance, and an investment objective of long-term growth. EB suffered losses of more than $1.1 million on these investments.

NASD Rule 3010(a)-(b) and FINRA Rule 3110(a)-(b) require every investment brokerage to establish and maintain a system and procedures to supervise the activities of its financial advisors that is reasonably designed to achieve compliance with securities laws and regulations and applicable NASD/FINRA rules.

FINRA rules require that financial advisors only recommend investments to suitable investors.  So if an investment poses too much risk, or possesses other characteristics that are inconsistent with the wants and needs of the investor, it is a violation to recommend that investment to such an investor.  This is commonly referred to as a “suitability” violation.

This is not the first time H. Beck has been penalized by regulators over non-traditional investments.  In March 2015, H. Beck was censured and fined $425,000 for failing to properly supervise the sale of unit investment trusts (UITs), failing to properly supervise the preparation of account reports sent to investors, and failing to enforce its own written supervisory procedures relating to financial advisors’ outside email accounts, which is a significant protection against fraud. Dresselaers also has a history of customer disputes.   This is concerning since Dresselaers is listed as the top executive at H. Beck.

Such regulatory findings and prior disputes evidence wide-spread supervisory problems at H. Beck and support private claims by investors.

Morgan Stanley $13 Mil. UIT Sanctions

The Financial Industry Regulatory Authority (FINRA) announced today, September 25, 2017, that it has sanctioned Morgan Stanley Smith Barney LLC approximately $13 million for UIT violations by its advisors and for failing to supervise its advisors’ short-term trades of unit investment trusts (UITs).

A UIT is an investment vehicle similar to a mutual fund but with some key differences.  It is an investment company that offers units in a portfolio of securities; however, unlike a mutual fund, it terminates on a specific maturity date. UITs impose a variety of charges, including a deferred sales charge and a creation and development fee, that can total approximately 3.95 percent for a typical 24-month UIT. This can be a significant cost.  A registered representative, or advisor, who repeatedly recommends that a customer sell a UIT position before the maturity date and then “rolls over” those funds into a new UIT, an action that can also be described as “churning,” causes the customer to incur increased and unnecessary sale charges over time.

FINRA found such actions in thousands of customer accounts. FINRA further found that Morgan Stanley failed to adequately supervise advisor sales of UITs by providing insufficient guidance to supervisors regarding how they should review such transactions to detect improper short-term UIT trading, failing to implement an adequate system to detect and deter such abuse, and failing to provide for supervisory review of rollovers prior to execution. Morgan Stanley also failed to conduct training for advisors specific to these UIT issues.

Susan Schroeder of FINRA said, “Due to the long-term nature of UITs, their structure, and upfront costs, short-term trading of UITs may be improper and raises suitability concerns. Firms must adequately supervise representatives’ sales of UITs –including providing sufficient training –and have in place a system to detect potentially unsuitable short-term UIT rollovers.”

In assessing sanctions, FINRA has recognized Morgan Stanley’s cooperation in having initiated a firmwide investigation that included, among other things, interviewing more than 65 firm personnel and the retention of an outside consultant to conduct a statistical analysis of UIT rollovers at the firm; identified customers affected and establishing a plan to provide remediation to those customers; and provided substantial assistance to FINRA in its investigation.

James Davis Trent

Investors suffering losses with James Davis Trent may be entitled to recovery from his brokerage employers, AXA, Proequities and Allstate.  Please call 1-866-817-0201 for a free consultation with a private attorney.

investingstockphoto 1Trent entered into a regulatory settlement with FINRA in which Trent was suspended from
association with any FINRA member in all capacities for six months. In light of Trent’s
financial status, no monetary sanction has been imposed. Without admitting or denying
the allegations, Trent consented to the sanction and to the entry of findings that he
engaged in a pattern of recommending unsuitable short-term trading of Class A mutual
fund shares to customers, resulting in the customers (all of whom were retired) incurring
approximately $6,362.50 in unnecessary sales charges, while Trent received approximately
$2,910 as his commission from the sales loads.

Short-term trading of mutual funds is a form of churning, an action where there is very little benefit to the investor but significant commissions to the broker.  Such actions are in violation of FINRA rules and the anti-fraud provisions of state and federal securities laws.

The regulatory findings stated that Trent recommended all of the transactions that were executed in the customers’ accounts at the firm, including short-term trading involving Class A front-end-loaded mutual funds. In the transactions at issue, Trent recommended the purchase of Class A mutual fund shares and, within less than a year, recommended the sale of the positions, resulting in an average holding period for the customers’ accounts of six months. Given the long-term nature of investments in Class A mutual fund shares and the customers’ investment profiles, Trent lacked a reasonable basis to believe that the recommended securities transactions were suitable for the customers.

 

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.