Tag Archives: Broker fraud

Misdeeds by Charles Euler

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.

 

Michael Lee Origin Fund Fraud

If you invested with the Origin Fund through Michael Lee or others you may be a victim of fraud.  Please call 1-866-817-0201 for a free and confidential consultation with a lawyer concerning your rights.

Invest photo 2Michael Lee is a former Kestra Investment Services broker.  From December 2015 through December 2016 (the “Relevant Period”), Lee engaged in the sale of the “Origin Fund.”  Lee was an employee of Kestra during this time.  His office was located in Darien, CT.

The Origin Fund is a prospective ETF fund. Lee solicited potential investors and distributing written materials prepared by Lee’s business partner.  The written materials distributed by Lee falsely represented that the Origin Fund was an investment advisory with $20 million in assets under management, and that Kestra’s was sponsoring and providing certain administrative services to the Origin Fund.

FINRA, the Financial Industry Regulatory Authority, suspended Lee for one year and fined him $12,500 for his actions associated with the Origin Fun.  At the time of suspension, Lee was still in the industry as a representative of Altium Wealth Management.

The inappropriate investments were done under Kestra’s watch.  Kestra, like all brokerages, had a duty to conduct audits and take other reasonable steps to prevent the “selling away” of its brokers.

Selling away is a common form of fraud where a broker uses his status as a broker to persuade investors into purchasing investments that have not been approved by the brokerage.  These investments often pay the broker an excessive commission but the investment itself often lacks substance and is often a fraud.

Dennis Allen Hayes Investors

Investors of Dennis Allen Hayes, recently with Newbridge Securities Corp., should call 1-866-817-0201 for a free and confidential consultation.

In January 2019, the Financial Industry Regulatory Authority (FINRA), the self-regulatory organization policing securities brokerages and brokers, filed suit against Hayes.  That complaint stated Hayes engaged in prolonged fraud in the handling of investor accounts.  In particular, he sold investments that were not approved by his employer and that were not legitimate investments.  Such an action is commonly referred to as “selling away.”

Between March 2010 and June 2016 (the “Selling Away Period”), while he was associated with Newbridge Securities Corporation (BD No. 104065) (“Newbridge” or the “Firm”), Dennis Allen Hayes (“Hayes”) recommended that nine investors, eight of whom were Newbridge customers, invest a total of $2.7 million in five companies. Hayes did not provide any written or any other notification to Newbridge regarding his participation in these private securities transactions. The investors suffered losses of at least $2.3 million, after one of the companies filed for bankruptcy and the other companies ceased operations.

In addition, from June 2011 through June 2016, Hayes used two personal email accounts of his to communicate with four customers about their Firm accounts. Hayes also communicated via text message with one Firm customer about her Firm account between November 2015 and June 2016. The use of private email and text messaging is a common mechanism to perpetrate fraud because it is generally done with the intent of hiding the communications from an employer.

On September 16, 2016, Hayes was permitted to resign because, “first, the Firm has an open internal review regarding a customer complaint that evolved into a[n] arbitration for possible selling away and private securities transactions [and] second [Hayes] had little or no production [other than fraud] in the last 12 months”.

Upon Hayes’ recommendation and with Hayes’ assistance, nine investors purchased securities issued by five privately-held companies without Hayes’ employer’s knowledge. Eight of the investors were customers of Newbridge.

The securities Hayes sold were promissory notes issued by MSLLC and IRLLC, common stock and promissory notes of BTInc, common stock and promissory notes of KIInc (a successor of BTInc) and common stock of FXInc.

The owner of the five companies was a family friend of Hayes’.

These investments are currently lost, but investors have recourse.  The employer of Hayes, Newbridge, had a duty to oversee the transactions of Hayes and to supervise against the sale of investments that Newibridge had not researched or approved.

Sean Kelly Theft

If you were an investor of Sean Kelly, previously of Center Street Securities, Capital Financial Services, and Lion’s Share Financial, please call 1-866-817-0201.  We are currently investigating his theft of investor funds.

Kelly, a Georgia stock broker, is facing criminal and SEC charges alleging that he stole at least $1 million from a dozen clients.  These clients include elderly widows and military veterans.  Kelly stole their savings and used the money for luxuries including Super Bowl tickets and vacations.

Sean Kelly, 49, of Marietta, Ga., and a stockbroker for Center Street Securities Inc., also is accused of falsely presenting himself to clients as both a brokerage firm and an investment advisor, according to the U.S. Securities and Exchange Administration.

Investors have recourse when investment professionals turn bad.

Investors have recourse when investment professionals turn bad.

The financial fraud of Kelly should have been foreseen by his employers.  The record of Kelly shows a broker with significant financial problems.  He has a history of multiple tax liens, a bankruptcy, and what is described as a “continuation of a prior bankruptcy.”

The U.S. Attorney’s Office for the Northern District of Georgia has filed criminal charges against Kelly and placed him under arrest, according to the SEC.

The SEC Complaint indicates that the fraud was fairly simple.  Kelly would have his clients make checks out to Lion’s Share.  The Complaint goes on state that Kelly used Lion’s Share as “his personal piggy bank.”

There has also been a temporary restraining order entered.  Such an order freezes the assets of Kelly.

Kelly, who has been a stockbroker for about 18 years, has been stealing money from clients since at least 2014, using recruiting techniques such as offering free tax preparation services for veterans and holding free retirement planning seminars in assisted living facilities, according to the SEC.

The theft could be well-above the $1 million currently estimated.   The number is reliant upon the documents the SEC has been able to obtain from the investigation of Kelly.  There are likely many more investors who will need to bring actions on their own to obtain recovery of their losses.

Brokerage firms have a duty to investigate and monitor outside business activities such as the activities of Kelly.  Further, FINRA requires securities brokerages to carry fidelity insurance.

Kelly’s use of Lion’s Share was well known to his employers.  Insufficient safeguard’s existed to protect the investors.

George Merhoff Loss Recovery

Investors of George Merhoff, a broker and advisor with Cetera Advisors, can call 1-866-817-0201 for a free initial consultation with an attorney concerning loss recovery.  All consultations are confidential and representations done on a contingent basis, where attorney fees paid from the ultimate settlement or judgment.

Merhoff, a securities broker located in Oregon, has been the subject of approximately 16 lawsuits in the past two years.  These lawsuits concern the recommendation of unsuitable securities.  Merhoff sold a significant amount of oil and gas investments to his investors over the last six years.  Oil and gas investments are inherently speculative.

The sale of unsuitable securities is not only a negligent action, but also a form of fraud.  The payout to the broker/advisor from these investments are generally higher.  This gives the broker or advisor an incentive to omit from the investor the high level of risk that these investments pose.

Suitability violations exist anytime a recommended investment is inconsistent with the wants 7crude-oil-pumps-power-transmission-elementsand needs of an investor.  FINRA, the regulator overseeing financial advisors and securities brokers, prohibits the recommendation of unsuitable securities.  These rules also require that the advisor or broker to “know the customer.”  This means that the advisor or broker must know the wants and needs of his investors, along with that investor’s tolerance for risk and objectives for the account.

Since the oil and gas investments are speculative investments that are inherently volatile, they would not be suitable investors indicating that they can afford to take significant risk with the funds.  The investments would not be suitable for investors looking to receive regular income from their investments or take only moderate risk.

Oil and gas investments of particular interest include Linn Energy (“LINE” or “LNCO”), PennGrowth and Teekay Partners.  Also of interest are investors investing in REITs or utilizing margin loans on the recommendation of Merhoff.

 

James Davis Trent

Investors suffering losses with James Davis Trent may be entitled to recovery from his brokerage employers, AXA, Proequities and Allstate.  Please call 1-866-817-0201 for a free consultation with a private attorney.

investingstockphoto 1Trent entered into a regulatory settlement with FINRA in which Trent was suspended from
association with any FINRA member in all capacities for six months. In light of Trent’s
financial status, no monetary sanction has been imposed. Without admitting or denying
the allegations, Trent consented to the sanction and to the entry of findings that he
engaged in a pattern of recommending unsuitable short-term trading of Class A mutual
fund shares to customers, resulting in the customers (all of whom were retired) incurring
approximately $6,362.50 in unnecessary sales charges, while Trent received approximately
$2,910 as his commission from the sales loads.

Short-term trading of mutual funds is a form of churning, an action where there is very little benefit to the investor but significant commissions to the broker.  Such actions are in violation of FINRA rules and the anti-fraud provisions of state and federal securities laws.

The regulatory findings stated that Trent recommended all of the transactions that were executed in the customers’ accounts at the firm, including short-term trading involving Class A front-end-loaded mutual funds. In the transactions at issue, Trent recommended the purchase of Class A mutual fund shares and, within less than a year, recommended the sale of the positions, resulting in an average holding period for the customers’ accounts of six months. Given the long-term nature of investments in Class A mutual fund shares and the customers’ investment profiles, Trent lacked a reasonable basis to believe that the recommended securities transactions were suitable for the customers.

 

Losses with Larry Charles Wolfe

Jeffrey Pederson PC assists investors in recovering losses such as those incurred as the result of the misdeeds of brokers, such as the alleged misdeeds of Larry Charles Wolfe.  Currently with Stoever, Glass & Co., Wolfe was previously with Aegis Capital Corp., and Herbert J. Sims & Co. Those suffering losses with this broker are likely entitled to recovery from either Wolfe or his employer.  Call 1-866-817-0201 for a free and confidential consultation.

Invest photo 2FINRA has announced that it has entered into a settlement with Larry Charles Wolfe for making unauthorized transactions in his clients’ accounts.  The allegations are that between November 10, 2015 and November 16,2015, Wolfe inappropriately exercised discretion in the accounts of 39 investors without obtaining prior written authorization from the customers or written approval of the accounts as discretionary from his employing member firm, in violation of numerous state and federal securities laws.

A securities broker must obtain authorization from an investor prior to making a securities transaction in the investor’s account unless that broker has written authorization to make such a trade.

Additionally, MSRB Rule G-17 and FINRA rules require that each broker or dealer in municipal securities to deal fairly with customers and prohibits registered representatives from engaging “in any deceptive, dishonest, or unfair practice.”

The trades are believed to involve municipal bonds and other securities.

In addition to this regulatory action, Wolfe has been sued by investors at least ten (10) times, primarily for allegations of unauthorized, excessive, or unsuitable trades.  Additionally, at least two (2) other investors have threatened suit.  Despite Mr. Wolfe being accused of wide-scale fraud he has not yet lost his license and is still working in the securities industry.