Suspension of Christopher Hildebrandt

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If you were an investor of Christopher Hildebrandt of Principal Securities and suffered losses please call 1-866-817-0201 to discuss your rights and potential recovery.  Initial consultations are free.

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Investors have rights to recover losses from fraud or negligence.

Mr. Hildebrandt agreed to a four-month suspension and a $5000 fine for the altering of investor documents.  Between 2009 and 2017 he altered over 90 investor documents.  These documents include new account documents, documents that identify an investors risk tolerance and investment objectives, along with money transfer forms and other documents.  This was done as an accommodation to approximately 30 investors and FINRA acknowledges that many, if not all, were authorized.

The regulatory action was finalized on July 30, 2020.

This was not the first time he was warned not to alter investor documents.  Additionally, four customer complaints were filed by investors against Hildebrandt or his employer concerning the investment sales practices of Hildebrand.  This includes allegations misrepresentations as to accounts, tax ramifications and investment products such as annuities.  Additionally, he was accused multiple times of misappropriating funds.

In 2018, he ceased working with Principal and his CRD, his record maintained by the Financial Industry Regulatory Authority, does not indicate current employment with a licensed securities firm.

 

 

The Fraud of Michael Barry Carter

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If you were a client of Morgan Stanley broker Michael Barry Carter, better known as Mike Carter, please call 1-866-817-0201 for a free and confidential consultation to determine whether you have been a victim of fraud.

The Securities and Exchange Commission on Monday, July 20, 2020, charged a former Morgan Stanley representative with stealing approximately $6 million from brokerage customers and an elderly investment advisory client.

Investors have recourse when investment professionals turn bad.

Investors have recourse when investment professionals turn bad.

Mike Carter was a financial advisor in the McLean, Virginia office of a Morgan Stanley.  He falsified internal documents in order to effect dozens of unauthorized wire transfers, totaling millions of dollars, from the accounts of brokerage customers to his own personal bank accounts.  

“As a financial advisor, Carter was entrusted with millions of dollars belonging to his brokerage customers, his advisory clients, and their families,”  stated SEC’s New York regional office director in a press release. “As alleged in our complaint, Carter instead took advantage of that trust for his personal gain.”

Morgan Stanley also failed to adequately monitor money transfers to accounts of its brokers.  Adequate supervision would have stopped most, if not all of these transfers.

Carter attempted to hide his fraud with the circulation of false account statements to his investors.  He then used the stolen funds to pay his credit cards and his mortgage.

Carter has been charged by federal authorities with wire fraud and other criminal counts.

Len Marzocco Churning Fraud

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If you were an investor of Len Marzocco please call 1-866-817-0201 to discuss whether you have been a victim of churning.  Churning is a type of fraud and investors who are victims of churning are entitled to recovery.

Churning is the action of a securities broker making excessive trades in an account that benefit the broker more than benefiting the investor.  Regulators require that trades be quantitatively and qualitatively suitable.  When a broker makes excessive trades, such trades are quantitatively unsuitable.

Regulators stated that Marzocco engaged in quantitatively was-unable trading in the accounts of multiple customers.

One way of determining the existence of churning is by analyzing the “turnover” in the account.  Turnover rate represents the number of times that a portfolio of securities is exchanged for another portfolio of securities. The cost-to-equity ratio measures the amount an account has to appreciate just to cover commissions and other expenses. In other words. it is the break-even point where a customer may begin to see a return. A turnover rate of six or a cost-to-equity ratio above 20 percent generally indicates that excessive trading has occurred.

Regulators found violations in at least three accounts:

• The first account exhibited an annualized cost-to-equity ratio of 179.29%. JMS’s accouim incurred losses of 5135.;: OD and paid 553,232 in commissions and 11et.s ($36,824 was charged at First Standard and $16,408 was charged at Spartan).’

• The second account exhibited an annualized turnover rate of 39.30 and an annualized cost-to-equity ratio of 76.86%. CR’s account incurred losses of 524.542 and paid $9,647 in commissions and fees.

• The third account exhibited a turnover rate of 37.88 and a cost-to-equity ratio of 54.44%. DG’s account incurred losses of 535.989 and paid 518,644 in commissions and fees.

Marzocco has a history of investor lawsuits, regulatory actions, felony criminal actions, and job terminations for fraud.  His employers had a duty to provide heightened supervision if they were to hire him at all.

Call for a free and confidential consultation.  Most representations handled on a contingency basis.

 

Misdeeds by Charles Euler

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If your were an investor of Charles J. Euler, Jr. with Janney Montgomery Scott of Radnor, PA please call 1-866-817-0201.  Charles Euler has a long history of being a broker but he also has a long history of lawsuits concerning alleged fraud in the form of selling unsuitable investments.

On March 27, 2020, Mr. Euler surrendered his license rather than defend a regulatory investigation.   The investigation was initiated by the Financial Industry Regulatory Authority (“FINRA”).  This is the self-regulatory organization that is empowered by the Securities and Exchange Commission to oversee securities brokers in the United States.  The agreement was that Mr. Euler consents to “A bar from associating with any FINRA member firm in any capacity.”

The investigation followed the filing of Janney that Mr. Euler was permitted to resign in April 2018.

The history of suits against Mr. Euler for similar actions is long.  In all, there are seven suits.  All the suits alleged that Mr. Euler allege that he made unsuitable recommendations.

Regulations, state and federal laws all prohibit the sale of unsuitable securities.  Unsuitable securities or investment plans are recommendations by a broker that are higher risk or inconsistent with an investors investment objectives.  This can be the result of high risk investments being placed in the portfolio of someone looking for moderate risk.  It can also occur when a broker recommends too high a concentration of a particular stock, industry, or too high a concentration in stocks compared to bonds, cash and CDs.

There are various reasons for the sale of unsuitable securities.  Many times high risk investments pay a higher commission than suitable investments.  Unsuitable recommendations can also be the result of negligence on the part of the broker.

FINRA requires brokerages to give a broker heightened supervision if the brokerage employs a broker with a customer complaint history.  The general number of suits or complaints triggering such supervision is four.    That means heightened supervision was required and the employer of Euler, Janney, is largely to blame for the actions of Euler.

Even before Euler reached the threshold of four complaints, Janney had a duty to supervise.  Each trade by a broker is to be reviewed by the employing brokerage for suitability.

Investors should speak to a lawyer familiar with FINRA regulations to determine if they are entitled to compensation.

 

Direxion ETF Loss

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If you have suffered losses in Direxion ETFs, please call 1-866-817-0201 to discuss the potential for loss recovery.

After days of volatility, Direxion stated that it was closing the following funds “due to their inability to attract investor assets“:

Direxion Daily Russia Bear 3X Shares RUSS
Direxion Daily Natural Gas Related Bull 3X Shares GASL
Direxion Daily Natural Gas Related Bear 3X Shares GASX
Direxion Daily MSCI Developed Markets Bear 3X Share DPK
Direxion Daily Mid Cap Bear 3X Shares MIDZ
Direxion Daily Regional Banks Bear 3X Shares WDRW
Direxion Daily MSCI European Financials Bull 2X Shares EUFL
Direxion Daily Total Bond Market Bear 1X Shares SAGG

These investments are investments that should have only been sold to highly sophisticated investors looking to take great amounts of risk.

In 2009,  FINRA, the regulator that oversees the actions of brokers,  stated that leveraged and inverse ETF investments are toxic for average investors.  These investments reset every day.  As a result, the investments compound in their losses and the nature of them can change drastically over the course of a few days.

Daily re-leveraging combined with high volatility, such as the volatility seen in March 2020, creates compounding issues.  When the underlying index of the ETF if volatile as opposed to being stable, either up or down, the re-leveraging of the ETF each day is mathematically destructive.

Gerald Dewes Loss Recovery

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If you were an investor of Gerald Dewes, call 1-866-817-0201 to discuss your legal rights as to loss recovery.  All initial consultations are with an attorney and are free and confidential.

Gerald Dewes’ employer, Cadaret,Grant & Co., terminated his employment in November 2019.  Termination was for selling investors shares of his own company, Elite Roasters.  In March 2020, FINRA, the Financial Industry Regulatory Authority, expelled Dewes from the securities industry.  Dewes had failed to cooperate with FINRA’s investigation of him and he failed to refute the charges against him.

The issue with selling Elite Roasters is that the investment was not approved by those supervising Dewes, his employing brokerage firm.  Approval is needed so that the requisite due diligence investigation can be given the investment to assure that representations are correct concerning the investments’ assets, financing and other important factors.  Brokers commonly sell unapproved investments so that the investment appears to have the backing of the brokerage firm but either is not a legitimate investment or would not withstand the scrutiny of a due diligence investigation by the brokerage.  Such action is termed “selling away” and is a form of fraud.

Many Ponzi schemes start as simple selling away violations.  A broker either wishes to promote  the broker’s own business or is paid a heightened commission to sell investments in a friend’s business.  These businesses do not have the due diligence review to assure that representations are accurate or that the venture is even solvent.  When the business cannot meet expectations payments are made if the funds of new investors.

As a result, FINRA instituted a number of rules, including Rule 3270.  This rule requires a broker to notify his employer of all outside business activity.  The employer, in turn, is required to audit the broker and verify that all outside business activity is disclosed.  The employer has a duty to supervise all investment sales even if the sales are of unapproved investments and outside the broker’s employment.

The employers of Dewes had other reasons to give heightened supervision.  Dewes has had a variety of investor suits of which he has been the subject, and he has also been the subject of multiple tax liens.  These past incidents of improper financial dealings should have served as a red flag.

We have handled a large number of selling away cases nationwide.  Please call for an evaluation.

 

SSL Loss Recovery

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If you suffered losses in SSL, Sasol Spon ADR, and were not a speculative investor you may be entitled to loss recovery.  Please call the Law Offices of Jeffrey Pederson at 1-866-817-0201 for a free and confidential consultation.

From its high in April 2019 of over $34 per share, SSL has lost over 90% of its value as of March 11, 2020.  This is an investment that was not only highly speculative, but was known to be highly speculative.  As a speculative investment, advisors and brokers cannot recommend or purchase such an investment for conservative, moderate or growth investors since such a purchase would be unsuitable.

Investment professionals have a duty to purchase only suitable investments.  This obligations for brokers stems from FINRA, the Financial Industry Regulatory Authority, rules.  For advisors, the act of purchasing unsuitable investments runs contrary to the fiduciary obligations of care and prudent investing.

SSL is an emerging markets investment.  This, in and of itself, is a high-risk field.  SSL has even higher risk than other emerging market investments.  The investment holds some of the riskiest investments in the MSCI Emerging Markets Index.

While many firms may be looking to recover by means of a class action route, recovery from class actions may be small.  We believe greater liability leading to greater recovery exists with those brokerage and advisory firms that allowed this speculative investment be sold to retail investors.

 

Legal Remedies for ETF or ETN Losses

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Call 1-866-817-0201 to speak to an attorney concerning legal remedies for ETF or ETN losses.  Many individuals lost savings in leveraged, inverse and other ETFs or ETNs their financial advisor should have never recommended to such investors.  Call to speak to an attorney about your legal options.  Initial consultations are free and confidential.

If you have significant losses in leveraged or inverse  ETFs or ETNs and you are not a sophisticated, day-trading investor, you may be entitled to legal remedies for your loss.  Brokers and advisers have the obligation to recommend only suitable investments.  The following investments are are just a small example of such investments and are only suitable if your are speculative investor, and only then if the investment is held less than one day:

CREDIT SUISSE NASSAU X LINKS MONTHLY PAY 2X LEVERAGE (AMJL)

UBS AG LONDON ETRACS 2X MONTHLY LEVER S&P MLP (MLPZ)

DBX ETF TRUST DIREXION DAILY HOMEBUILDERS SUPP BULL 3X (NAIL)

DIREXION SHARES ETF TRUST DAILY REGIONAL BKS BULL 3X SHS (DPST)

UBS AG LONDON ETRACS 2X MONTHLY LEVER LNG AL (MLPQ)

PROSHARES ULTRAPRO QQQ ETF (TQQQ)

DIREXION DAILY S&P 500 BULL 3X SHARES (SPXL)

DIREXION DAILY GOLD MINERS BEAR 3X AND 2X SHARES (DUST)

DIREXION DAILY GOLD MINERS BULL 3X AND 2X SHARES (NUGT)

DIREXION DAILY S&P OIL AND GAS (GUSH)

PROSHARES ULTRAPRO S&P 500 (UPRO)

ETRACS MONTHLY PAY 2X LEVERAGED S&P DIV. ETN (SDYL)

ETRACS MONTHLY PAY 2x LEVERAGED MORTGAGE REIT ETN (MORL and MRRL)

UNITED STATES OIL FUND (USO)

Invesco and ProShares QQQ derivations

Many other leveraged ETFs and ETNs exist that should never have been sold to everyday or “retail” investors.  This year, at least 15 ETNs managed by UBS have been taken off the market after tumbling in value. ETNs run by Citigroup, Wells Fargo, UBS, JPMorgan and other firms have suffered significant losses. When troubled funds are taken off the market, investors typically are paid just a fraction of what they initially put in.  Regulators have confirmed that such investments should not be recommended to retail investors.

FINRA, the regulator that oversees the actions of brokers, has stated that these investments are toxic for average investors.  The investments reset every day.  As a result, the investments compound in their losses and the nature of them can change drastically over the course of a few days.  The following was stated by FINRA in NTM: 09-31:

“Exchange-traded funds (ETFs) that offer leverage or that are designed to perform inversely to the index or benchmark they track—or both—are growing in number and popularity. While such products may be useful in some sophisticated trading strategies, they are highly complex financial instruments that are typically designed to achieve their stated objectives on a daily basis. Due to the effects of compounding, their performance over longer periods of time can differ significantly from their stated daily objective. Therefore, inverse and leveraged ETFs that are reset daily typically are unsuitable for retail investors who plan to hold them for longer than one trading session, particularly in volatile markets.”

The daily resetting can be devastating for an investor that hold these investments for more than one day.  So a broker or advisor who recommends the investment and then allows the investment to sit more than 24 hours takes a legally impermissible chance with the savings of his/her investors.

The resetting can cause the investment to lose money even if the underlying index is stable or increasing.  This is due to many factors including cost drags of compounding interest.

On March 19, 2020, the resetting function caused UBS to manditorily redeem MORL and MRRL.  These were both UBS ETRACS investments.  These investments were to leveraged ETNs tied to an index following 37 REITs.  The ETN lost 95% of its value.

History has supported this.  In February 2018 many inverse and leveraged ETF investors, for such investments tied to the VIX index, lost 80% to 100% of the value of these investments in the period of 48 hours.

As quoted in the Wall Street Journal, “If institutions aren’t buying this, the retail investor shouldn’t be either. Otherwise they’re the sucker at the poker table that doesn’t know it,” said Larry Swedroe, chief research officer at Buckingham Wealth Partners.

The risk of these investments may not be something you know, but they are something your broker or advisor knew or should have known.  If you suffered such losses please call 1-866-817-0201 for a free and confidential consultation.

UBS Yield Enhancement (YES) Losses

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UBS

If you sustained significant losses or were a conservative or moderate investor recommended the UBS Yield Enhancement System (YES), please call 1-866-817-0201 for a free and confidential consultation.

UBS brokers marketed the Yield Enhancement Strategy, or YES, to wealthy clients. During times of low market volatility the strategy generated positive returns, but it racked up losses in 2018 and 2020 when market gyrations picked up.  Because the program used borrowed money, known as leverage, investors had to either add additional money when trades went south or sell their positions at a loss.

UBS limited participation in the program to investors with a net worth of $5 million but that does not mean the recommendation was suitable or that an appropriate percentage of an investor’s portfolio was invested in YES.

Investors seeking yield often seek a conservative income strategy.  The yield strategy utilized by UBS in YES was highly speculative and always contained a high risk of loss.

Securities brokerages have a duty to recommend only suitable investments.  This includes investments consistent with the objectives and risk tolerance of an investor.  The wealth of an individual does not absolve a brokerage from making suitable recommendations.

FINRA has further has called into question the suitability of complex investments used in accounts of unsophisticated investors.  YES was highly complicated and utilized a system that only the most sophisticated investors would understand.

Jeffrey Pederson is an attorney located in Denver, Colorado who has represented investors nationwide in suitability suits against securities brokers and brokerages.  Representations are generally on a contingency basis.