Tag Archives: New Jersey

Network 1 Financial ETF Losses

From August 2010 to September 2015 Network 1 Financial failed to establish and enforce a supervisory system reasonably designed to supervise advisor sales of complex investments such as leveraged, inverse, and inverse-leveraged exchange-traded funds (ETFs).  These are the regulatory findings that Network 1 neither denies or admits.  This issue has impacted over one hundreds securities accounts at Network 1.  If you are a Network 1 investor please call 1-866-817-0201 for a free and confidential consultation.

Non-Traditional ETFs are complicated investment vehicles suitable for only a small section of the investing public.  Such ETFs are designed to return a multiple of an underlying index, Such as the Russell 2000, S&P 500 or VIX, the inverse of that benchmark, or both, over the course of a day.

The performance of such ETFs over periods of time longer than a single trading session be very volatile and be substantially risky.  The results, as FINRA states, “can differ significantly from the performance . . . of their underlying index or benchmark during the same period of time.”

FINRA, the regulator of securities brokerages in the United States, has warn brokerages and their advisors that NonTraditional ETFs “are typically not suitable for retail investors who plan to hold them for more than one trading session, particularly in volatile markets.”

Approximately 29 Network 1 financial advisors/brokers traded such ETFs in 167 customer accounts. These representatives executed 645 ETF transactions totaling approximately $48 million in possibly unsuitable trades.

Transactions in Non-Traditional ETFs during the referenced period, Network 1 Financial had inadequate supervisory procedures regarding the suitability and supervision of Non-Traditional ETFs transactions.


Attention Investors of Voigt Cullen Kempson III

Pederson, PC is investigating the actions of V. Cullen Kempson III currently of American Portfolios and previously of Commonwealth Financial Network.   Kempson has previously settled charges of unauthorized trading in the account of a deceased investor and is currently facing felony weapons charges.  To speak to an attorney for a free and confidential consultation please call 1-866-817-0201.  

A recent settlement agreement Kempson enter into with FINRA regulators agrees to the 30-day suspension for making a large number of unauthorized trades in the account of an investor Kempson knew was deceased.  In the agreement, referred to as an AWC, Kempson neither admits nor denies fault.

The alleged facts are that in February 2007, A Kempson investor opened two investment Invest photo 2advisory accounts with Kempson at the Firm. At the time, the investor signed an agreement with the Firm granting Kempson discretionary trading authority, the ability to make securities trades without first contacting the investor.  A broker must contact an investor prior to the making of trades unless the broker has been granted authority by the investor in writing to make trades in an account.

On June 13, 2015, the investor passed away. Although Kempson was aware of the investor’s death since at least June 29,2015, Kempson did not inform his Firm of the investor’s death and continued to effect trades on a discretionary basis in the accounts.

Between June 29,2015 and April 5, 2016, Kempson effected a total of 40 trades in the deceased individual’s accounts.  FINRA Rule 2010 requires members to observe high standards of commercial honor and just and equitable principles of trade. After the investor passed away, Kempson had no written authority to conduct any trades in the investor’s accounts. FINRA charged that, by effecting 40 trades in a deceased customer’s accounts, Kempson violated FINRA Rule 2010.

Additionally, in February 2017, Kempson was charged on felony weapons charges for the unlawful possession of a weapon.  As stated in his CRD, he case is in front of the New Jersey Superior Court in Essex Vincinage.  He has asserted that he is not guilty.

Platinum Partners

We are currently investigating losses suffered by investors in Platinum Partners.  If you have suffered losses please call 1-866-817-0201 for a free consultation with an attorney.

As reported on December 19, 2016 in the Wall Street Journal, top executives of hedge fund Platinum Partners were arrested Monday morning and will be charged with defrauding investors in one of the biggest such cases since Bernard L. Madoff’s Ponzi scheme.  The level of fraud is anticipated to approach or top $1 billion.

guy in handcuffsPlatinum previously reported more than $1 billion in assets under management.  This includes holdings scattered in eclectic investments like loans to bankrupt companies and thinly-traded pharmaceutical stocks. In form of a true Ponzi-type operation, Platinum boasted a performance track record with no down years for its funds.

The scheme targeted members of the Jewish community in New York, New Jersey, Florida and Texas.

The indictment unsealed Monday in federal court in Brooklyn charges Platinum founder and Chief Investment Officer Mark Nordlicht, co-chief investment officer David Levy, and former president Uri Landesman with counts of securities fraud, investment adviser fraud and conspiracy.

Authorities in New York said these Platinum executives and others falsely inflated the value of Platinum’s assets, allowing Platinum Partnersthe firm to collect a hefty cut of all investment gains and project a veneer of financial stability. In actuality, the firm’s investments were worth far less, and Platinum’s executives knowingly faked the performance figures, authorities said.

Caldwell International Securities

If you suffered losses at Caldwell International Securities, please call 1-866-817-0201 and request to speak to an attorney concerning this investigation.

Caldwell International Securities and a variety of its representatives were named respondents in a FINRA complaint alleging that the firm, by and through one or more of its registered representatives and principals, put profits before customers, growth before compliance and subterfuge before transparency. The complaint alleges that the firm’s culture of non-compliance led to serious sales practice, supervisory and reporting violations at its home office and multiple branches.

The representatives alleged to be involved are Greg Allen Caldwell (CRD #2816295, Austin, Texas), Alex Evan Etter (CRD #2981742, Old Tappan, New Jersey), Alain J. Florestan (CRD #2818942, Queens Village, New York), Lennie Simmons Freiman (CRD #1007506, Fischer, Texas), Paul Joseph Jacobs (CRD #4658235, Austin, Texas), Richard Andrew Lee (CRD #2768039, West Nyack, New York), Lucas Dylan Lichtman (CRD #5542092, Fort Lee, New Jersey) and Richard Lim (CRD #4949289, Clark, New Jersey).

Etter, Florestan, Lee, Lichtman, and Lim made unsuitable recommendations of an active trading investment strategy to their customers despite the fact these representatives failed to understand the risks of the investment strategy being recommended, or the impact the staggering commissions and fees generated by this active trading investment strategy would have on their customers’ accounts. These representatives had no reasonable basis to recommend such a strategy to their customers. As a result of the recommendation of an unsuitable active investment trading strategy, customer accounts suffered more than $1.1 million in realized trading losses while paying over $1 million in commissions and fees.

The firm is liable for the unsuitable recommendations of an active trading investment strategy made by Etter, Florestan, Lee, Lichtman and Lim under the doctrine of respondeat superior because each representative was an agent of the firm acting within the scope of his duties when he engaged in this misconduct. The firm, acting by and through its formerly registered representatives, made unsuitable recommendations involving inverse and/or leveraged ETFs without a reasonable basis for believing these investments were suitable for their customers.

The complaint also alleges that the firm, Caldwell, Freiman and Jacobs failed to establish and maintain a system to supervise the activities alleged that was reasonably designed to achieve compliance with applicable securities laws and regulations and NASD/ FINRA rules. The firm, Caldwell, Freiman and Jacobs failed to monitor for, detect and, when detected, investigate multiple instances of potential misconduct by the firm’s brokers involving unsuitable active trading investment strategies, unsuitable ETFs, discretionary trading without written authorization and excessive trading/churning in multiple customer accounts across multiple branches of the firm. In addition, the firm, Caldwell, Freiman and Jacobs failed to implement a reasonable supervisory system to adequately review trades for unsuitable recommendations, such as ETFs, and to adequately monitor whether the firm’s representatives understood the risks and benefits of the active trading investment strategy they were recommending, nor did the firm monitor whether the representatives had done any due diligence on the recommended active trading investment strategy.

This grossly inadequate supervisory system resulted in many firm customers suffering significant losses and paying staggering commissions and fees. The firm, Caldwell, and Freiman failed to establish and maintain a system to supervise the firm’s activities that was reasonably designed to achieve compliance with applicable securities laws and regulations and NASD/FINRA rules and/or the firm’s WSPs in multiple other ways. The firm, Caldwell, and Freiman failed to place representatives on heightened supervision, review all electronic correspondence to and from customers, identify and report customer complaints received, and apply right of reinvestment/right of reinstatement fee waivers, resulting in overcharges of $107,367.08 to customers’ accounts. The complaint further alleges that the firm, Caldwell, Freiman and Jacobs failed to establish, maintain and enforce WSPs to supervise its business that were reasonably designed to achieve compliance with applicable securities laws and regulations and NASD/FINRA rules. The firm did not establish, maintain and enforce written procedures to supervise its representatives’ recommendations of active and aggressive trading investment strategies to many of its customers in multiple branches. The firm failed to establish, maintain and enforce written procedures to ensure that reduced sales charges were applied for mutual funds where applicable in accordance with the fund’s right of reinvestment/right of reinstatement provisions. In addition, the complaint alleges that the firm, Freiman, Jacobs, and Etter failed to identify customer complaints and none of these complaints were reported to FINRA. The firm failed to report to FINRA statistical and summary information regarding written customer complaints from three branches as required. Moreover, the complaint alleges that the firm willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-10 by charging customers misleading and/or discriminatory miscellaneous fees in several transactions.  Furthermore, the complaint alleges that the firm, acting by and through Freiman, failed to log into the FinCEN system and conduct any of the required searches of its accounts and systems to determine whether it maintained any accounts for persons appearing on FinCEN’s 314(a) request list. The complaint also alleges that Florestan and Lim willfully failed to timely update their Forms U4 to disclose judgments against them. The complaint further alleges that Florestan failed to timely respond to requests from FINRA for documents and information during the course of its investigation of the firm’s branch activities.


Oil or Gas Investment Losses

Oil Stock IIJeffrey Pederson, P.C. helps investors determine if they have a right to recover investment losses in oil, gas or other investments.  Please call 1-866-817-0201 toll-free for a free and confidential consultation.

While brokers will unlikely blame the 2020 decline in energy investments on the coronavirus issues, the declines started in advance of the virus and the virus was only a small portion of the decline.

These investments have always been known to be speculative with a potential for large losses.  Heightened commissions or an inattention to risk drove brokers or adviser’s to inappropriately recommend such investments over the past few years.  The losses such investments suffered in 2020 is not first time oil and gas has gone into free-fall.  In fact, the oil and gas industry has suffered equal or greater shocks in the past decade.

In 2016, oil dropped to a price below $30 a barrel.  This happened again in 2020 when some oil futures fell below $0.  Many investors simply ignore their losses, believing that the loss is simply due to the market, without knowing that they may be entitled to a recovery.  Such individuals unnecessarily let their plans for retirement or other future plans go unfulfilled because of the financial loss they sustained.

In late 2014, countless oil, gas and other energy companies have filed for bankruptcy.  Many investors in these companies were illegally sold these investments by brokerage firms motivated by commissions paid by the investments.  Such investments can take many forms including, but not limited to, Master Limited Partnerships (MLPs), common stock, notes, bonds, mutual funds, and Exchange Traded Funds (ETFs).

Regulators have put brokers on notice that oil and gas exchange traded products, ETPs, should not be recommended to average investors.

In sum, these investments are and have always been inappropriately sold to investors looking for moderate investments or otherwise looking to fund retirement or retirement savings.  The investments are and have never been stable.  This was known or should have been known by brokers and investment advisors for years.  Recommendations of oil and gas investments to such moderate investors is motivated either by heightened commissions many of these investments pay or, in some cases, negligence.

The reason brokers continue to misrepresent these investments and recommend to people who do not want such risk is the commission paid.   These investments can pay a broker and brokerage 10 to 20 times the commission that the average stock transaction pays.

Investors in certain ETFs, such as Direxion or USO, may have been inappropriately invested in these historically speculative investments.  Please call to speak to an attorney about whether you are entitled to recovery.

We are also currently investigating investments into the following energy companies:Oil Stock

American Eagle, BPZ, Buccaneer, Clean Energy Fuels, Climax Energy, Duer Wagner, Earthstone, Ensign Energy Services, Exxon, Fiduciary Claymore, Genal Energy, Hart Resources, Hercules Offshore,  Matador, Milagro Oil and Gas, Noble Energy, Petrobras, Origin Energy, Quicksilver Resources, Sabine, Samson Resources, Sandridge Energy, SBM Offshore, Southern Pacific, Walter Energy and WBH Energy.

Additionally, we are looking at MLPs focusing on energy such as Goldman Sachs MLP (GMZ) or any of the Steelpath investments.

Oil and gas limited partnership losses can do more than take away the hard earned principal of investors, it can also create tax liabilities that the investor was not expecting.  The result is that the investor could lose more than invested.  The following link discusses the risks that in more detail.

Jeffrey Pederson has represented investors in Alabama, Arizona, Arkansas, California, Colorado, Connecticut , Florida, Hawaii, Massachusetts, Montana, New Jersey, New Mexico, New York, North Carolina, Minnesota, Missouri, North Dakota, Rhode Island, Texas, Utah, and Wyoming, in FINRA arbitration actions against securities brokerage firms for unsuitable investments.  Please call for a confidential and free consultation.