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A Variable Rate Structured Product (VRSP) is a complex investment vehicle that places an investor in unnecessary risk but pays a high commission to the broker of the product. The financial incentive often causes advisors to place investors in such investments despite the investment being inconsistent with the risk tolerance of the investor. Such an action constitutes fraud and we can help recover losses in VRSP investments.

The investments are sold inappropriately if sold to moderate or conservative investors. VRSPs are high-risk structured products and pay interest at a fixed rate for an initial period, usually 1-3 years. After the initial period, the investments are not guaranteed to pay any interest. The recovery of the principal at maturity is based on the operation of complex, derivative items. So the principal is not secured. Additionally, a secondary market may not exist for VRSPs. This means that there may be little to no way to sell these investments after purchased.

Recent regulator action highlights the issue. On September 5, 2024, the Financial Industry Regulatory Authority (FINRA) entered into a settlement with Newbridge Securities concerning its unsuitable sales of VRSP investments.

Shortly thereafter, on September 18, 2024, Wedbush Morgan entered into a similar settlement with FINRA. Wedbush agreed to a $50,000 fine and to pay $77,736 to investors for losses. The charges were initiated based upon Wedbush’s sale of such investments to investors with low or moderate risk profiles. The regulator also found that a lack of supervision contributed to these fraudulent sales violations.

The U.S. Securities and Exchange Commission (“SEC”) issued a warning about these products back in 2022. It has become increasingly concerned about the sale of complex investment products to retail investors. These types of products use option strategies, investments tied to unusual indices, and other exotica. The securities industry has known of the risks associated with this investment vehicle for some time.

We represent investors nationwide and help them recover losses in such unsuitable investments.

Peter Joseph Glowacki is accused of making trades in the accounts of his clients without sufficient authority. This violates the federal securities rules and the securities rules of most states. We are a firm that helps investors recover losses from such misdeeds.

From January 2022 through December 2023, as alleged by regulators, Peter Joseph Glowacki exercised discretionary authority when placing 105 trades in fourteen customer/investor accounts belonging to nine customers/investors without first obtaining prior written authorization from the customers and having the accounts accepted as discretionary by his employer.

In addition, from December 2021 through January 2023, Glowacki communicated with 12 investors about securities business via text messages sent through his personal cell phone- even though RBC, his employer, had not approved Glowacki’s use of this channel for business communications.

This is troublesome because a) securities firms are required to keep written communications with their investors, and b) many complex investment fraud schemes start with brokers communicating with their investors through unapproved channels.

Although Glowacki discussed his trading with the investors generally, he did not speak with the customers about the specific trades on the dates of the transactions. This falls outside of the time/place discretion that a broker has. In addition, RBC did not accept the accounts as discretionary.

Regulators handed Glowacki a two-month suspension from the securities industry and a fine of $10,000.

Collateralized Loan Obligations, also known as CLOs, are a popular new investment being sold to retail investors despite their high risk. As reported in the Wall Street Journal on October 17, 2024, Wall Street is trying to sell ordinary investors “low-rated corporate loans” by packaging them as CLOs. Such sales are largely inappropriate unless the investor is fully aware of the risk, the investor had the means to financially withstand a high risk of loss, and the investor is looking to speculate.

BlackRock, Nuveen, and other asset managers have recently asked permission from the Securities and Exchange Commission (SEC) to launch new exchange-traded funds (ETFs) of collateralized loan obligations. CLOs are made by bundling bonds rated as junk. Those asset managers will join about $16 billion in assets of other CLO funds that have already entered the market.

These investments are especially vulnerable to economic downturn. CLOs contain loans to companies with weaker credit ratings. Like its cousins, the collateralized debt obligation (CDO) and collateralized mortgage obligations (CMO), those obligated to pay CLO investors are usually the first hit and first to fail during times of recession.  

FINRA, the entity that oversees securities brokerages, strictly regulates CLOs and CDOs. FINRA Rule 2111 states that a securities broker can only recommend high risk investments to suitable investors. That means that an investor must understand the investment, the investment must be consistent with the objectives of the investor, the investor must be able to financially withstand the risk of such investment, and that the investor must be looking to incur such risk.

Brokers incentives are significant, and not necessarily legitimate, to recommend unsuitable CLOs. The investments generally pay a much higher commission than a traditional investment such as a stock or bond.

We have represented investors for over 20 years in claims concerning investment suitability. Call for a free consultation toll-free at 844-253-5858.

Jim Geake inappropriately sold investors illiquid investments. These include Real Estate Investment Trusts (REITs) and Business Development companies (BDCs). Please contact us if you lost funds or cannot access your savings. We have represented investors for inappropriate BDC and REIT sales for over 20 years. Call us toll-free at 1-844-253-5858.

Geake is a financial advisor with Madison Avenue Securities in Skokie, Illinois. He or his employer has been sued, or threatened with suit, fifteen times concerning Geake’s inappropriate investment recommendations.

Fifteen legal suits is excessive under any measurement. A brokerage firm is required to give heightened supervision when a financial advisor has excessive complaints. Generally, the level considered excessive is anything above four complaints.

One such suit concerning a REIT that Geake sold an investor settled in 2021. The investor received $450,000 in the settlement.

There are many reasons that these investments are inappropriate for many investors. Regulators have highlighted the problems with non-traded REITs for years. These include the high commissions paid to advisors, inability to trade or sell the investment, lack of guarantee as to distributions, inability to value the investment, and inability to determine the health of the investment.

The individual investments sold by Geake include NorthStar Healthcare REIT, Hospitality, Investors Trust (HIT), and other non-traded REITs. Complaints also include inappropriate sale of variable annuities. Like REITs and BDCs, these investments pay the broker an unreasonably high commission for selling investments that meet the needs of very few investors.

Scott Norvell is accused of misrepresenting aspects of annuity products. Norvell, operating in Omaha, Nebraska, is an advisor with Brokers Financial, and previously with LPL and Cetera. Advisors commonly engage in the high-cost practice of variable annuity fraud, and variable annuity switching in particular, due to the high commissions at stake. We have represented annuity victims for over 20 years and know how the high commissions of variable annuities can lead an advisor to misrepresent the investment.

On November 22, 2023, the regulator overseeing securities brokers, FINRA, suspended Norvell from the securities industry for a period of two months. Norvell entered into an agreement for this sanction. While he did not admit to the findings, he also did not deny the findings. The settlement allowed Norvell to avoid a greater sanction if the matter went to trial.

Norvell negligently misrepresented the death benefits that customers would receive following the exchange of their existing variable annuity products for a different variable annuity product.  Annuity switching is a form of fraud. There are very few reasons to switch from one annuity to another, other than the high commission that the advisor receives.

States and federal regulators take annuity switching seriously. A broker can receive, and the investor can pay in costs, around 15% of the sale. FINRA has special rules to prevent annuity switching. States can have strict rules that sometimes entail an investor not only receiving a written warning but requires the advisor to read the warning out loud.

The findings stated that Norvell negligently misrepresented to his investors that the new product had a guaranteed death benefit that was equal to the greater of the account value or the customer’s contributions, less adjusted withdrawals. However, the guaranteed death benefit was only available by selecting an optional rider on the application. Norvell failed to select the rider on the applications for these transactions or collect the additional fee. As a result, the customers did not receive a guaranteed death benefit and switched annuities for no reason.

A majority of the transactions took place after Norvell’s supervisor had notified him that he had failed to select the optional death benefit rider in connection with a different transaction. The findings also stated that Norvell caused his advisory firm to maintain inaccurate books by falsifying signatures of senior customers by electronically signing documents on their behalf. Although Norvell had prior permission from the customers, the firm prohibited signing a customer’s name or initials regardless of the customer’s knowledge or consent.

In addition, Norvell falsely attested in a compliance questionnaire that he had not signed or affixed another person’s signature on a document.

This is not the first time Norvell has found himself in legal trouble. Investors previously sued him three times for false or incomplete information in the sale of investment products. At least two of these prior complaints involved annuities. Norvell has also previously faced criminal charges for providing false information. While it appears that none of these prior allegations resulted in a verdict against Norvell, the allegations should have put his employers on notice of the need to have heighted their supervision of Norvell.

We are investigating Alexandra Bovee, aka Alexandria Montgomery and Aia Montgomery, who participated in a marijuana investment Ponzi. The former Edward Jones broker in Sumter, South Carolina accepted a securities industry bar rather than participate in the Financial Industry Regulatory Authority (FINRA) investigation into her alleged work for a cannabis growing company. 

We are a firm representing investors and pursuing cases against securities brokerages.

Bovee declined to provide testimony when given the opportunity in FINRA’s investigation of whether she had “violated FINRA rules or federal securities laws” in connection with sales of securities issued by Integrated National Resources (INR), according to a FINRA Advice Waiver and Consent filing of settlement finalized on Wednesday. In that position she received inappropriate commissions totaling $715,000. Her refusal triggered the automatic bar under FINRA Rule 8210, according to the FINRA AWC filing. 

Bovee resigned from Edward Jones in December 2022, according to the regulatory AWC. She had initially worked as a financial advisor (stockbroker) but was serving as a branch office administrator at the time of her resignation, according to a person familiar with the matter. 

We allege that Edward Jones failed to appropriately supervise Bovee. Securities broker-dealers, like Edward Jones, have a duty to supervise inexperienced advisors and the investment actions advisors make away from the firm. Bovee had been a student and managed a Mexican restaurant in Las Vegas prior to starting at Edward Jones in 2019, according to BrokerCheck. Shortly thereafter, in 2022, Bovee started her inappropriate relationship of investing clients in INR.

INR, also known as WeedGenics, was shut down and all assets were frozen in mid-2023 following the initiation of the SEC’s legal action against the company. The company, which launched in 2019, purported to raise investor funds to develop and expand cannabis cultivation facilities in California and Nevada, and had raised approximately $61.7 million from approximately 350 investors, according to the SEC’s complaint in a federal court in Santa Ana, California. 

Some investors of the INR marijuana investment Ponzi have recourse.

Matthew Stucke, currently with Cetera, and previously with Cambridge and Raymond James, is alleged to have inappropriately invested his investors. Please contact us if you were a Stucke investor. We have represented investors for 20 years. We can provide a free and confidential consultation as to whether you were sold inappropriate stock or other investments.

There are currently two suits filed against the employers of Stucke. Details of the allegations reveal that he is accused of mishandling the investments in a discretionary account in a suit filed in July 2023. This suit sought $370,000 in damages and settled for $275,000.

A second suit filed in October 2023 alleges that Stucke recommended unsuitable and overly risky stock investments. The suit seeks damages of approximately $100,000.

Raymond James also, according to Stucke, also forced him out of their employment for investment practices. A FINRA panel found that Raymond James appropriately terminated Stucke in 2020 because of “email communications with clients that violated firm policies, including emails providing clients with limited-distribution investment material without firm approval.”

Stucke had asserted that he was the victim of a conspiracy and sued Raymond James to have the terminations removed. He stated that others at Raymond James conspired against him to take his business.

FINRA denied the attempt by Stucke to have the termination removed from his record. Not only that, FINRA ordered to Stucke to pay back a $1 million loan he had taken with his former employer.

Stewart Ginn is affiliated with Independent Financial Group and Crosby Investment Group with offices located in California and Colorado. Regulators accuse Ginn of churning accounts, of mostly elderly investors, and creating millions of dollars in losses and unnecessary commissions.

A regulatory complaint asserts that Ginn, a licensed securities broker, exercised control over the accounts of at least five investors. These investors were mostly elderly and retired. Ginn then proceeded to trade the accounts excessively. This was in the best interests of Ginn and not his investors. As a result, the investors incurred losses and commissions of over $4.5 million.

Securities regulations currently require that a broker act in the best interests of an investor. A broker fails to act in the best interests of a client when the broker puts commissions ahead of the investment objectives of a client. As the percentage of the portfolio consumed by commissions increases, the ability for the portfolio to sustain value decreases. Even before this best interests standard was the rule, brokers were required to only recommend suitable trades and abstain from excessive trading.

Ginn and his employer are currently facing three investor lawsuits in addition to the regulatory suit. All assert allegations of excessive trading and excessive commissions.

We have handled investor suits such as these for over 20 years. Please contact us to discuss your options. Initial consultations are free and confidential.