Tag Archives: unsuitable securities

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.

 

 

Fifth Third Annuity Fraud

If you were recommended the purchase or sale of an annuity by Fifth Third you may have been the victim of fraud.  We represent investors nationwide and are available to discuss whether you are a victim and entitled to compensation.  Please call 1-866-817-0201 for a free and confidential consultation.

Invest photo 2The Financial Industry Regulatory Authority (FINRA) in a statement on May 8, 2018 stated that it has fined Fifth Third Securities $4 million and required the firm to pay approximately $2 million in restitution to customers for failure to accurately consider and describe costs and benefits of variable annuity (VA) exchanges, and for recommending exchanges without a reasonable basis to believe they were suitable for customers.  While the FINRA action focused on variable annuities, the exchange or early liquidation of any annuity is possibly a violation.

Variable annuities are complex and expensive investments commonly marketed and sold to retirees or those saving for retirement. Exchanging one annuity with another involves a comparison of the complex features of each security. Accordingly, annuity exchanges are subject to regulatory requirements to ensure that brokers have a reasonable basis to recommend them, and their supervisors have a reasonable basis to approve the sales.  Failure to do so can cost investors hundreds of thousands of dollars and cause the investor savings to become unnecessarily illiquid.

Brokerage firms, like Fifth Third, have been on notice of this problem and other problems with annuities for years.  FINRA has warned of the limited suitability of these investments and that they should only be sold to limited types of investors and has done so more than once..  In fact, variable annuities and variable life insurance is so prone to fraud, FINRA has specific rules concerning these products.

FINRA found that Fifth Third failed to ensure that its registered representatives obtained and assessed accurate information concerning the recommended annuity exchanges. It also found that the firm’s registered representatives and principals were not adequately trained on how to conduct a comparative analysis and truthfully sell the annuities.

As a result, the firm misstated the costs and benefits of exchanges, making the exchange appear more beneficial to the customer. By reviewing a sample of annuity exchanges that the firm approved from 2013 through 2015, FINRA found that Fifth Third misstated or omitted facts relating to the costs or benefits of the annuity recommendation or exchange in approximately 77 percent of the sample.  For example:

  • Fifth Third overstated the total fees of the existing VA or misstated fees associated with various additional optional benefits, known as riders.
  • Fifth Third failed to disclose that the existing VA had an accrued living benefit value, or understated the living benefit value, which the customer would forfeit upon executing the proposed exchange.
  • Fifth Third represented that a proposed VA had a living benefit rider even though the proposed VA did not, in fact, include a living benefit rider.

FINRA found that the firm’s principals ultimately approved approximately 92 percent of VA exchange applications submitted to them for review. However, in light of the firm’s supervisory deficiencies, the firm did not have a reasonable basis to recommend and approve many of these transactions.

In addition, FINRA found that Fifth Third failed to comply with a term of its 2009 settlement with FINRA. In the 2009 action, FINRA found that, from 2004 to 2006, Fifth Third effected 250 unsuitable annuity exchanges and transactions and had inadequate systems and procedures governing its annuity exchange business. For more than four years following the settlement, the firm failed to fully implement an independent consultant’s recommendation that it develop certain surveillance procedures to monitor VA exchanges by individual registered representatives.

As a result, the firm misstated costs and benefits of VA exchanges — and in some cases omitted critical information altogether — making the exchanges appear more beneficial to customers in 77 percent of the exchanges Finra reviewed for the period of 2013 through 2015. For instance, Fifth Third transgressions included telling customers that the new VA contracts being marketed had living rider benefits guaranteeing minimum payments to customers and their beneficiary when none existed, Finra said.

Investors of Mark Kaplan of Vanderbilt

We are currently looking to speak to investors of Mark Kaplan of Vanderbilt Securities.  Please call 1-866-817-0201 is you have suffered investment losses.  We believe there is potential for certain investors to recover these losses.

Between March 2011 and March 2015 , Mark Kaplan of Vanderbilt Securities engaged in investment churning and unsuitable excessive trading in the brokerage accounts of a senior customer. We believe that such actions were likely widespread and impacted many of Kaplan’s investors.  Kaplan willfully violated federal securities laws and FINRA regulations by such actions.

Invest photo 2Kaplan has been known for years by Vanderbilt to have problems in his handling of investor accounts.  Morgan Stanley terminated Kaplan in 2011 for his alleged improper activity in Kaplan’s customer accounts.  Additionally, Kaplan has been the subject of seven separate customer lawsuits concerning improper securities transactions.

A recent regulatory action by the Financial Industry Regulatory Authority (“FINRA”) alleges that Kaplan took advantage a 93-year-old retired clothing salesman who had an account with Kaplan.   This investor not only placed his complete reliance in Kaplan but was also in the beginning phases of dimensia.

The investor opened accounts at Vanderbilt Securities with Kaplan during March 2011.  As of Match 31, 2011, the value of the investor’s accounts was approximately $507,544.64. Social Security was the investor’s only source of income during the Relevant Period. Kaplan exercised control over the accounts.  The investor relied on Kaplan to direct investment decisions in his accounts, contacting Kaplan frequently.

The investor was experiencing a decline in his mental health.  In 2015, a court granted an application by the investor’s nephew to act as his legal guardian and manage his financial affairs.

During the Relevant Period, Kaplan effected more than 3,500 transactions in the investor’s accounts, which resulted in approximately $723,000 in trading losses and generated approximately $735,000 in commissions and markups for Kaplan and Vanderbilt. Kaplan never discussed with the investor the extent of his total losses or the amount he paid in sales charges and commissions.

More can be learned about such excessive trading at the warning page for the SEC.

Please call the number above to determine if you have also been taken advantage of and your rights for recovery.

 

Attention Investors of Western International

If you lost money investing with Western International, please call 1-866-817-0201.  The initial consultation with an attorney is free.  Jeffrey Pederson represents investors nationwide in securities brokerage disputes.

NYSE pic 2Western recently entered into a regulatory settlement where it neither admitted not denied the following facts.  Those facts are that from January 1, 2011 to November 5, 2015 (the “Relevant Period”), Western failed to establish, maintain and enforce a supervisory system to ensure that representatives’ recommendations regarding certain ETFs (exchange traded funds) and also failed to comply with certain securities laws in the sale of these ETFs.

In addition, Western allowed its representatives to (1) recommend Non-Traditional ETFs without performing reasonable diligence, the required level of investigation into the investments, to understand the risks and features associated with the investments, and (2) recommend NonTraditional ETFs that were unsuitable, either due to the known high level of risk in the investments or inherent complexity, for certain customers based on their ages, investment objectives and financial situations.

Non-Traditional ETF’s, such as the ETFs that were sold by Western, are designed to return a multiple of an underlying index or benchmark, such as the VIX or S&P, the inverse of that index or benchmark, or both, over the course of a day. As a result, the performance of Non-Traditional ETFs over periods of time longer than u single trading session “can differ significantly from the performance of their underlying index or benchmark during the same period or time.” Because of these risks and the inherent complexity of these products, FINRA has advised broker-dealers and their representatives that Non-Traditional ETIls “are typically not suitable for retail investors who plan to hold them for more than one trading session, particularly in volatile markets.”

We have spoken to a number of investors who have suffered similar losses and believe that such investments were intended for highly sophisticated investors only, such as hedge fund managers, and could not be legitimately sold to retail investors.  So if your were investing for retirement and were sold such investments, you likely have grounds for recovery.

Losses in Inverse VIX ETNs and ETFs

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Investments connected to the VIX index were known to be highly speculative.

We are a firm that specializes in investor loss recovery.  Investors of Inverse VIX Exchange Traded Notes (ETNs) and Inverse VIX Exchange Traded Funds (ETFs), including VelocityShares Daily Inverse VIX Short-Terms ETN (XIV), the ProShares Short VIX Short-Term Futures ETF (SVXY), and the LJM Partners’ Preservation and Growth fund (LJMIX and LJMAX) may have grounds for the recovery of their losses.

If you were sold an Inverse VIX ETN please call 1-866-817-0201 for a free and confidential consultation with an attorney.

These investments were suitable for very few investors.   The sale of unsuitable investments is a form of negligence and possibly fraud.   These investments carry such a high level of risk and are so complicated that they were likely not suitable for any retail (non-institutional) investor.   “Unless you were a hedge fund manager you should not have been sold these funds.” If you were recommended such investments as part of a retirement savings portfolio you have grounds to recover your losses.  The makers of these funds have acknowledged that the fund was for hedge fund managers only, and not individual investors.

Starting on February 2 and continuing through February 6, investors saw portfolios implode due to investments in obscure products that tracked market volatility.  Such investments tracked the VIX index.  The VIX index is a complicated monitor of investment market volatility or “investor fear.”  An “inverse VIX” investment is an investment that benefits from stable markets but loses value quickly in times of volatility.  The losses in the inverse VIX investments mounted quickly until NASDAQ halted the trading of these investments on February 6, with some suffering losses of almost all value in just a few days.

For example, VelocityShares XIV plummeted 80 percent in extended trading on February 5, 2018.  This is a security issued by Credit Suisse this tracks the inverse of the VIX index tracking market volatility.  As the market rose and sank the value of XIV dropped sharply.  Such sudden drops have a cascading impact that can lead to margin calls and other losses.

Of particular concern, though any sale of such an investment to a retail investor is concerning, are investors who purchased such shares through the following brokerage firms:  Credit Suisse, Fidelity, Merrill Lynch, and Wells Fargo.

The dramatic losses was foreseeable to securities brokerages, often referred to as securities “broker-dealers.”  The regulator that oversees broker-dealers, FINRA, the Financial Industry Regulatory Authority, issued its latest warning in a string of warnings on October 2017 to broker-dealers about VIX and inverse VIX investments.  FINRA identified such investments speculative and warned the “major losses” could result from such investments from a failure to understand how such investments work.  For example, many are short-term trading vehicles that can degrade over time.

FINRA also warned all financial advisers that VIX ETNs may be unsuitable for non-institutional investors and any investor looking to hold investment as opposed to actively trading the investment.   While this warning occurred in October 2017, similar warnings were issued in 2012.  That same month, FINRA fined Wells Fargo for unsuitable recommendations of similar volatility investingstockphoto 1funds.

FINRA stated in 2012 in a Regulatory Notice, RN 12-03, that heightened supervision is required of any broker who sells such complex investments, and specifically identified the need for brokerage firms to oversee any recommendation of an investment based upon the VIX.

While all short VIX trading is suspect and potentially recoverable, the following investments are of particular concern:  XIV, SVXY, VMIN, EXIV, IVOP, LJMIX, LJMAX, XXV, and ZIV.

FINRA is conducting sweep investigations of all brokerages that sold any and all of these investments to retail investors.  ‘The sweep is part of Finra’s continuing focus on the suitability of sales of complex products, including leveraged and volatile products, to retail customers,’ stated FINRA.

In addition to suitability, there is also concern that due diligence by these brokerages should have revealed that the index was subject to manipulation.  This was recently reported by the Financial Times of London.  A scholarly report from researches at the University of Texas in 2017 identified the mechanism for manipulating the VIX.  FT reports that the Securities and Exchange Commission is currently investigating such allegations.

Investors suffering losses in such investments may have valid claims despite the warnings contained in the prospectus.  These investments should not have been offered to any retail investors.

PedersonLaw has represented investors in similar actions in most of the 50 states either directly or pro hac vice.

Vincent Sciabica Investors

Investors of Vincent Sciabica may have recourse for their losses.  A recent regulatory action has revealed wide-spread negligence and possibly fraud in the accounts Sciabica’s investors.  If you are such an investor please call 1-866-817-0201 for a free and confidential consultation.

Regulators allege that during the period he was employed by Morgan Stanley, Vincent Sciabica engaged in an unsuitable pattern of short-term trading of UITs in approximately 360 customer accounts.  Sciabica entered into a settlement with regulators where he did not deny or confirm these allegations.

UlTs are investment companies that offer shares of a fixed portfolio of securities in a one-time public offering, and terminate on a specified maturity date. As such, they are not designed to be used as trading vehicles. In addition, UlTs typically carry significant upfront charges, and as with mutual funds that carry front-end sales charges, short-term trading of UITs is generally improper.  Trading of these investments is unwise because of the cost, but can unreasonably enrich the broker who recommends such a strategy.

During the period when he was employed by Morgan Stanley, in connection with these customer accounts, Sciabica repeatedly recommended that the customers purchase UlTs and then sell these products before their maturity dates. The majority of the UlTs that Sciabica recommended had maturity dates of at least 24 months and carried sales charges. Nevertheless, Sciabica continually recommended that his customers sell their UIT positions less than a year after purchase.

In addition, on more than 1,000 occasions, Sciabica recommended that his customers use the proceeds from the short-term sale of a UIT to purchase another UIT with similar investment objectives. Sciabica’s recommendations caused the customers to incur unnecessary sales charges, and were unsuitable in view of the frequency and cost of the transactions.

Sciabica left his employ with Morgan Stanley in 2014 while Morgan Stanley was investigating this wrongdoing.  The investigation of the Financial Industry Regulatory Authority (FINRA) began in November 2017.

 

Recovery of Woodbridge Loss

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Woodbridge investors believed real estate ensured the safety of their investments.

Investors of Woodbridge may have the ability to recover the losses they sustained.  Please call 1-866-817-0201 or 303-300-5022 for a free consultation with a private attorney concerning potential loss recovery.

Regulators have charged the Woodbridge Group of Companies with operating a Ponzi scam.  This creates liability on the part of those advisors selling Woodbridge.

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.

On December 21, 2017,  the SEC charged the Woodbridge Group of Companies with operating a $1.2 billion Ponzi scheme that targeted thousands of investors nationwide.  “The only way Woodbridge was able to pay investors their dividends and interest payments was through the constant infusion of new investor money,” per Steven Peikin of the SEC.

Prior to the charge, in January 2017, the SEC served a subpoena on Woodbridge for relevant electronic communications.  Woodbridge failed to respond to this subpoena.  This left the SEC to seek court intervention to compel Woodbridge to produce potentially damaging documentation the SEC believes existed.  The SEC filed its allegation that Woodbridge is a Ponzi scheme within weeks of its access to Woodbridge’s documents.

Through court filings, the SEC states that Woodbridge “has raised more than $1 billion from several thousand investors nationwide” and it “may have been or may be, among other things, making false statements of material fact or failing to disclose material facts to investors and others, concerning, among other things, the use of investor funds, the safety of the investments, the profitability of the investments, the sales fees or other costs associated with the purchase of the investments.”

Shortly after the issuance of the order sought by the SEC Woodbridge declared bankruptcy.  This filing does not extinguish the rights of investors.  These investors have claims against the brokers and advisors selling the investments.

Woodbridge has additionally stated that it has also received inquiries from about 25 state securities regulators concerning the alleged offer and sale of unregistered securities by unregistered agents.

The Woodbridge Group of Companies missed payments on notes sold to investors the week of November 26, 2017, and December 5, 2017 filed chapter 11 bankruptcy.  The company blamed rising legal and compliance costs for its problems.

Woodbridge said it had settled three of the state inquiries and was in advanced talks with authorities in Arizona, Colorado, Idaho and Michigan when it filed for Chapter 11 protection.

The company’s CEO, Robert Shapiro, resigned on December 2  but will continue to be paid a monthly fee of $175,000 for work as a consultant to the firm.

Those at Woodbridge are not the only ones responsible for investor losses.  The Colorado Division of Securities is considering sanctions against investment advisor Ronald Caskey of Firestone, Colorado.  Caskey is the host of the Ron Caskey Radio Show.  James Campbell of Campbell Financial Group in Woodland Park, Colorado and Timothy McGuire of Highlands Ranch, Colorado are also the subject of regulatory investigations by the state regulator.  The Colorado Division of Securities has also begun investigating Jerry Kagarise of Security 1st Financial of Colorado Springs.  Another seller of Woodbridge in the Springs area is Carrier Financial.

These and other Colorado investment advisors have raised approximately $57 million from 450 Colorado investors.  Woodbridge continued to solicit investors through these advisors, in addition to radio and online ads, through October 2017, just prior to the bankruptcy filing.

While the regulatory actions will do little to compensate the damaged investors, these actions support private civil actions for recovery by investors.  We are investigating and in the process of bringing suit against Colorado investment advisors selling Woodbridge investments, and would like to share what we have learned with other investors in Colorado and nationwide.

Rueters is the source of some of the information contained herein.

Attention Investors of Michael Oromaner

If you have suffered losses investing with Michael  “Mike” Oromaner please call 1-866-817-0201 to speak to an attorney about your rights.  Oromaner has a long history of suits and regulatory actions concerning the unauthorized trading in the accounts of his investors.   If you have suffered losses you may be entitled to recovery from Oromaner’s former employers.

Regulatory rules provide that brokers may not exercise discretionary power in an investor’s account unless the investor has given prior written authorization and the account has been accepted by the member firm in writing as a discretionary account.

These rules also provide that a brokerage firm, in the conduct of his business, shall observe high standards of commercial honor and just and equitable principles of trade.  Oromaner exercised inappropriate discretion in the account of a single customer during a single year 41 times.

Respondent failed to obtain prior written authorization from this investor to exercise discretion in the account and employer did not approve the account for discretionary trading.

Because of this and other misdeeds, Oromaner is currently undergoing a two-year suspension from the securities industry.

Over the course of the career of Oromaner, he has been the subject of over 16 “disclosure events.”  A disclosure event is any lawsuit, bankruptcy, regulatory action, written investor complaint or other matter negatively reflecting on an advisor’s ability to handle the funds or recommend investments.  The 16 disclosure events of Oromaner is extremely high and raises the question of whether his employers were negligent in hiring him.

Please call if you wish to discuss potential recovery of your losses.

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.

Wells Fargo Losses

If you suffered losses with Wells Fargo in ETP investments or other investments that you understood to have only low to moderate risk, please call 1-866-817-0201 for a free and confidential consultation with an attorney.

Wells FargoFINRA, the regulator that oversees securities brokerages, ordered Wells Fargo on Monday to pay investors $3.4 million after its advisers recommended “unsuitable” investments known as volatility-linked products that were “highly likely to lose value over time.”

Wells Fargo pushed its investors into these investments, volatility-linked ETPs, as hedges, to protect against a market downturn. In fact, these investments are unsuitable for such a strategy.  The investment are, in reality, “short-term trading products that degrade significantly over time,” regulators said, and “should not be used as part of a long-term buy-and-hold” strategy.  The recommendation of such unsuitable investments is a form of negligence, and could be seen as reckless enough to be considered fraud.

Volatility-linked ETPs are complex products that most investors do not understand and, as such, they rely upon their adviser, who should be a trained professional, to understand.   Certain Wells Fargo representatives mistakenly believed that the products could be used as a long-term hedge on their customers’ equity positions to help safeguard against a downturn in the market. In fact, volatility-linked ETPs are generally short-term trading products that degrade significantly over time and should not be used as part of a long-term buy-and-hold investment strategy.

FINRA issued Regulatory Notice 17-32 shortly after announcing the settlement with Wells Fargo to remind firms of their sales practice obligations relating to these products. Wells Fargo had previously been on notice to provide heightened supervision of complex products such as ETPs in Regulatory Notice 12-03, and were advised, along with all other brokerages, to assess the reasonableness of their own practices and supervision of these products.

FINRA found, “Wells Fargo failed to implement a reasonable system to supervise solicited sales of these products during the relevant time period.”  The complete news release of the FINRA action can be found at the following link.