February 5, 2016

SEC Files Fraud Charges Against American Growth Funding II

The Securities and Exchange Commission is pursuing a securities fraud case against American Growth Funding II, LLC. The regulator contends that the company, which raises money for business loans, lied to investors that bought high-yield securities. Also subject to charges is brokerage firm Portfolio Advisors Alliance, Ralph Johnson, Kerri Wasserman, and Howard Allen III.

In its complaint, the regulator said that AGF II sold about $8.6M AGF II units to at least 85 investors through Portfolio Advisers Alliance. The sales occurred in a private placement between 3/11 and 12/13.

However, investors were purportedly not told that AGF II’s principal asset had significantly dropped in value, which lessened the chances that investors would be repaid in full let alone make the12% interest yearly they were promised.

In private placement memoranda that were put out in ’11 and ’12, Johnson is accused of misrepresenting that the lending company’s financial statements had been audited and would continue to be audited periodically. The statements for ’11 and ’12 were not audited until 2014.

The SEC believes that Johnson, who played a central part in preparing the private placement memoranda, knew and acted in reckless disregard and was aware that misrepresentations were made to investors. He also is accused of causing investors to get an email in 2013 that contained false statements noting that an accounting firm was working on an audit, which was not, in fact, the case, and issuing monthly statements that concealed the company’s financial woes. Investors were not made aware that because most of AGF II’s loans were likely uncollectible, the firm wouldn’t be able to pay the account balances that were noted in the statements.

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February 4, 2016

Plummet in Oil Prices is a Worry to Investors

With oil prices plummeting, investors may have reason for concern. This week, ConocoPhilip cut its dividend by two-thirds because of the drop in oil prices to $30/barrel. Its dividend went from 74 cents/share to 25 cents/share

And Conoco isn’t the only company whose dividends are in trouble because of cheap oil. In January, Noble Energy slashed dividend payout by 44%. Last year, Eni (E) in Italy also made a substantial dividend cut, as did pipeline company Kinder Morgan with a 75% cut in December. Investors are worried that big oil companies, such as Chevron (CVX) and ExxonMobil (XOM), may be next.

Such speculation wasn’t helped by the abrupt liquidation of a $600M leveraged fund bet on falling prices. According to Reuters, unknown investors in the VelocityShares 3x Inverse Crude Oil Exchange Traded Note left the fund after jumping in just last month. Over 1.8M shares of $602M were redeemed, which, according to FactSet Research data, is the largest ETN outflow over the past year. Credit Suisse (CS), the ETN’s issuer, was forced to repurchase short positions in quick measure.

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February 1, 2016

Texas Securities Commissioner Orders Firm To Stop Selling Pension Streams

John Morgan, the Texas securities commissioner, is ordering SoBell Corp. and its owner Andrew Gamber to stop selling its Pension Income Stream Program in the state of Texas. SoBell, which is based in Mississippi, executes agreements with pension benefits recipients to sell their income stream to investors for $35K to over $1K, while offering 7-8% in yearly returns.

Morgan says that the company and Gamber committed fraud by selling unregistered securities and making statements to investors that were “misleading and deceiving.” SoBell also is accused of executing agreements with pension benefit recipients that gave the company authority to sell pension-sourced income to investors.

As for Gamber, he allegedly did not disclose that he had been subject to sanctions in Pennsylvania, Arkansas, New Mexico, and California. The four states had issued cease and desist orders against Voyager Financial Group, LLC, Gamber, and people who sold the unregistered securities. They also are accused of misleading investors about the risks involved in certain investment products, including default rates involving pension income stream sales made by companies that Gamber controlled, and they purportedly did not disclose that making pension payment assignments is against federal law.

Disabled persons, veterans, military members, and federal government employees are among those that typically get involved in pension-sourced income. The Texas Securities Board says that often these investors are solicited while they are under “financial distress.”

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January 31, 2016

Diversified Stock Funds Drop in Value

A number of diversified stock funds posted significant losses at the end of the January. For example, funds seeking underpriced stocks saw their holdings lose value as did value funds. Here is a list (From Morningstar):


· PIMCO RAE Fundamental Plus EMG (PEFIX)

· Templeton Foreign A

· Vanguard International Value (VTRIX)

· Dodge & Cox Stock (DODGX)

· Longleaf Partners (LLPFX)

· DFA International Value I (DFIVX)

· Fairholme (FAIRX)

· Pacific Advisors Small-Cap Value (PASMX)

· Russell Emerging Markets S (REMSX)

· Longleaf Emerging Partners International (LLINX)

· FPA Capital (FPPTX)

· Vanguard International Value Inv (VTRIX)

· Longleaf Partners (LLPFX)
Sequoia (SEQUX)

· Templeton Developing Markets A (TEDMX)

· Royce Opportunity Invmt (RYPNX)

· Doge and Capital International Stock (DODFX)

· Templeton Foreign A (TEMFX)


Concentrated funds, which did well last year, are also doing poorly so far this year.

Shepherd Smith Edwards and Kantas, LTD LLP is a stockbroker fraud law firm. If you suspect that your investment losses are a result of securities fraud, contact our law firm today.

Some big diversified stock funds in full bear mode, InvestmentNews, January 19, 2016

January 30, 2016

Morgan Stanley Pays Widow Over $95K for Puerto Rico Securities Losses

A Financial Industry Regulatory Authority (FINRA) arbitration Panel has ordered brokerage firm Morgan Stanley to pay Morrisa Schiffman (Schiffman) $95,632 for the losses she sustained from investing in Puerto Rico securities. Schiffman, who is a widow from New Jersey, had been using the income from the Puerto Rico investments to supplement her retirement. She accused the firm of making unsuitable recommendations and engaging in negligent supervision and disclose failures.

Bloomberg reports this is one of the first cases involving an investor in the U.S mainland seeking financial recovery related to the Commonwealth’s debt. More than 1,300 FINRA arbitration cases have already been filed in Puerto Rico for residents of the island who sustained heavy losses when Puerto Rico bonds began their fall in 2013.

Puerto Rico bonds were a big draw for investors in and out of Puerto Rico for a number of years because the securities are tax-exempt in the U.S. However, since these bonds dramatically declined in value nearly three years ago, investors have come forward to file arbitration claims against brokerage firms who recommended the bonds to them.

Our securities firm’s analysis has shown that, despite their tax advantages, most Puerto Rico bonds were not suitable for many customers' investment goals or their portfolios. Brokers should have steered customers away from the Puerto Rico securities instead of toward them. Because of their negligence, there are investors who have lost all of their money in these bonds.

Firms named in recent Puerto Rico muni bond fraud cases include UBS Financial Services Incorporated of Puerto Rico (UBS), Banco Santander, Banco Popular, Stifel Nicolaus & Co. (SF), Bank of America’s (BA) Merrill Lynch, and others.

Puerto Rico owes $70 billion in debt. The Commonwealth recently defaulted on $37 million of payments that were due to certain creditors so that it could pay more of the general obligation debt that the island owes.

Insurers Ambac Assurance Corporation (AMBAC), Financial Guaranty Insurance Company (FGIC), and Assured Guaranty Corp. (Assured) are now suing the territory over the default, for which they’ve had to pay millions of dollars on claims.

Continue reading "Morgan Stanley Pays Widow Over $95K for Puerto Rico Securities Losses " »

January 29, 2016

Hedge Fund Manager to Repay Investors $2.87M for Losses

QED Benchmark Management LLC and its hedge fund manager Peter Kuperman will resolve U.S. Securities and Exchange Commission charges accusing them of misleading investors about the QED Benchmark LP hedge fund’s historical performance and investment strategy. As part of their settlement they will pay back investors $2.8M in losses. However, by settling they are not admitting or denying the charges.

According to the SEC, the investment advisory firm and Kuperman did not disclose to investors that there were heavy trading losses. They purportedly did this by using a combination of real and hypothetical returns when giving out information about performance history. Marketing strategy included proposing to abide by a scientific stock-selection strategy using algorithms to concentrate on over 280 metrics in the areas of value, momentum, risk, growth, and estimates. The fund was supposed to select investments using the metrics to determine which ones would do better in the market.

QED's offering memorandum and its limited partnership agreement said that no more than 20% of assets could be invested in any one security, while no more than 5% could be invested in a security that was illiquid. The SEC said that none of these agreements were honored.

Because of these alleged misrepresentations, QED Benchmark and Kuperman were able to secure millions of dollars from investors. The two of them are accused of not following the fund’s stated investment plan and placing most of the assets into one penny stock. Misleading and incomplete disclosures about the investment’s liquidity and value were also purportedly made. In just the first quarter that stock earned a 79% loss. When Kuperman presented potential investors with 2009 results, he did not disclose the bad returns and used hypothetical returns instead.

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January 27, 2016

Ameriprise Must Pay Woman’s Estate Over $2M For Broker Fraud

A Financial Industry Arbitration panel says that Ameriprise Financial (AMP) must pay over $2M to the estate of Glenny B. White for losses related to fraud committed by an ex-firm broker. The executor of White’s estate claims that Ameriprise Financial Services did not properly supervise former broker Jeffrey Davis.

In 2014, Davis admitted to stealing money from White and other clients. White was his client for almost ten years before she found out in 2013 that he was stealing funds from her. She died at the age of 91 in 2014.

Davis has since been fired from Ameriprise, and FINRA barred him from the brokerage industry. Last year, he was sentenced to over four years in prison after pleading guilty to wire fraud and admitting to stealing almost $200K from clients.

On Finra’s BrokerCheck report about Davis, it is noted that in at least two cases involving Ameriprise clients the firm had reported to the regulator that their funds were misappropriated.

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January 25, 2016

UBS Shutters MLPL and MLPV Funds Following Millions of Dollars in Investor Losses

UBS AG (UBS) is reportedly closing down two of its exchange traded note (ETN) funds that were concentrated in master limited partnerships:

· The $11M ETRACS 2x Monthly Leveraged S&P MLP Index ETN (MLPV), which was just issued last July

· The $113M ETRACS 2x Monthly Leveraged Long Alerian MLP Infrastructure ETN (MLPL)

The move comes following the collapse of the MLPV, which is down to just $6.6/share and the MLPL, which is now at $12.60/share.

With the MLPL and MLPV, their notes weren’t due to expire until after 2040. UBS, in its press release, noted that an “Acceleration Event" occurred, which was sparked by intraday indicative value hitting $5.00 or less on 1/20/16. It was oil’s sharp price decline that activated the acceleration event.

It appears that investors may not have known that such an event could compel the funds to instantly liquidate holdings at prices that could wipe out shareholder value. Some of their advisers may not have been aware of the ETNs mandatory liquidity provisions or that they were exposed to volatile commodities, including oil, to such a degree. For example, master limited partnership investments are heavily connected to natural and energy resource companies that are very dependent on oil prices staying high.

If your financial adviser recommended that you invest in either the ETRACS 2x Monthly Leveraged Long Alerian MLP Infrastructure ETN or the ETRACS 2x Monthly Leveraged S&P MLP Index please contact our securities fraud law firm right away. Shepherd Smith Edwards and Kantas, LTD LLP is looking into possible securities claims against broker-dealers and investment advisers who recommended that investors back these securities.

It is important that advisers and brokers make sure that investing in gas and oil and commodities-related investments is suitable for an investor, his/her risk tolerance, and investment goals. Also, financial representatives have a responsibility to understand the risks involved and properly communicate these to clients so that the latter understand what they are getting involved in.

If you are an investor who backed one or both of these UBS MLP ETNs, please contact our securities law firm right away. Shepherd Smith Edwards and Kantas, LTD LLP is also investigating claims involving investors whose brokers or investment advisers recommended that they invest in structured notes, leveraged ETFs, exchange traded notes, private placements, individual stocks, mutual funds, and other oil and gas commodities products.

UBS Shuts Two MLP ETNs After Steep Declines, Barron's, January 20, 2016

UBS ETRACS Launches 2X Leveraged S&P MLP Index ETN Offering Significant Income Potential, Yahoo, July 15, 2015

January 23, 2016

SEC Wants Lawyer to Pay $2.5M Penalty in Texas Securities Case

The U.S. Securities and Exchange Commission has filed a motion for summary judgment in its case against Gregory Jones. The Texas lawyer is facing civil charges accusing him of defrauding investors in two securities offerings, including a fracking water filtration deal and an oil and gas exploration venture.

Now, the SEC wants Jones to pay a $2.5M civil penalty, disgorgement of $985K, further disgorgement of $480K, and $17K in prejudgment interest.

The regulator, in its original complaint that it submitted last year, claims that Jones represented Swiss and French investors who invested about $6M in Edwards Exploration. The attorney had a deal with the company in which he would get paid for providing due diligence related to the investors' shares. The fees he received under the agreement were about $480K. However, claims the Commission, Jones did not tell investors that the money came from their principal cash.

The SEC also says that from ’13 through at least ’14, Jones sold and offered securities that were put out by Aquaphex, which was supposedly a business that was involved in recycling fracking water. He raised about $64K from nine investors. However, contends the Commission, the investment documents for the company included false statements, including a claim that investors could end up making over 115% a year on the securities the they bought.

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January 22, 2016

Investors Files Texas Securities Case Alleging Violations by United Development Funding IV

Investors have filed a class action securities case claiming that the Texas nontraded real estate investment trust United Development Funding IV (NASDAQ:UDF) and certain of its officers violated federal securities laws. The complaint come a month after the Harvest Exchange website published a report accusing the Company of running a Ponzi-like scam. The UDF umbrella is accused of raising capital to bail out its earlier vintage entities.

On December 10, 2015, the day that the report went out, UDF’s shares dropped significantly. The Company then put out a press release disclosing that its UDF IV and UDF III have been cooperating for nearly two years with the U.S. Securities and Exchange Commission, which has been conducting a non-public probe since early 2014. Following that announcement, Company shares fell even further, negatively impacting investors.

The Texas securities case accuses the defendants of, from June 4 – December 10, 2015, failing to disclose that:


· New UDF companies gave older UDF companies substantial liquidity, letting them pay earlier investors.

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January 21, 2016

FGIC Sues Puerto Rico Over Bond Payment Default

A third bond insurer is now suing Puerto Rico over the way its government officials diverted tax money to fulfill certain bond payments that were due while defaulting on other payments. The latest plaintiff is Financial Guaranty Insurance Company (FGIC). Its complaint has been consolidated with a lawsuit brought by Ambac Assurance Corporation (Ambac) and Assured Guaranty Corp. (Assured) that makes similar allegations.

FGIC contends that government officials violated the U.S. Constitution when they diverted over $164 million to pay off some of the Commonwealth’s general obligation debt. As a result of the diversion, Puerto Rico defaulted on $37 million in interest on bonds and FGIC says that because of this it had to pay over $6 million in claims.

The fund diversion lets the territory avoid default on general obligation bonds, which, under its own Constitution, are the priority in terms of making payments. However, according to the three insurance companies, the island expects to make about $9 billion in the fiscal year that ends in June and this goes beyond its debt-service costs. The insurance companies do not believe that money had to be redirected away from the government agencies.

Puerto Rico owes over $70 billion in debt. Recently, U.S. Treasury Secretary Jack Lew pressed Congress to pass legislation to help the beleaguered territory. Lew visited the island on Wednesday.

Continue reading "FGIC Sues Puerto Rico Over Bond Payment Default " »

January 19, 2016

Securities News: Alternative Fund Manager Accused of Misleading Investors, Futures Trader Goes to Jail for Fraud, Ex-NBA Player Gets Sentence for Ponzi Scam, and 9th Circuit Upholds Investment Manager’s Conviction

Equinox Fund Management Resolves SEC Charges For Over $5.8M
A Denver-based alternative fund manager has consented to settle Securities and Exchange Commission charges accusing it of misleading investors about the way certain assets were valued and for overcharging management fees. According to the regulator, Equinox Fund Management LLC determined its management fees differently from the method it described in registration statements for The Frontier Fund, which is a managed futures fund.

Although registration statements said that management fees would be calculated based on each series’ net asset value, Equinox used the assets' national trading value instead. Also, the firm is accused of straying from the valuation methodology it had disclosed for certain holdings.

The fund manager will pay back investors about $5.4M in excessive management fees that it was paid over seven years, in addition to $600K in prejudgment interest. It also will pay a $400K penalty.


Futures Trader Goes to Jail, Pays Restitution for Securities Fraud
RXM Holdings Ltd. futures trading director Robert Scott Wiens is sentenced to one year in prison after pleading guilty to securities fraudhttp://www.stockbroker-fraud.com/legal-news.html. He also will pay $260k in restitution to investors he harmed.

Wiens was an unlicensed securities professional in 2010 and 2011. He sold fraudulent investments, which he traded on the futures market.

Wiens directed investors to open bank accounts under RXM’s name for their funds. He told them that there was zero risk and returns were guaranteed. He then used the money in the accounts to pay off earlier investments and cover his own spending.

Continue reading " Securities News: Alternative Fund Manager Accused of Misleading Investors, Futures Trader Goes to Jail for Fraud, Ex-NBA Player Gets Sentence for Ponzi Scam, and 9th Circuit Upholds Investment Manager’s Conviction " »