Tag Archives: unsuitable securities

Investigation into Everbridge Losses

In December 2021, Everbridge (EVBG) lost approximately half of its value. This highly speculative investment is only for investors willing to take the highest level of risk. If you are not such an investor, and recommended this investment by your advisor, please call 1-303-300-5022.

We are currently investigating the circumstances surrounding the fall of EVBG. While the popular refrain is that the losses were unexpected due to the abrupt resignation of CEO David Meredith, we believe that issues with this investment were known prior to the resignation.

The volatility of Everbridge was known to be a speculative option for investment. This company built assets faster than its revenue growth. Some external analysts even saw extreme financial distress in the finances of EVBG to the extent that they opined imminent bankruptcy.

Additionally, we believe that the internal research of the broker-dealers originally recommending Everbridge will reveal problems at EVBG. The advisors never revealed and disregarded these issues until the abrupt resignation of Meredith.

As such, we are looking to speak to investors to investigate our suspicions. We are currently only looking at brokerage firms recommending this investment to moderate or conservative investors. If you were recommended EVBG please contact us at the number above.

For the last 20 years, the Law Offices of Jeffrey Pederson represents investors nationwide. Initial consultation is free, and all consultations are confidential.

Churning at Fist Standard Financial

If you are or were an investor with First Standard Financial and believe First Standard churned your account, please call 303-300-5022.  Initial consultations are free and confidential.

A supervisor with First Standard Financial has recently been suspended for two months and fined for failing to supervise churning activities First Standard Financial brokers.  The regulator instituting this stipulated sanction is the Financial Industry Regulatory Authority (FINRA).  FINRA regulates securities brokerage firms under the oversight of the SEC.

Between March 2018 and May 2019, the supervisor at First Standard failed to reasonably supervise a former First Standard broker who had, with a history of violations and was required to given heightened supervision, excessively and unsuitably traded the accounts of three investors.  Excessive trades are commonly referred to as “churning.”

FINRA rules prohibit excessive trading in an investor’s account.  To guard against this, FINRA rules require a brokerage to “establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules.” To comply with this FINRA rule, a firm’s supervisors must reasonably investigate “red flags,” or warning signals, of potential broker misconduct and take appropriate action when misconduct has occurred.   First Standard Financial failed to institute such safeguards.

Not only did the broker have a history that should have required heightened supervision, the supervisor who was charged with monitoring the broker also had a history.  An arbitration panel in 2016 found that this supervisor had committed violations himself while acting as a broker.  These violations included churning.

This same supervisor also has a history of being associated with a number of brokerages that been expelled by regulators.  These facts make the systematic failure to supervise churning at First Standard foreseeable.

Misdeeds by Charles Euler

If your were an investor of Charles J. Euler, Jr. with Janney Montgomery Scott of Radnor, PA please call 303-300-5022.  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.

 

Buckman, Buckman & Reid Loss Recovery

If you suffered investment losses with Buckman, Buckman & Reid (BBR) please call 303-300-5022 about potential loss recovery.  BBR has been censured and officer, Chip Buckman, suspended for a culture of insufficient supervision leading brokers to make excessive trades and recommend overly aggressive securities

From January 2013 through April 2017, BBR failed to maintain a supervisory system and enforce written supervisory procedures. In addition, BBR and Chip Buckman—who was the Firm’s designated supervisory principal responsible for conducting suitability reviews failed to reasonably supervise two former registered representatives, who the regulatory documents identify only by initials GK and RI, recommended excessive and unsuitable trades in dozens of investor accounts.

Regulatory rules require securities firms and their brokers to have a reasonable basis to believe that a recommended securities transaction or investment strategy is “suitable” for the customer, based on the information obtained through the reasonable diligence of the firm or associated person to ascertain the customer’s investment profile. A customer’s investment profile includes, but is not limited to, the customer’s age, other investments, financial situation and needs, investment objectives, investment experience, investment time horizon, liquidity needs, and risk tolerance.  Failure to do so is a “suitability” violation.

Unsuitable investment recommendations and excessive trading are forms of fraud.  Both enable a broker to make commissions that significantly above those that would be earned if the broker handled the account in a manner consistent with regulatory obligations.  Both also create unnecessary risks in the portfolios of their investors.

 

BBR was required to maintain procedures to make sure that investment recommendations were suitable BBR’s system failed to monitor its brokers in such a fashion.  No one at BBR reviewed the monthly reports and alerts that could have helped the Firm detect excessive trading and unsuitable concentration levels in customer accounts.

The supervisory failures allowed the fraud to occur.  At least one of the brokers involved had a history of misdeeds when he was first hired by BBR including many complaints for unsuitable securities sales.  Despite this history of fraud, BBR failed to supervise this broker.  Not surprisingly, the broker continued to commit fraud in the accounts of his investors.

We assist investors who lose value in their portfolio when brokers commit misdeeds and brokerages fail to supervise.  Please call for a free and confidential consultation.

 

 

Ami Forte Investigation

If you suffered losses with Ami Forte, please call 303-300-5022 for a free and confidential consultation.  Jeffrey Pederson, PC handles claims against securities brokerages nationwide for unsuitable securities and unauthorized trading violations.

The Financial Industry Regulatory Authority (FINRA) announced on October 3, 2018 that it was widening the investigation of Ami Forte.  FINRA is the national regulatory agency that oversees securities brokerages.  It does so with the oversight of the SEC.

The October 3 notice advises Forte that the regulator will include additional potential violations of rules tied to conflicts of interest and fraud. Other violations included in the October 3 notice relates to rules tied to suitability, municipal securities advisory activities and books and records.

Forte, once Morgan Stanley’s most celebrated and prominent financial advisor with $2 billion in assets under management, lost her job at Morgan Stanley when an FINRA arbitration panel entered a substantial judgment against her.  The panel ordered her, her branch manager and Morgan Stanley to pay $34 million to the estate of Home Shopping Network co-founder Roy Speer in 2016. Lynnda Speer, Roy Speer’s widow, argued that the estate had been harmed by unauthorized trading, churning and elder abuse.

The initial investigation began in January 2018.  FINRA had made a preliminary determination concerning violations of multiple FINRA rules.  These rules concerning inappropriate exercises of discretion in an account and inappropriate recommendation of direct participation investments.

Forte had recently begun a career resurrection of sorts. In March 2018, Pinnacle Investments announced Forte as its chief business development officer.

This was short-lived.  BrokerCheck records indicate that the employment with Pinnacle ended Oct. 17,

Jeffrey Pederson has represented hundreds of investors over the past 15 years in FINRA arbitrations nationwide.  Time limitations may exist.  Investors suspecting wrongdoing should call at their earliest convenience

Charles Bloom of Chelsea Financial

Please call 1-866-817-0201 if you were an investor with Charles Bloom of Chelsea Financial.  Bloom operated primarily in the West Palm and Royal Palm areas of Florida, but likely has investors nationwide.  We have reason to believe that Bloom engaged in a pattern of inappropriate behavior in the portfolios of his investors.

In October 2017, FINRA, the regulator that oversees securities brokers, commenced an investigation into allegations that Bloom engaged in an unsuitable pattern of trading in at least three customer accounts.

All securities brokers are required to know their investors and only recommend investments Invest photo 2that are consistent, or suitable, with the investors risk tolerance and investment objectives, among other things.  Brokers have many incentives to recommend investments that are too risky or otherwise unsuitable for investors.  This motivation can lead to large losses by an investor.  As such, the recommendation of unsuitable investments is considered to be a form of fraud.

In connection with the FINRA investigation, on June 21, 2018, FINRA sent a request to Bloom for on-the-record testimony. Brokers are required to cooperate with FINRA investigations into misconduct.  As stated in a phone call with FINRA staff on July 3, 2018, Bloom acknowledges that he received FINRA’s request and would not cooperate.

Ultimately, Bloom surrendered his license and accepted a bar from the securities industry as a result of the allegation.  However, this allegation is just the latest in a long list of allegations.  The record  of Bloom shows prior regulatory actions, a 20-day suspension, and two customer suits.  This raises the question of why Bloom was hired and why he was not given appropriate supervision in light of his history.

We represent investors in securities industry arbitration proceedings across the country.  Please call for a free and confidential consultation.

 

Recovery of CLO Losses

CLO (Collateralized Loan Obligation) investors may have recovery avenues for their losses.  These complex investments are only suitable for the most sophisticated investors willing to assume the high risk of these investments.  Investors who are less sophisticated or who seek only investments or looking for only moderate risk investments cannot legally be sold these investments.  For a consultation, please call 1-866-817-0201.

The financial industry is governed by rules concerning whether certain investments can be sold to investors.  One such limitation is that securities broker, financial advisors and investment advisors may only sell investments that are suitable, or investments that are consistent with an investors level of sophistication, investment objectives and tolerance for risk.  Complex investments that carry a high risk potential are unsuitable for your average investor looking for growth or income with a tolerance for moderate risk.

investingstockphoto 1As identified by FINRA, the Financial Industry Regulatory Authority, a CLO is very complex and risky investment.   A CLO is a security made up of loans to corporations that usually have relatively lower credit ratings. Leveraged buyouts, in which a private equity firm typically borrows money to purchase a controlling stake in a company, are a common for CLO loans. After the loans are made, they’re sold off to a manager, who bundles them together and then manages the consolidations, buying and selling loans as he or she sees fit.

A CLO manager raises money to buy the loans by selling debt and equity stakes to outside investors in slices of the total collection according to risk level.

FINRA gives an example to demonstrate how tranches work.  Think of everyone who owns a piece of the loan pool as standing in a long line. Those at the front of the line would get repaid first if any of the loans in the pool go into default, but they receive lower interest payments than those at the back of the line. The people further back are paid more for taking a greater risk that they would not be repaid in the event of losses in the underlying loan pool.

Typically, a CLO includes both debt tranches and equity tranches. The debt tranches are similar to bonds – they have credit ratings and offer regular coupon payments for a period of several years. Interest rates may be set or “floating,” meaning they vary with prevailing interest rates.

Debt tranches have first dibs on payments from the underlying loans, though here again, there are important differences within the group. Senior tranches have a higher-priority claim to payments (and receive lower interest payments) than junior tranches (which receive higher interest payments).

Equity tranches are the riskiest piece of the CLO puzzle. They have no credit ratings, are last in line for payment, and thus are the first to suffer losses if the underlying loan portfolio falters. Though equity tranche investors are simply paid whatever cash is left over after the debt investors have received their interest payments, they typically earn a higher return than debt tranche investors do.

FINRA is not alone.  The Wall Street Journal has also identified these investments as risky and complex.  The Journal points out that the race to provide higher returns has led to an even greater sales of such investments, and that such investments hit a record in 2017.

Unless you are a very sophisticated investor willing to speculate the money invested in CLOs, you should seek legal representation for losses sustained.

Recovering Woodbridge Losses of Peter Holler

If you were an investor with Peter Holler and invested in Woodbridge notes, please call 1-866-817-0201 about options to recover losses.

We believe Holler and his employer have the bulk of responsibility for these losses.  During the relevant period when Holler sold Woodbridge, which coincides with his time working for Securities Services Network (SSN), Holler solicited investors to purchase promissory notes in Woodbridge Mortgage Investment Funds, a purported real-estate investment fund. Ultimately, Holler sold approximately $1.39 million in Woodbridge notes to 19 individuals, nine of whom were SSN customers. He received $49,790 in commission in connection with these transactions.

Woodbridge has been identified as a $1.2 billion Ponzi scheme by the Securities and Exchange Commission (SEC ).  The allegations are that Woodbridge gave notes to investors for funds to be used as hard money loans to be used in the development of real property.  Instead the funds were co-mingled by Woodbridge and used to pay earlier investors.   Woodbridge became insolvent shortly after the SEC brought its action.

LandmarkRecovery from the Woodbridge bankruptcy may be difficult.  Woodbridge and its subsidiaries are in bankruptcy proceedings in federal court in Delaware.  The Woodbridge notes were largely unsecured despite assertions to the contrary by those soliciting the notes.  As a general rule, bankruptcy are where unsolicited claims are extinguished.  Holler and SSN had a duty to know these facts prior to investing an investors and disclosing to the investors this incredibly high risk of loss.

These Woodbridge investments were not properly reported to his employer and his employer either turned a blind eye or failed to do the requisite supervision to monitor against such outside business activity.  As a result, the investments were sold though they were not suitable to be sold to any investor.  This creates potential liability on the part of both Holler and SSN.

The regulator FINRA brought an action against Holler for his sale of Woodbridge.  This regulatory action echos the concern that the Woodbridge investments and their sale were not appropriately vetted.

FINRA rules state, “prior to participating in a private securities transaction, [a broker] shall provide written notice to the member with which he is associated describing in detail the proposed transaction and the person’s proposed role therein and stating whether he has received or may receive selling compensation in connection with the transaction.” FINRA Rule 3280(e) defines a private securities transaction as any securities transaction outside the regular course or scope of an associated person’s employment with a member. FIN RA Rule 20 I 0 requires associated persons, in the conduct or their business, to observe high standards of commercial honor and just and equitable principles of trade.

The record  of Holler indicates that he and his former employer, Securities Services Network, currently facing two investor suits over the sale of Woodbridge notes.   Both suits suits were filed subsequent to the bankruptcy of Woodbridge in December 2017.

Securities Services Network previously terminated Holler in August 2017 for the sale of Woodbridge notes.  BrokerCheck identifies that Holler was terminated because the Woodbridge sales were unapproved by the firm.  Despite this, Securities Services Network

We represent a number of investors across the country in obtaining recovery of Woodbridge losses.  Please call for a free consultation.

 

 

Fifth Third Annuity Fraud

If you were recommended the purchase or sale of an annuity by Fifth Third you may have been the victim of fraud.  We represent investors nationwide and are available to discuss whether you are a victim and entitled to compensation.  Please call 1-866-817-0201 for a free and confidential consultation.

Invest photo 2The Financial Industry Regulatory Authority (FINRA) in a statement on May 8, 2018 stated that it has fined Fifth Third Securities $4 million and required the firm to pay approximately $2 million in restitution to customers for failure to accurately consider and describe costs and benefits of variable annuity (VA) exchanges, and for recommending exchanges without a reasonable basis to believe they were suitable for customers.  While the FINRA action focused on variable annuities, the exchange or early liquidation of any annuity is possibly a violation.

Variable annuities are complex and expensive investments commonly marketed and sold to retirees or those saving for retirement. Exchanging one annuity with another involves a comparison of the complex features of each security. Accordingly, annuity exchanges are subject to regulatory requirements to ensure that brokers have a reasonable basis to recommend them, and their supervisors have a reasonable basis to approve the sales.  Failure to do so can cost investors hundreds of thousands of dollars and cause the investor savings to become unnecessarily illiquid.

Brokerage firms, like Fifth Third, have been on notice of this problem and other problems with annuities for years.  FINRA has warned of the limited suitability of these investments and that they should only be sold to limited types of investors and has done so more than once..  In fact, variable annuities and variable life insurance is so prone to fraud, FINRA has specific rules concerning these products.

FINRA found that Fifth Third failed to ensure that its registered representatives obtained and assessed accurate information concerning the recommended annuity exchanges. It also found that the firm’s registered representatives and principals were not adequately trained on how to conduct a comparative analysis and truthfully sell the annuities.

As a result, the firm misstated the costs and benefits of exchanges, making the exchange appear more beneficial to the customer. By reviewing a sample of annuity exchanges that the firm approved from 2013 through 2015, FINRA found that Fifth Third misstated or omitted facts relating to the costs or benefits of the annuity recommendation or exchange in approximately 77 percent of the sample.  For example:

  • Fifth Third overstated the total fees of the existing VA or misstated fees associated with various additional optional benefits, known as riders.
  • Fifth Third failed to disclose that the existing VA had an accrued living benefit value, or understated the living benefit value, which the customer would forfeit upon executing the proposed exchange.
  • Fifth Third represented that a proposed VA had a living benefit rider even though the proposed VA did not, in fact, include a living benefit rider.

FINRA found that the firm’s principals ultimately approved approximately 92 percent of VA exchange applications submitted to them for review. However, in light of the firm’s supervisory deficiencies, the firm did not have a reasonable basis to recommend and approve many of these transactions.

In addition, FINRA found that Fifth Third failed to comply with a term of its 2009 settlement with FINRA. In the 2009 action, FINRA found that, from 2004 to 2006, Fifth Third effected 250 unsuitable annuity exchanges and transactions and had inadequate systems and procedures governing its annuity exchange business. For more than four years following the settlement, the firm failed to fully implement an independent consultant’s recommendation that it develop certain surveillance procedures to monitor VA exchanges by individual registered representatives.

As a result, the firm misstated costs and benefits of VA exchanges — and in some cases omitted critical information altogether — making the exchanges appear more beneficial to customers in 77 percent of the exchanges Finra reviewed for the period of 2013 through 2015. For instance, Fifth Third transgressions included telling customers that the new VA contracts being marketed had living rider benefits guaranteeing minimum payments to customers and their beneficiary when none existed, Finra said.

Investors of Mark Kaplan of Vanderbilt

We are currently looking to speak to investors of Mark Kaplan of Vanderbilt Securities.  Please call 1-866-817-0201 is you have suffered investment losses.  We believe there is potential for certain investors to recover these losses.

Between March 2011 and March 2015 , Mark Kaplan of Vanderbilt Securities engaged in investment churning and unsuitable excessive trading in the brokerage accounts of a senior customer. We believe that such actions were likely widespread and impacted many of Kaplan’s investors.  Kaplan willfully violated federal securities laws and FINRA regulations by such actions.

Invest photo 2Kaplan has been known for years by Vanderbilt to have problems in his handling of investor accounts.  Morgan Stanley terminated Kaplan in 2011 for his alleged improper activity in Kaplan’s customer accounts.  Additionally, Kaplan has been the subject of seven separate customer lawsuits concerning improper securities transactions.

A recent regulatory action by the Financial Industry Regulatory Authority (“FINRA”) alleges that Kaplan took advantage a 93-year-old retired clothing salesman who had an account with Kaplan.   This investor not only placed his complete reliance in Kaplan but was also in the beginning phases of dimensia.

The investor opened accounts at Vanderbilt Securities with Kaplan during March 2011.  As of Match 31, 2011, the value of the investor’s accounts was approximately $507,544.64. Social Security was the investor’s only source of income during the Relevant Period. Kaplan exercised control over the accounts.  The investor relied on Kaplan to direct investment decisions in his accounts, contacting Kaplan frequently.

The investor was experiencing a decline in his mental health.  In 2015, a court granted an application by the investor’s nephew to act as his legal guardian and manage his financial affairs.

During the Relevant Period, Kaplan effected more than 3,500 transactions in the investor’s accounts, which resulted in approximately $723,000 in trading losses and generated approximately $735,000 in commissions and markups for Kaplan and Vanderbilt. Kaplan never discussed with the investor the extent of his total losses or the amount he paid in sales charges and commissions.

More can be learned about such excessive trading at the warning page for the SEC.

Please call the number above to determine if you have also been taken advantage of and your rights for recovery.