INVEST Act Hurts Investors
The House of Representatives passed the INVEST Act on December 11, 2025. The Act purports to protect investors but may increase investor vulnerability.
The Act weakens the accredited investor standard. A large portion of private investments require that investors be “accredited.” Currently, to be an accredited investor, an investor must have a certain level of income or net worth. This is to protect individuals with limited worth from these speculative investments. Private investments typically provide little financial transparency and cannot be easily sold if the investment underperforms.
In the place of the economic standard, the Act authorizes the creation of a competency-based exam. The Act directs FINRA, the Financial Industry Regulatory Authority, to create such an exam. Under this framework, brokers will now be able to recommend such speculative investments regardless of an investor’s financial ability to sustain losses.
A foreseeable problem is broker participation in the completion of the exams. Private investments generally pay brokers higher commissions than publicly traded securities. Brokers have, in prior cases, commonly completed, or falsified, account opening documents to allow trading in more lucrative investments. Investors could lose substantial portions of their savings if a broker assists in taking the exam or improperly advises an investor regarding the exam responses.
Kyle Ray Critcher Bond Allegations
Kyle Ray Critcher is accused of misrepresenting bonds as being FDIC-insured. First registered in 2021, Critcher is a former broker LPL Financial.
Regulators allege that in July 2024, Critcher negligently misrepresented that corporate bonds he recommended to two senior customers were FDIC-insured certificates of deposit. He recommended the senior customers purchase more than $500,000 in corporate bonds based upon this assurance. This is false. As such, the recommendation violated
If true, the alleged facts would violate federal securities laws. Section 17(a)(2) of the Securities and Exchange Act prohibits “in the offer or sale of any securities […] by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements […] not misleading[.]”
The recommendations would also violate Critcher’s obligations under the Financial Industry Regulatory Authority (FINRA) rules. FINRA Rule 2010 requires securities brokers to “observe high standards of commercial honor and just and equitable principles of trade.”
Jeffrey Pederson represents investors misled by brokers. Call for a free initial consultation.
Advisors Using AI
Advisors using AI must comply with regulatory obligations to protect their investors. Investors have recourse when advisors use artificial intelligence in a manner that put their holdings at risk.
FINRA, the Financial Industry Regulatory Authority, published its 2026 regulatory oversight report concerning AI in December 2025. Continuing and emerging trends FINRA identifies concerning generative artificial intelligence (GenAI) are many.
Advisors have obligations addition to acting in the best interests of investors. FINRA RN 24-09 reminds advisors of their additional obligations when using GenAI. They also have duties to protect their investors from GenAI fraud. Advisors also cannot blame others for the failing of AI programs since FINRA requires the oversight of such third-party vendors.
The report identified many risks to investors from advisor use of artificial intelligence:
- Autonomy: AI agents acting autonomously without human validation and approval.
- Scope and Authority: Agents may act beyond the user’s actual or intended scope and authority.
- Auditability and Transparency: Complicated, multi-step agent reasoning tasks can make outcomes difficult to trace or explain, complicating auditability.
- Data Sensitivity: Agents operating on sensitive data may unintentionally store, explore, disclose or misuse sensitive or proprietary information.
- Domain Knowledge: General-purpose AI agents may lack the necessary domain knowledge to effectively and consistently carry out complex and industry-specific tasks.
- Rewards and Reinforcement: Misaligned or poorly designed reward functions could result in the agent optimizing decisions that could negatively impact investors, firms or markets.
- Unique Risks of GenAI: Keep in mind that the unique risks of GenAI—bias, hallucinations, privacy—also remain present and applicable for GenAI agents and their outputs.
Securities America Mutual Fund Switching
The Financial Industry Regulatory Authority (FINRA) charged Securities America with allegations of mutual fund switching. Securities America is currently owned by Osaic. Osaic paid $3 million to settle these charges.
Fund switching occurs when a fund is exchanged for another such fund. Regulators consider this fraudulent because the sales charges, or load, are so great. The charge is so great that taking on a new load by exchanging the fund rarely makes economic sense. Any recommendation that a mutual fund with a front load be liquidated in the short term raises a red flag.
From at least January 2018 to June 14, 2024, Securities America failed to have a supervisory system designed to achieve compliance with FINRA Rule 2111. This rule requires that brokerage firms offer only strategies that are suitable for their investors. Securities laws also require firms to offer only strategies in the investor’s best interests, which SA lacked.
Class A mutual funds are generally suitable only as long-term investments and not for short-term trading. Class A share funds carry significant sales charges. An investor usually must hold the Class A share for a long enough period of time to recoup the costs associated with the front-end sales charge.
Between January 1, 2018, and June 14, 2024, Securities America effected the purchase of approximately $3.8 billion in Class A mutual funds, which comprised a substantial portion of the firm’s revenue. However, from at least January 2018 to June 14, 2024, Securities America failed to establish, maintain, and enforce a supervisory system.
Jeffrey Pederson represents victims of fund switching. Call for a consultation.
Fraudster David Gentile Pardoned
On November 30, 2025, investors learned the news of a David Gentile pardon. Gentile served fewer than two weeks of a seven-year sentence. The seven-year sentence is light considering Gentile’s role in a $1.6 billion Ponzi-type scheme that robbed the savings of thousands of investors.
The Department of Justice indicted Gentile in 2018. Gentile, the former CEO and co-founder of GPB Capital, reported to federal prison to begin his sentence on November 14, 2025. He earned this sentence for his part in a scheme to defraud over 10,000 investors in GPB.
As a refresher, Gentile and the company he led perpetrated the following: 1) GPB misled investors over its assets. Gentile represented that a subsidiary would have 50% of assets in auto dealerships, a lucrative asset. But at that time the subsidiary had zero such dealerships. GPB had not done an auto acquisition since Q2 2015 anywhere in the portfolio. It also did not appear to have any working toward resolution of acquiring such assets.
2) Gentile used investor funds to prop-up other companies Gentile owned or had significant ownership. Gentile, the co-founder and general manager of GPB, owned positions in several of the companies that GPB has invested. This includes the company Qello. This was a significant conflict of interests.
3) Gentile and GPB utilized a business strategy that made the investment much riskier that represented to investors. GPB shifted to a debt strategy rather than private equity, making high interest rate loans to highly troubled companies, instead of private equity investments.
4) GWG made questionable loans of investor money to “Friends of Gentile.” Loans include a questionable real estate development loan in Florida.
5) GPB obstructed the access to audited financials by those seeking to conduct due diligence on the company. Due diligence is an important investor protection.
6) GPB utilized a type of accounting inconsistent with industry standards. Under industry standards, the company would be showing losses rather than gains.
When such things happen, the only recourse for an investor may be to pursue the advisors who fail to discover the fraud through reasonable diligence. Jeffrey Pederson represents such investors and has been doing so for over 20 years.
James Holmes III
James Holmes settled allegations of FINRA, the Financial Industry Regulatory Authority, that he brazenly falsified documents to allow him to churn an investment account.
Between October and December 2021, Holmes recommended options transactions to an investor with a conservative investment profile. The investor had an income objective and could not afford to lose principal. As such, Holmes made the transactions without having a reasonable basis to conclude that the transactions would be in the customer’s best interest or suitable based on her investment profile. To accomplish this, Holmes inaccurately stated on account opening documents the investor’s financial circumstances, investment experience, and investment objectives.
Holmes also churned the accounts of many of his investors. He made trades without the appropriate permission in at least five customers’ accounts to effect at least 250 trades.
FINRA Rule 2360 prohibits such an action. That rule provides that the option must be suitable for the investor after reasonable inquiry. Section (19) of that rule specifically states, “that the recommended transaction is not unsuitable for such customer” after analysis financial situation and objectives of the investor.
Further, the action is in violation of SEC Regulation BI. That rule requires that the broker put the financial interests of his clients ahead of his own. Here, Holmes made substantial commissions not only by making trades clients never authorized, but by treating the portfolios as more aggressive that authorized. An aggressive portfolio is more lucrative to a broker than a conservative portfolio.
Holmes first entered the securities industry in October 1991 through an association with a FINRA member firm. In August 2019, Holmes registered with FINRA as a General Securities Representative through an association with Wells Fargo.
The settlement is not an admission of wrongdoing but is also not an exoneration of these substantial charges. FINRA suspended Holmes for eight months from the securities brokerage industry and fined him $10,000. Wells Fargo also faces a $500,000 customer dispute concerning such actions of Holmes.
Jeffrey Pederson has successfully represented hundreds of investors in similar actions for over 20 years. Call for a free and confidential consultation if you have suffered loss due to churning or suitability violations.
Adam and Daniel Kaplan Defraud 100 Victims
On November 13, 2025, a federal jury convicted investment advisors and twin brothers Adam and Daniel Kaplan of wire fraud conspiracy, wire fraud, investment advisor fraud, and money laundering conspiracy.
The jury also found Adam Kaplan guilty of another count of conspiracy to commit wire fraud, bank and wire fraud conspiracy and money laundering. The two also attempted to obstruct justice by threatening witnesses and attempting to bribe officials. The federal verdict was after an eight-week trial before United States District Court in Central Islip, NY.
The US Attorney stated, “With today’s verdict, Adam and Daniel Kaplan stand convicted of stealing millions of dollars from […] elderly and disabled [clients], who trusted the [the Kaplans].” The actions were so egregious the prosecutor described them as “ruthless thieves.” Further, “Adam Kaplan is facing additional, very serious consequences for […] attempting to threaten victims and witnesses and bribe Department of Justice officials.”
The crime is especially heinous due to the fiduciary capacity the Kaplans stood in relationship with their clients. Registered investment advisers, such as the Kaplans, are statutory fiduciaries and required to put their clients’ needs above their own.
Jeffrey Pederson represents investors and has been doing so for over 20 years. Call for a free and confidential consultation.
Barry Buchholz Unauthorized Trading
Barry Buchholz is an LPL broker. He accepted a suspension from the Financial Industry Regulatory Authority (FINRA) over allegations of unauthorized trading in multiple accounts. Additional terms of the regulatory settlement are that Buchholz pay a fine and repay $7,480 of commissions received.
The underlying charges stem from allegations of unauthorized trading. In particular, the allegations are that from September to October 2023, Buchholz placed 11 unauthorized mutual fund trades. The principal value of the trades was $590,000. The trades generated in excess of $16,000 in commissions.
The investors were four children of one of Buchholz’ clients who had recently passed. As such, the children each opened a brokerage account at LPL with their respective portions of their father’s estate. The allegations are that Buchholz made unauthorized mutual fund transactions in each of the children’s accounts.
Additionally, Buchholz has a long history of customer disputes and lawsuits. These disputes are not limited to unauthorized transactions but also include the sale of unsuitable securities and insurance products.
FINRA rules require every trade to be authorized. An investor must give written authority to exercise discretion in an investor’s account. Absent such authority, the broker must obtain investor approval just prior to each trade. FINRA sets rules for securities dealers under the oversight of the Securities and Exchange Commission (SEC). FINRA Rule 2111 also requires that every trade recommendation be consistent with the objectives and risk tolerance of the investor.
Buchholz did not admit wrongdoing in the settlement.
Jeffrey Pederson handles cases concerning misdeeds by securities brokers. Please call for a free and confidential initial consultation.
Leveraged ETFs
Leveraged ETFs, or “multiplier ETFs,” are speculative investments. Unless you are a speculative investor, an advisor or broker’s recommendation of such investments is likely violating legal duties he has to you.
Unique characteristics of these ETFs make them high risk. First, the investment, whose return mirrors the return of an underlying index, resets daily. This makes a multiple day loss almost insurmountable. As such, most regulators prohibit the holding of such an investment for more than a single day.
FINRA, the regulator overseeing brokerages, takes a similar position. FINRA states, “Because they reset each day, leveraged and inverse ETFs typically are inappropriate as an intermediate or long-term investment.” It goes on to say that only in a sophisticated trading strategy, should the position be held more than “one day.”
Second, when the underlying index starts to fall, the ETFs leveraged by the index accelerate the loss. A downward trend in the index prompts holders of leveraged funds to sell to avoid a heighten loss. These outflows further losses in the index as a whole. This vicious cycle is known as “negative gamma.”
Many advisors have lost their licenses due to recommending such investments.
Call Jeffrey Pederson to learn if you have recourse. Initial consultations are free and confidential.
Unsuitable Crypto Strategies
You may have recourse if you are a moderate investor and your advisor recommended unsuitable crypto currency investments or strategies. These investments are speculative and suitable for only the most sophisticated and aggressive investors.
Many crypto strategies suffered substantial losses in 2025. MicroStrategy, also known as Strategy, lost 46% of its value from its height. Similar losses have been incurred by Bitmine Immersion, BMNR, and ETHZilla, ETHZ. These crypto treasury companies were not only known to have exposure to speculative crypto assets but were also known to be overvalued based upon the underlying crypto currency.
Advisors have a duty to act in their investors’ best interests. This includes not only understanding the underlying assets supporting the price of an investment, but also to only invest or recommend investments consistent with an investor’s objectives and risk tolerance. Advisors have a duty to know these things. So it is a form of fraud when they act contrary to these investor characteristics.
Jeffrey Pederson represents investors sold investments not in their best interests. Call for a free initial consultation.