Tag Archives: Stockbroker fraud

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 :

  • 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.

Oil / Gas Investment and Tax Loss

Oil StockSome Energy, Oil and Gas investments can only legally be sold to a limited section of the investing public.  If you suffered losses we may be able to  help.  Contact us at 303-300-5022 or 1-866-817-0201 (toll-free) for a free consultation.

Oil and gas investors do not have to sit and watch their life savings diminish.  These investors have rights though many are unaware of the recourse they have for such losses.

Many investors have received high pressure sales of oil and gas investments.  Brokers and other investment professionals like to sell these types of investments because they usually pay a very high commission.  These commissions can be 10 to 20 times higher than the commission on your average stock sale.  The high commissions will often cause these individuals to ignore the rules in the sale of such investments. The two rules that are usually ignored are those concerning accreditation and suitability.

Oil and gas limited partnerships can generally only be sold to “accredited” investors.  Such investors are individuals whose liquid net worth, their net worth excluding their home, is in excess of $1 million. The second rule that is commonly violated in the sale of such investments is the suitability rule.  Oil and gas investments are known by investment professionals to generally be very high risk investments.  Investments need to be consistent with the level of risk that an investor is willing or able to take.  For example, a person approaching or in retirement or who cannot otherwise afford to take high levels of risk with their investments could not legally be offered an oil and gas investment.

Likewise, an individual who expresses a desire for conservative or moderate investments would not be a suitable investor. There are many other rules that can potentially be violated in the sale of oil and gas investments.

Problems exist not just with the investment losses, but also with the tax consequence of investing in these companies.  A detailed description is found in the following Link to Forbes.   In short, these investments are partnerships.  When debt is defaulted upon by a partnership, and the lender “writes off” the debt, the write off means that the owners (the investors) are taxed as if they received the amount written off as income.  Considering some limited partnerships defaulted on billions in loans, the tax obligation of investors is substantial.

If you have any questions, please feel free to give us a call.  These rules apply no matter if you invest in individual oil or gas investments or invest through a mutual fund or master limited partnership (MLP).

Common oil and gas investments we see recoverable losses include Linn Energy (“LINE” or “LNCO”) and more information can be found at www.jpedersonlaw.com/blog/linn-energy-losses/, Williams Companies (“WMB”), Penn West Petroleum (“PWE”), BP Prudhoe Bay Royalty Trust (“BPT”), Breitburn Energy Partners, LP (“BBEP”), Hawthorne, SandRidge Energy, Williams Ridgewood Energy, Apco, Atlas Energy, Midstates Petroleum, Peabody Energy, Resolute Energy, XXI Energy, Nobel, Permian Basin, and Breitling Energy.  Some of these losses may be recoverable by class action while others may require individual FINRA arbitration suits.

More information on SandRidge can be found at this link.

Oil Stock IIJeffrey Pederson is an attorney who works with investors to recover losses in FINRA arbitration and has represented investors in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut , Florida, Hawaii, Illinois, Indiana, Massachusetts, Montana, New Jersey, New Mexico, New York, North Carolina, Maryland, Minnesota, Missouri, Montana, North Dakota, Rhode Island, Texas, Utah, and Wyoming, in FINRA arbitration actions against securities brokerage firms for unsuitable investments.  Please call for a confidential and free consultation.

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.

Morgan Stanley ETF Losses

If you have suffered losses with an ETF purchased through Morgan Stanley please call 1-866-817-0201 for a free and confidential consultation with a private attorney concerning your rights. We have reason to believe that Morgan Stanley engaged in systematic wrongdoing in the sale of certain ETFs based upon recent findings of the The Securities and Exchange Commission.

The SEC announced on February 14, 2017 that it has settled with Morgan Stanley for $8 million for inappropriate sales of complex exchange traded funds to advice clients.  More importantly, Morgan Stanley admitted to wrongdoing.

Morgan Stanley failed to obtain a signed client disclosure notice, which stated that single inverse ETFs were typically unsuitable for investors planning to hold them longer than one trading session unless used as part of a trading or hedging strategy.  This is important because the number of clients this impacted number in the hundreds.

The investment recommendations were also unsuitable, in violation of the regulatory duties that Morgan Stanley owes its investors.  Morgan Stanley solicited clients to purchase single inverse ETFs in retirement and other accounts, the securities were held long-term, and many of the clients experienced losses.

The SEC’s order further finds that Morgan Stanley failed to follow through on another key policy and procedure requiring a supervisor to conduct risk reviews to evaluate the suitability of inverse ETFs for each advisory client.  Among other compliance failures, Morgan Stanley did not monitor the single-inverse ETF positions on an ongoing basis and did not ensure that certain financial advisers completed single inverse ETF training.

Morgan Stanley also owes a duty to the investors to follow its own internal regulations.  The SEC’s order finds that Morgan Stanley did not adequately implement its policies and procedures to ensure that clients understood the risks involved with purchasing inverse ETFs.

“Morgan Stanley recommended securities with unique risks and failed to follow its policies and procedures to ensure they were suitable for all clients,” said Antonia Chion, Associate Director of the SEC Enforcement Division.

Losses with Maczko of Wells Fargo

If you invested with Matthew Maczko, a broker with Wells Fargo Advisors in Oak Brook, Illinois and suffered losses that you question, please call 1-866-817-0201 for a free and private consultation with an attorney concerning your rights.

Wells FargoMaczko was suspended from the securities industry last week, the week of February 7, 2017, for alleged excessive trading in the brokerage accounts of a 93-year-old customer, according to a FINRA. Maczko effectively controlled the customer’s accounts, which had an average aggregate value of $3 million.

Maczko’s trading  generated more than 2800 transactions resulting in $582,000 in commissions, $84,270 in fees and approximately $397,000 in trading losses for the account in question. Such trading activity was not only churning but was also unsuitable for Maczko’s victim given the customer’s age, risk tolerance and income needs.

Maczko also intentionally mislead FINRA regulators and investigators by telling them during testimony that he had not spoken to  other senior customers after his termination from Wells Fargo, when in fact he had spoken with them several times.

Securities brokers are required to follow the rules of FINRA.  FINRA requires that investments not only be suitable in terms of the nature of the investment, but also that the investments be quantitatively suitable.  This means that the number of trades cannot be excessive in light of the wants and needs of the customer.  Above a certain level, the trades can be seen as not being for the benefit of the customer, but for the broker.

The trades of Maczko went well beyond the acceptable number of trades.

Dougherty & Company Investment Losses

 

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

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

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

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

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

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

The full AWC can be found at the following link.

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

 

Tobin Joseph Senefeld

FINRA  has announced that  Tobin Joseph Senefeld, formerly of PIN Financial, a Carmel, Indiana brokerage firm owned by Veros Partners, has been barred from associating with any FINRA member institution, according to its monthly disciplinary report released last week. The sanction is related to a Securities and Exchange Commission suit that claimed Senefeld and two others operated a multimillion-dollar Ponzi scheme involving farm loans.

FINRAThe SEC case claimed the three raised $15 million from 80 investors in 2013 and 2014 to fund farm loans. New investor funds were used to pay older investors when the loans went bad.

Senefeld has a long history of misconduct.  The FINRA and SEC actions are just the latest of his legal problems.  The record of Senefeld contained on FINRA’s BrockerCheck indicates that Senefeld has 27 disclosure events dating back to 1997.

The prior misconduct of Senefeld, also known as “disclosure events,” include a substantial number of state regulatory actions, including the revocation of his license by Michigan in 2000 and other regulatory punishment by 16 other jurisdictions around the same time.  Senefeld also had a long history of tax liens, terminations, and civil suits initiated against him by other investors.

Co-defendants in the present SEC matter, Matthew D. Haab and Jeffrey B. Risinger, both have settled the civil suit for about $184,000 and $100,000, respectively. Senefeld and the SEC failed to reach a settlement at an in-person meeting Oct. 28, according to court filings, so Senefeld’s case remains on course for trial.

Senefeld, PIN and Risinger have all received lifetime bans from the securities industry by FINRA.