Tag Archives: UDF

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.

Losses with First Financial Equity (FFEC)

If you have suffered investment losses with First Financial Equity Corp. (“FFEC”) please call for a free consultation with an attorney at 1-866-817-0201.  Recent actions of FINRA, the financial industry regulator, indicate that investors may have been harmed by the actions of this firm.

FFEC and its chief compliance officer entered into a settlement with FINRA regulators  on March 8, 2017 concerning the lapses in supervision.  The alleged lapses allowed a variety of different fraudulent activity to occur throughout FFEC and in particular the Scottsdale, Arizona branch.  FINRA asserted that the chief supervisor of FFEC, the chief compliance officer, had not adequately supervised and that the firm did not have adequate supervisory procedures.

The most obvious result of the lack of supervision is the 26 customer complaints of broker John Schooler.  These complaints, many of which evolved into arbitration lawsuits, involved his inappropriate trades in oil & gas investments and TIC investments.

One issue alleged to be a result of the inadequate supervision is the sale of unsuitable ETFs.  Unsuitable securities are those which are not consistent with the wants and needs of an investor.  Usually, an investment is unsuitable if it puts at risk funds not earmarked for risk, or otherwise is inconsistent with who the client is as an investor.

In the case of FFEC, its brokers recommended and invested its customers in aggressive ETFs, including leveraged and inverse ETFs.  Such investments are known to be high risk, yet the brokers recommended the investments to individuals who did not express a desire for high risk investments.  Worse, many of these investments were purchased by the FFEC brokers for accounts where the brokers were given discretion and not given the required supervisory review.

To ensure suitability, FFEC brokers were required to obtain sufficient information about their investors to evaluate the investments that would be suitable.  The settlement states that this was not done.

Another issue alleged to have been caused by the lack of supervision is churning/excessive trading.  This occurs any time trades are made which the costs and fees are of an amount that the trades benefit the adviser more than the investor.

First Financial Equity Corp. Losses

Please call for a free consultation with an attorney if you suffered losses First Financial Equity Corp., particularly if you suffered losses in ETF or annuity investments.

First Financial Equity, a securities brokerage firm headquartered in Scottsdale, Arizona, as identified by FINRA in February 2017, entered in a regulatory settlement with FINRA regulators concerning allegations that financial advisers were receiving excessive commissions and selling unsuitable ETF investments and annuities.  The suit also revealed that systemic problems existed in the supervising of the advisers that would prevent such violations.

A FFEC broker who typifies the problems at FFEC is John Schooler.  This FFEC broker has 26 customer complaints.  Such complaints generally evolve into arbitration lawsuits against the firm.  The complaints against Schooler involve TIC, oil/gas and other inherently aggressive investments.

Under the terms of the Offer of Settlement with FINRA, the firm consented to, without
admitting or denying the same, the entry of the following findings. The findings
stated that First Financial Equity failed to establish, maintain, and enforce an adequate supervisory system, including written procedures, designed to ensure that the firm’s sales of leveraged and inverse ETFs (nontraditional ETFs) complied with applicable securities laws, and
NASD and FINRA rules.

The findings also stated that First Financial Equity failed to establish, maintain,
and enforce an adequate supervisory system and written procedures related to the sale
of multi-share class variable annuities and to maintain records supporting customer
suitability determinations with respect to variable annuity purchases.

Leveraged and inverse ETF are a high risk investment that pays advisers a high commission.  This creates a problem in that it provides motivation for advisers to recommend such investments to investors not seeking high risk.  Such suitability violations are in violation of FINRA rules in addition to the anti-fraud provision of federal and most state securities laws.

 

The firm failed to provide sufficient training to its registered representatives and principals on the sale and supervision of multi-share class variable annuities. The findings also included that the firm failed to implement a reasonable supervisory system and procedures to supervise variable annuity exchanges.

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.

Charles Fackrell Fraud

If you were an investor with Charles Fackrell and believe you may be a victim of his fraud, or simply wish to know your rights, please call 1-866-817-0201 for a free consultation with an attorney.

LPLFackrell,  a former LPL adviser based in North Carolina, was sentenced by a federal court to more than five-years in prison for running a $1.4 million Ponzi scheme that operated under the name “Robin Hood.”

The former adviser pleaded guilty to one count of securities fraud in April and was sentenced last week to 63 months in jail.

From May 2012 to December 2014, Fackrell ran his Ponzi fraud, misusing funds from at least 20 investors. He was a registered broker with LPL during that time.

Fackrell “used his position of trust to solicit victim investors and steer them away from legitimate investments to purported investments with” various “Robin Hood” named entities, according to the U.S. Attorney’s office. “These were entities [Mr.] Fackrell controlled and through which he could access the victim’s funds.”

Promising guaranteed annual returns of 5% to 7%, Mr. Fackrell “solicited his victim investors by making false and fraudulent representations, including that the investors’ money would be invested in, or secured by, gold and other precious metals,” according to the U.S. attorney. In fact, Mr. Fackrell spent only a fraction of investor money on such assets, the government claims, and diverted over $700,000 back to his investors in the fashion of a Ponzi scheme.

He used the balance of the money to cover personal expenditures, including hotel expenses, groceries and medical bills, and to make purchases at various retail shops and to make large cash withdrawals.

Information for this post was found at investmentnews.com.

Ameritas Broker Theft and Other Losses

If you have suffered losses, believe funds are missing from your account, or had funds stolen while with Ameritas Investment Corp., please call the Law Offices of Jeffrey Pederson at 1-866-817-0201 for a free consultation with an attorney.

We are currently investigating losses and missing funds of Ameritas investors due to inadequate supervision of Ameritas brokers.  Ameritas recently submitted an AWC, a settlement with regulators, in which the firm was censured and fined $50,000. Without admitting or denying the findings, the firm Stock handcuffsconsented to the sanctions and to the entry of findings that it failed to adequately monitor and otherwise supervise a registered representative’s activities. The findings stated that the firm did not detect that the representative changed a customer’s address of record to the address of the representative’s branch office, and then requested disbursements from the customer’s account to the new address of record. The customer did not authorize either the address change or the disbursement of funds. As a result, the firm sent funds from the customer’s account to the branch office, where the representative misappropriated the money. The firm’s supervisory systems and procedures at the time were not sufficient to adequately monitor its representative’s requests to change the customer’s address of record without her knowledge and to disburse funds to her new address.

Paul Lebel of LPL

Paul Lebel, a broker formerly registered with LPL Financial, was barred on Tuesday, October 18, 2016, by the Securities and Exchange Commission for churning and excessively trading mutual funds in customer accounts and generating excess fees.  If you suffered losses with Mr. Lebel please call 1-866-817-0201 to speak to an attorney and receive a free consultation.

Mutual funds carry large loads which can be costly to investors if trading in and out of the funds.  These same loads can lead to substantial fees for a broker.  Brokers can defraud investors with only a few mutual fund trades.

Invest photo 2Lebel, who was with LPL broker from 2008 to 2014, “during his employment with LPL, [Lebel] defrauded four customers by churning several of their accounts,” according to the SEC which entered into a settlement with Mr. Lebel. “In particular, Lebel exercised de facto control over these customers’ accounts and excessively traded mutual fund shares which carry large front-end load fees.”

Mr. Lebel bought and sold mutual fund A shares, which are meant to be long-term, buy-and-hold investments, generating $50,000 in commissions, according to the SEC. Mr. Lebel will pay $56,500 as part of the settlement.

The SEC stated, “Lebel’s excessive trading was inconsistent with the customers’ investmentLPL objectives, and willfully disregarded the customers’ interest,”

We suspect that there are other investors who who have suffered loss as the result of fraud by Mr. Lebel.  We have help many investors recover their losses due to such action.  The amounts that we are seeking are separate and possibly in addition to the recovery by the SEC.

UBS Investor Loss Recovery

UBSIf you are an investor with UBS suffering losses in investments made between 2011 and 2014 you may be entitled to a recovery.  Please call 1-866-817-0201 for a free consultation.

As reported by Rueters, UBS Group AG has agreed to pay more than $15 million to settle U.S. Securities and Exchange Commission (SEC) charges that its failure to properly train brokers led to customers buying hundreds of millions of dollars of unsuitable securities.

The SEC said on Wednesday that UBS from 2011 to 2014 sold about $548 million of “reverse convertible notes,” derivatives tied to individual stocks, to more than 8,700 retail customers who were relatively inexperienced and unsophisticated.

These notes, with mouthfuls of names as Trigger Phoenix Autocall Optimization Securities and Airbag Yield Optimization Securities, were sold to people of modest means, often with low risk tolerances, and included some retirees, the SEC said.

“UBS dropped the ball,” SEC enforcement chief Andrew Ceresney said in a statement.

Gregg Rosenberg, a UBS spokesman, in a statement said the Swiss bank was pleased to settle. It did not admit wrongdoing.

UBS’s payout includes a $6 million civil fine, $8.23 million of improper gains and about $798,000 of interest.

The case is part of a years-long crackdown by the SEC, the Financial Industry Regulatory Authority (FINRA) and other regulators to stop banks and brokerages from selling products that retail and even professional customers may not want, need or understand.

According to the SEC, UBS’s notes were designed to offer attractive yields with a lessened risk of loss.

But Ceresney said on a conference call that UBS’s training focused on describing the “potential upside” from the various products, not their volatility.

UDF Losses

If you invested in UDF, you have rights and should call 1-866-817-0201 for a free consultation with a lawyer.

The FBI on Thursday, February 18, 2016 raided the Grapevine, TX, in suburban Dallas, offices of large real estate investment trust, United Development Funding IV (“UDF”).  Allegations have circulated that investors have suffered losses at UDF as the result of Ponzi activity.  Shares of UDF on that day toppled 54% before trading was stopped.

FBI

As of October 16, 2016,  United Development Funding IV (“UDF IV” or the “Trust”) released more bad news.  It announced in a press release that it received a written notification letter from NASDAQ indicating that the Nasdaq Hearings Panel (“Panel”) had determined to delist the shares of UDF iV from Nasdaq.  The Trust has not filed its Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Form 10-K”) and its Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30, 2016 (the “2016 Forms 10-Q” and collectively with the 2015 Form 10-K, the “Reports”) by October 17, 2016, the deadline by which the Trust was to file all Reports in order to regain compliance with Nasdaq Listing Rule 5250(c)(1).  This despite repeated assurances by the Trust to its investors that it would file such documents.

A disproportionate number of investors come from a small number of independent brokerages.  This could mean that the sale of the investment was influenced by inappropriate means, such as heightened commissions.  Many of the recommendations were also unsuitable, a fraudulent activity of recommending a security when the security is in contradiction to the wants and needs of the investor.

The brokerage firms we believe sold

Accordingly, the trade halt that has been in place since February 2016 will be converted to a trading suspension effective at the open of business on October 19, 2016.  While this suspension will occur at the open of business on October 19, 2016, the Trust currently plans to appeal the Panel’s determination to delist the Trust’s shares, although no assurance can be given regarding whether the Panel will grant the appeal or whether the appeal will ultimately be successful in preventing the delisting of the Trust’s shares.  As stated in the notification letter from Nasdaq, following the suspension of trading of the Trust’s shares on Nasdaq, the Trust’s shares may trade on the over-the-counter market.

On October 13, 2016, the Trust informed Nasdaq that it would be unable to meet the previously granted extended deadline of October 17, 2016 for filing the 2015 Form 10-K and the 2016 Forms 10-Q, as a result of the Trust’s auditors requiring more time to complete the audit.  In addition, the Trust informed Nasdaq that the Trust has received a “Wells Notice” from the staff (the “Staff”) of the U.S. Securities and Exchange Commission’s (“SEC”) Division of Enforcement stating that the Staff has made a preliminary determination to recommend that the SEC file an enforcement action against the Trust alleging violations of certain provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.

Certain individuals associated with the Trust and its advisor also received similar Wells Notices.  A Wells notice is a notice from SEC regulators indicating that a preliminary investigation of UDF IV has recommended a likely enforcement action for violation of securities laws.

UDF has seen its stock price fall 81% in the months after a hedge fund alleged it was operating for years like a Ponzi scheme.

“The FBI is lawfully present and conducting law enforcement activity” at the UDF offices, said FBI spokeswoman Allison Mahan.

UDF has previously defended itself saying that the Ponzi charges are untrue and that it is the victim of individuals spreading rumors in hopes of shorting the REIT.   Claiming in a filing with the Securities and Exchange Commission that the REIT was the victim of this type of securities trading scheme known as a “short and distort.”  However, UDF also disclosed in December that it had been the subject of a fact-finding investigation by the SEC since April 2014.

The FBI’s presence at UDF headquarters further decimated the company’s share price, which fell  Thursday, February 18, to $3.20 per share after the FBI activity at company headquarters was reported. As recently as two months ago, UDF shares were trading at $17.20.

UDF IV had total assets of $684 million, the vast majority of which, $513.2 million, were notes receivable, according to its quarterly report from November. Notes receivable for related parties was $69.6 million, according to the report.

Earlier this month, hedge fund manager Kyle Bass revealed that he was shorting UDF. “UDF is using new investor money to pay existing investors,” he wrote. “UDF Management is misleading investors and is preying on ‘Mom and Pop’ retail investors.”

UDF investors should speak with an attorney to know their rights.

 

Sources for this report include Investmentnews.com and Wsj.com.