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Three years after the U.S. Securities and Exchange Commission barred Ray Lucia Sr. from the securities industry, the ex-investment adviser and radio talk show host is still seeking to overturn that decision. Last week, he filed a petition asking the U.S. Court of Appeals for the D.C. Circuit to hear his case again.

It was just last August that the appeals court heard his petition but refused to review and vacate the SEC ruling. His latest petition was submitted en banc, which could allow all 11 members of the appeals court to refuse to hear the case or decide to do so and issue a vote.

Lucia, who once touted a “buckets of money” investment strategy for retirement was barred after an SEC administrative law judge found that the ex-investment adviser misled investors about the strategy’s approach to growing retirement assets. According to the regulator, the inflation rates Lucia employed to “back-test” his strategy failed to factor in the historical inflation rates during the time periods that were supposedly relevant.

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The Financial Industry Regulatory Authority has ordered Avenir Financial Group to pay a $229K fine over allegations that the latter engaged in the fraudulent sale of promissory notes and equity interests in the firm. Avenir is suspended from taking part in the self-offerings of securities for two years.
According to the FINRA hearing panel, the firm, its ex-CEO/CCO Michael Todd Clements, and registered representative Karim Ahmed Ibrahim, also known as Chris Allen, purposely omitted or misrepresented material facts related to the sale of equity interests in the firm. Avenir is accused of making misrepresentations when selling debt and equity interests in the holding company of its branch office.
The FINRA ruling said that in 2013, Avenir solicited investors through funds via an equity self-offering because the firm needed capital. The self-regulatory organization said that Clements told Ibraham to tell customers that this money would go toward day-to-date operations and growth at Avenir but did not tell him about the firm’s financial issues and certain other information.

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The Financial Industry Regulatory Authority has barred ex-broker Douglas Wayne Studer after it was discovered that he was named to inherit a 91-year-old customer’s Florida waterfront condominium. FINRA’s investigation, which began last year, sought to determine whether he violated his ex-employer’s policy by being named in the estate documents belonging to the elderly investor.

Without denying or admitting to FINRA’s allegations Studer agreed to the sanction. Until July, Studer had worked for Kovack Advisors Inc.  since last October. 
 

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Chad Peter Smanjak has been sentenced to a year and a day in prison. Smanjak admitted to operating a pump-and-dump scam linked to a company founded by Daniel Ruettiger, also known as Rudy. Ruettiger’s time playing football at Notre Dame was retold in the movie “Rudy.”

Smanjak is accused of targeting over 250 investors in his penny stock scam, which made at least $5M in profits. Although he had co-conspirators, Smanjak was the only person indicted in this securities case.

The penny stock in the scam was issued by Rudy Nutrition, which Ruettiger founded. The sports drink company claimed it was selling health conscious drinks.

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The Financial Industry Regulatory Authority is ordering Ameriprise Financial Services (AMP) to pay $50K for failing to properly supervise and notice  that one of its brokers was bilking his own family members. According to the self-regulatory organization, the registered representative took over $370K from five firm customers, which included his domestic partner, mother, grandparents, and stepfather.
From 10/11 to 9/13, the broker moved the funds to a business account. The transfers went undetected for two years because Ameriprise purportedly neglected to adequately supervise the moving of customer funds to third parties. It wasn’t until 9/13 that evidence was found that the broker had been practicing the signature of a family member.
The Ameriprise broker turned in forms to move the money from the brokerage accounts of customers into a business bank account. The transfer was under the guise of making investments. Instead, said FINRA, the broker allegedly used the money to pay himself commissions and an additional salary.

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The Financial Industry Regulatory Authority announced that UBS Financial Services and its Puerto Rico subsidiary (UBS) must collectively pay three investors $750,000 in damages for losses they sustained from investing in UBS’s proprietary Puerto Rico closed-end bond funds and Puerto Rico bonds. The claimants are Jenny Robles Adorno, Desarrollos Jarra SE, and Jose A. Rivera.

The investors accused UBS of recklessness, fraud, and negligence. They sought compensatory damages, punitive damages, and reimbursement of commissions that they said were unlawful. In San Juan, the FINRA arbitration panel awarded Rivera $562,500, Robles $30,000 and Jarra $157,500. UBS said it was “disappointed” with the panel’s decision to award any damages to the claimants.

This is not the first Puerto Rico bond fraud arbitration case in which UBS has been ordered to pay investors. Just this March, the firm had to pay over $470,000 to three investors who said their accounts were over-concentrated in the same Puerto Rico focused investments. The claimants in that case alleged negligent supervision and fraud. Similarly, UBS was ordered to pay a former television executive over $1,400,000 in the fall of 2015 for over-concentrating the former customer in UBS’s proprietary funds and misrepresenting the risks of those investments.

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Charles August Banks IV was arrested in San Antonio this week. Banks, is charged with two counts of wire fraud related to a $7.5M investment that former NBA basketball star Tim Duncan made with Gameday Entertainment, a sports merchandising company. Banks became Duncan’s financial adviser nearly two decades ago while working for CSI Capital management and he advised him for years.

Banks, now a renowned wine investor,  is  also facing a securities fraud lawsuit brought by the SEC. Although Duncan, formerly with the San Antonio Spurs, isn’t named specifically in the complaint, the regulator said that the case involves an ex-pro basketball player who was Banks’ client.

The SEC claims that Banks made material misrepresentations and omissions of key facts to the basketball player to persuade him to invest in Gameday.  Among the alleged misrepresentations:

The U.S. Securities and Exchange Commission said that BOK Financial Corporation subsidiary BOKF NA will pay over $1.6M to resolve charges accusing the Oklahoma-based bank of ignoring signs that businessman Christopher F. Brogdon was engaged in suspect activates related to his management of municipal bond offerings for investors. Brogdon was charged by the regulator with fraud last year and he must pay back investors $85M.
The federal government accused him of collecting almost $190M through private placement offerings and muni bond offerings. Investors thought they would earn interest from money made by assisted living facilities, nursing homes, or another retirement community project. Instead, Brogdon commingled accounts and redirected investor funds to other ventures and his own expenses.

According to the regulator, BOKF and ex-senior VP Marrien Neilson found out that Brogdon was taking money out from reserve funds for the muni bond offerings and not replacing the money. They also became aware that he had neglected to file annual financial statements for the bond offerings.

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The White House has appointed seven people to the Fiscal Control Board tasked with helping Puerto Rico deal with its $70B of debt. The appointees, named by President Obama, include: Jose Ramon Gonzalez (Federal Home Loan Bank of NY CEO/President), Arthur Gonzalez (Ex-bankruptcy Judge), Ana Matosantos (Ex-California Dept. of Finance Director), Carlos Garcia (Ex-Puerto Rico Government Development Bank president and CEO/Founder of BayBoston Managers LLC), Jose Carrion III (Puerto Rico insurance executive), Andrew Biggs (Scholar) and David Skeel (University of Pennsylvania Law Professor). Three of these board member are Democrats, four are Republicans. The eighth member of the board is Puerto Rico’s governor Alejandro Garcia Padilla. He is an automatic member because of his position but does not have a vote.

The creation of the federal control board was part of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). The legislation was passed by the U.S. Congress to help the U.S. territory with its financial woes. Puerto Rico has been defaulting on its debt payments that have been due. Just last week, the Government Development Bank of Puerto did not pay almost $10 million of interest that was due on it outstanding bonds. According to a recent report by the ReFund America Project, which has been investigating the U.S. territory’s debt, approximately $1.6 billion of the island’s debt are the fees earned by Wall Street firms, such as Citigroup (C), UBS (UBS), Barclays Capital (BARC), and Goldman Sachs (GS). Even worse, the ReFund America Project said that about $323 million of the money paid to Wall Street firms was for “scoop and toss” deals involving UBS as the main underwriter.

The report also stated that close to half of the $134 million in debt Puerto Rico and its public corporations have issued over the last 16 years is refunding debt. Puerto Rico’s financials purportedly show that the territory had been putting out new refunding bonds to pay back bonds that had been issued earlier. The use of refunding bonds to delay current debt payments for later is what is involved in “scoop and toss” financing.

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Paul Mata, the founder of Logos Wealth Advisors, has been barred by the U.S. Securities and Exchange Commission. Mata and fund manage David Kayatta, whom the SEC has also barred, are accused of fraudulently raising over $14M in investor funds.

Mata drew in investors through investment seminars and online videos that came with the promise of “Indestructible Wealth.” During presentations to church groups, he touted “Finances God’s Way.”

Kayatta was the manager of two unregistered investment funds while at Logos Wealth Advisors. According to the Commission, beginning in 2008, the two men raised this money from over 100 investors in the unregistered funds. Kayatta and Mata promised guaranteed returns, did not make any disciplinary history known, and misused investor money.

In the order against him, the SEC said that Kayatta was responsible for the misleading and false statements in private placement memoranda for the Funds. According to InvestmentNews, in 2010, Kayatta was ordered by the state of Nevada to cease-and-desist from pursuing investors in unregistered securities and taking part in investment advisory conduct without the proper licensing.

Please contact our investment adviser fraud lawyers if you would like to find out whether you have grounds for a securities case.

Read the SEC’s Complaint (PDF)

SEC Bars 2 Advisors Who Said They Managed Money ‘God’s Way’, Think Adviser, September 2, 2016

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