February 17, 2015

DOJ Investigating UBS Over Losses Related To Firm’s V10 Enhanced FX Carry Strategy

UBS Group AG (UBS) is under scrutiny over losses related to its V10 Enhanced FX Carry Strategy. The complex financial product was sold to fund managers, businesses, and individual investors and touted as a high-yielding foreign-exchange investment that employed computer algorithms to reduce risks during volatile times.

Unfortunately, according to Bloomberg, in 2010 during the start of the debt crisis, the index to which the notes were tied lost 26% over two years. Now, sources tell Bloomberg, the U.S. Department of Justice is looking at whether traders shortchanged investors by charging them too much for executing the currency trades for the strategy.

The V10 Enhanced FX Carry Strategy created sales commissions while offering an opportunity to profit from these sales and purchases of underlying currencies. Investors bought notes tied to the V10 index, which is calculated by ranking currencies from the Group of 10 nations daily according to one-month interest rates. UBS would then bet on the three highest-yielding currencies advancing and the three lowest declining. During a rise in volatility over a predetermined level, positions would be switched. Now, investigators with the DOJ are looking at instant messages, talking to traders, and examining documents issued to customers to figure out whether UBS represented how much profit it was taking on the trades.

One investor, Walter Michaelson, claims that UBS sold him the complex financial product that he never requested nor were ever properly explained to him. He said that he and UBS agreed that he would place a $1 million home-equity loan with another bank but that the paperwork was modified after he signed so that he got a business loan instead of a personal loan. This allowed UBS to take collateral assets the equivalent of five times more than his home’s value. He was required to pay back the loan by August 2010.

According to Michaelson’s complaint, the bank’s employees said the V10 notes would garner him yearly returns of 7-15% while keeping his capital preserved. When UBS contacted him to request that he invest more in V10, he found that his investment had gone up $70K. Michaelson decided to close his position and take the funds. That was when he discovered that he had lost $127,000.

Michaelson said that because of UBS-related dealings, including those involving V10, he lost $350K. Meantime, the bank says it will mount a vigorous defense against his claims. Also under scrutiny by the DOJ for a purportedly similar strategy is Barclays (BARC)

In November, UBS, JPMorgan Chase & Co. (JPM), HSBC Holdings (HSBC), Royal Bank of Scotland Plc (RBS), Bank of America Corp. (BAC), and Citigroup (C) settled with regulators for $4.43 billion for failing to stop traders from attempting to manipulate the foreign exchange market.

UBS Client Claims Losses on Currency Product Probed by US, Bloomberg, February 16, 2015

Regulators fine global banks $4.3 billion in currency investigation, Reuters, November 12, 2014


More Blog Posts:
Jury Says Ex-Envoy Involved in Stanford Ponzi Scam Must Pay $750K, Stockbroker Fraud Blog, February 16, 2015

EU Fines ICAP $17M for Helping Traders Manipulate Yen Libor, Institutional Investor Securities Blog, February 17, 2015

UBS Under Scrutiny in New Tax Evasion Probe, Institutional Investor Securities Blog, February 4, 2015

February 9, 2015

John Carris Investments Expelled by FINRA

A FINRA panel has expelled John Carris Investments LLC, along with Chief Executive Officer George Carris from the securities industry. Bot are accused of suitability violations and fraud.

According to the panel, Carris and JCI were reckless when selling shares of stock and promissory notes. They purportedly left out material facts and used misleading statements. Both have been barred for manipulating Fibrocell’s stock price via the unfunded purchases of big stock blocks and engaging in trading that was pre-arranged through matched limit orders.

The FINRA panel said that JCI and Carris acted fraudulently when they did not reveal the poor financial state of parent company Invictus Capital yet sold the latter’s stock and notes. Material facts were purportedly left out of offering documents. Rather than shutting down operations when it ran out of net capital compliance, JCI kept selling Bridge Offering notes to investors and using money from the sales to remedy its net cap deficiency, all the while not telling customers that was were the money went. Offering sales were also used by Carris to cover his personal spending.

Carris and his firm are accused of keeping inaccurate records and books, not remitting payroll taxes for employees, failing to put into place anti-money laundering procedures and policies, and not setting up and enforcing a reasonable supervisory system.

Registered representative Andrew Tkatchenko was suspended for two years for recommending the stock and promissory notes without having reasonable grounds. Jason Barter, the head trader, received an 18-month suspension for his involvement. Both also must pay fines.

Contact our FINRA arbitration fraud lawyers today.

FINRA Hearing Panel Expels John Carris Investments and Bars CEO George Carris for Fraud, FINRA, January 14, 2015


More Blog Posts:
Oppenheimer to Pay $20M Settlement to the SEC and FinCEN Over Penny Stock Violations, Stockbroker Fraud Blog, January 28, 2015

Libor Manipulation Cases Get the Green Light from U.S. Courts, Institutional Investor Securities Blog, January 30, 2015

PFS Investments, Ex-Broker Under Investigation for Securities Fraud that Bilked At Least Twenty Customers, Stockbroker Fraud Blog, January 30, 2015

February 7, 2015

UBS Financial Puerto Rico’s Chairman Told Brokers to Sell More Bond Funds in 2011

Reuters is reporting that in 2011, before the prices of UBS Financial Services Inc. of Puerto Rico’s (UBS) proprietary bond funds dropped, the firm’s chairman, Miguel Ferrer, told brokers to either start selling more UBS Puerto Rico bond funds or find a new job. He spoke after the brokerage firm’s representatives began to express reservations about selling the bond funds to their customers because of, among other issues, the high risks that were involved.

According to Reuters, sources in the know said that when UBS asked their brokers about their reluctance to sell the funds, they gave Mr. Ferrer and UBS nearly two dozen reasons, including concerns with low liquidity, excessive leverage, instability, oversupply, and because of the concentration of Puerto Rican government debt, which UBS had underwritten.

UBS has come under fire not just for pushing its own funds to clients for whom they were not appropriate, but also for improperly directing some of them to borrow money from another UBS unit to purchase more fund shares. The Federal Bureau of Investigation, along with the Securities and Exchange Commission, are reportedly looking into the allegations.

Since the fall of 2013, a number of the funds have lost half to almost two-thirds of their value. Hundreds of investors have come forward to file Puerto Rico municipal bond fraud claims against UBS Puerto Rico, seeking to get their money back.

Ferrer’s comments pushing the funds was recorded and you can hear some of what he said by clicking on the link from Reuters below. The audio of Ferrer speaking could benefit investors with securities arbitration claims. Those investors are reportedly already seeking over $900M in damages.

When asked to confirm the recording’s authenticity, UBS would not. Ferrer, however, said he would provide a translation through his attorneys (seemingly confirming it is him on the tapes) and that he reminded the financial advisers during and after the meeting that it was their responsibility to recommend only the financial instruments that were suitable for each customer.

Claimants say that UBS Puerto Rico marketed the Puerto Rico bond funds as providing tax benefits and garnering high yields but failed to notify investors about the significant risks. Investors are also accusing the firm of placing its financial interests first by guiding customers to funds with UBS-underwritten bonds. Many of these investors were retirees.

Meantime, the firm maintains that it thought the funds were solid investments that would benefit investors. However, that has not proven to be the case for many. For example, Mabel Ladicani, 88, and her daughter are among the claimants. The two of them said that without their request, UBS moved their money into debt funds that were higher risk than where they were previously invested. Shortly after the move, these risky investments financially devastated Mrs. Ladicani and her daughter.

In Puerto Rico and the United States, the law firm of Shepherd, Smith, Edwards & Kantas is representing investors in Puerto Rico bond and bond fund cases with claims against UBS Puerto Rico and other financial firms that inappropriately sold the products to customers. Contact Shepherd Smith Edwards and Kantas, LTD LLP today for a free, no obligation consultation.


Recording shows how UBS drove reluctant brokers to sell high-risk Puerto Rico funds, Reuters, February 6, 2015

An Audio of Ferrer's Recording, mp4/Reuters


More Blog Posts:
Beneficiaries of Puerto Rico Trust File Securities Fraud Lawsuit Seeking Over $4.5M From UBS Financial Services, Stockbroker Fraud Blog, January 5, 2015

UBS Settles SEC Dark Pool Case for $14M, Stockbroker Fraud Blog, January 16, 2015

UBS Under Scrutiny in New Tax Evasion Probe, Institutional Investor Securities Blog, February 4, 2015

January 28, 2015

Oppenheimer to Pay $20M Settlement to the SEC and FinCEN Over Penny Stock Violations

Oppenheimer & Co. (OPY) has consented to pay $20 million to resolve settlements with the U.S. Securities and Exchange Commission and the Financial Crimes Enforcement Network. The firm is accused of not properly identifying and reporting suspect trades in penny stocks. The low priced, highly speculative securities are easy to manipulate and involve in pump-and-dump scams.

At least 16 Oppenheimer customers in several U.S. states were reportedly identified as having engaged in “suspicious activity.” Admitting guilt, the broker-dealer acknowledged that it did not set up and implement a proper anti-money laundering program nor did it perform sufficient due diligence on a foreign correspondent account. Oppenheimer also said that it failed to comply with the USA PATRIOT Act’s Section 311, which allows FinCEN’s director to decide whether a foreign financial firm is a money laundering risk.

The government agency said that because Oppenheimer did not notify its foreign correspondent financial institutions of the special measures under Section 311, the firm ended up conducting business without setting up the necessary procedures, policies, and internal controls that allow it to reasonably report and detect suspect fraud activity from ’08 to ’14.

FinCEN noted that this is the second time it has penalized the Oppenheimer for similar violations. It fined Oppenheimer $2.8 million in 2015. In 2013, it was the Financial Industry Regulatory Authority that fined the broker-dealer $1.4 million for anti-money laundering failures and securities laws violations.

Meantime, in the SEC’s parallel action, the regulator noted two times between ’08 and ’10 when the firm took part in unregistered penny stock sales. One incident involved a financial adviser and his branch manger purposely engaging in the unregistered sales of 2.5 billion penny stock shares for one customer even though the shares were not registration exempt. The trades made $12 million and the firm got $588,400 in commissions. Oppenheimer is accused of not reacting to red flags or looking into whether sales were exempt from registration.

The other incident is over Oppenheimer’s possible involvement in purportedly illegal activities involving Gibraltar Global Securities, which is a broke-dealer in the Bahamas that is not registered to do business in the United States. The firm purportedly executed billions of shares of penny stocks in Gibraltar’s account and either knew or was negligent if it didn’t know that that firm was making transactions and providing brokerage services for customers, many of whom were based in the U.S.

The Commission said that Oppenheimer did not report possible misconduct by Gibraltar and its clients and, also, did not properly deal with over $3 million in backup withholding taxes in that brokerage’s account. The filing of Suspicious Activity Reports is a Bank Secrecy Act requirement.

As part of the SEC settlement, Oppenheimer is admitting wrongdoing and will pay $10 million. The other $10 million resolves the FinCEN claims.

Read the SEC Order (PDF)

FBI raids Florida firm with 'Wolf of Wall Street' link: witnesses, Reuters, January 14, 2014


More Blog Posts:

SEC Sanctions UBS, Charles Swab, Oppenheimer, & 10 Other Firms For Improper Sales of Puerto Rico Junk Bonds, Stockbroker Fraud Blog, November 3, 2014

Ex-Oppenheimer Fund Manager to Pay $100K To Settle Private Equity Fund Fraud Charges, Institutional Investor Securities Blog, January 25, 2014


Oppenheimer Told by FINRA to Pay $675,000 Fine, $246,000 Restitution over Municipal Securities Transaction Pricing, Supervisory Violations, Stockbroker Fraud Blog, December 12, 2013


January 20, 2015

FINRA Fines Fidelity $350K for Overcharging More than 20,000 Clients $2.4M

The Financial Industry Regulatory Authority says that Fidelity Investments must pay $350,000 for overcharging thousands of clients $2.4 million for transactions involving fee-based accounts in its Institutional Wealth Services Group. The overcharges are said to have occurred from 1/06 to 9/13. The group offers brokerage and trading services to investment advisers and their clients.

According to the self-regulatory organization, the inappropriate charges happened because of a supervisory oversight involving the way that Fidelity applies fees under its asset-based pricing model. The model typically charges according to assets, not transactions.

FINRA says that until 2013, the financial firm did not have a designated supervisory principal to oversee the group’s asset-based pricing program. As a result, a number of clients may have been charged excess commissions beyond the asset-based management fee or were double billed.

Fidelity was the one that identified the issue in 2012 and notified FINRA. The firm also paid back all of the clients who were affected. According to a firm spokesperson, about 1.5% of brokerage accounts held for investment advisers were impacted, with most getting a reimbursement of under $100.

Fidelity settled FINRA’s claims without denying or admitting to the SRO’s findings.

In other Fidelity Investment news, the fund manager and eight others are getting ready to launch a dark pool. While Fidelity is leading the effort to set up the private trading venue that would benefit mutual fund shareholders, other money managers involved include J. P. Morgan Chase & Co. (JPM), BlackRock Inc. (BLK), T-Rowe Price Group Inc. (TROW), and Bank of New York Mellon Corp. (BNK).

The market—called Luminex—would allow in asset managers wanting to trade big share volumes at once.

Fidelity-backed group unveils ‘dark pool’ for big stock trades, The Boston Globe, January 20, 2015

Fidelity, other major fund managers to launch stocks dark pool, Reuters, January 19, 2015

Fidelity fined $350,000 in billing snafu, InvestmentNews, January 20, 2015


More Blog Posts:
Fidelity Investments Settles Class Action Lawsuits Over 401(K) Plan for $12 million, Stockbroker Fraud Blog, September 5, 2014

Investor Files Securities Case Against Fidelity Over Float Income Investments Involving 401(K)s, Institutional Investor Securities Blog, May 6, 2013

FINRA Orders Pershing to Pay $3M Fine for Customer Protection Rule Violations, Stockbroker Fraud Blog, January 7, 2015

January 16, 2015

UBS Settles SEC Dark Pool Case for $14M

A UBS AG (UBS) subsidiary has consented to pay $14.4 million to resolve Securities and Exchange Commission claims that the firm committed violations involving the marketing and operation of its dark pool. The subsidiary, UBS Securities LLC, is accused of placing some players at an advantage in its alternative trading system the UBS ATS, which is the second largest dark pool in the United States.

According to the regulator, the Swiss bank failed to adequately disclose the way the dark pool worked to all of its clients, which allowed only some investors to know all of its rules. The SEC said that beginning in 2008 and into 2012, UBS let customers turn in orders at prices with denominations under a penny even though market rules dictate that all orders cannot be in any denomination below one cent.

UBS pitched the PrimaryPegPlus (PPP) order type, which let traders sell and purchase securities at the under the one cent increment prices, primarily to market makers and high-frequency trading firms. This let them get in front of orders that were made at the legal, whole-penny prices.

The SEC also said that UBS did not tell all subscribers about the “natural-only crossing restriction,” which was supposed to ensure that certain orders would not execute against orders made by the high-frequency trading firms and market makers. The shield only benefitted orders made using UBS algorithms, which are automated trading strategies. It wasn't until 2 1/2 years after this feature's launch that every subscriber was notified of its existence.

The SEC is accusing UBS of other violations, including the submission of incomplete and inconsistent statements about sub-penny orders and its natural-only crossing restriction in Form ATSs. The firm also purportedly did not set up written standards for giving subscribers access to the natural-only crossing restriction.

The Commission says that from August 2008 to March 2009, and for a certain period in 2010, UBS failed to preserve certain order data for the UBS ATS. It is accused of violating confidentiality requirements when it gave employees that shouldn't have had access the private trading data of subscribers.

By settling, UBS is not denying or admitting to the SEC findings. Of the $14.4 million payment, $12 million is a penalty.

According to Bloomberg, a source said that the SEC is working on rules that will compel dark pools to follow some of the same requirements as exchanges. This would include requirements dealing with disclosure of order types available in the dark pools, as well as pricing data sources.

The regulator is reportedly considering whether to make dark pool operators tell investors who else is trading as opposed to keeping trader identities anonymous. Some critics have expressed concerns that dark pools give computerized trading firms the upper hand. Also, because certain dark pools use aggregated feeds to match traders, critics are worried that investors are getting dated data when considering whether to trade.

SEC Order (PDF)


More Blog Posts:
NY Sues Barclays Over Alleged High Speed Trading Favors in Dark Pool, Stockbroker Fraud Blog, June 26, 2014

Deutsche Bank, UBS Are Probed Over Dark Pools & High-Frequency Trading, While An Investor Sue Barclays, Institutional Investor Fraud Blog, July 30, 2014

SEC Working on Mutual Fund Regulations, Conducts Dark Pool Probes, Enacts New Exchange Rules, Institutional Investor Fraud Blog, November 20, 2014

January 5, 2015

Beneficiaries of Puerto Rico Trust File Securities Fraud Lawsuit Seeking Over $4.5M From UBS Financial Services

Plaintiffs in Puerto Rico who say they are the beneficiaries of a trust have filed a securities lawsuit against UBS Financial Services (UBS). The beneficiaries’ complaint asserts that UBS in Puerto Rico breached its duty to properly manage funds linked to UBS’s proprietary closed-end Puerto Rico bond funds.

The beneficiaries of Nellie Sánchez Carmona's estate claim that the brokerage firm acted against their best interests when it opted to keep the trust invested in the proprietary funds—a move that earned UBS underwriting and management fees, along with commissions, and interest. The beneficiaries contend that UBS and its subsidiaries purposely prevented Sánchez Carmona from collecting benefits she was owed so that the firm could keep investing her money in the closed-end funds, which were issued by the firm, and continue to collect fees.

Also, according to the plaintiffs, for 10 years UBS prevented Sánchez Carmona from finding out that she was a beneficiary of the trust, which was set up by her husband Robert Hargen. Even though he passed away several years ago, UBS, in federal filings up to at least 2010, represented that Hargen was still alive and in possession of the trust.

During this time, plaintiffs say, UBS reinvested about $664,000 of what the trust made, placing the money in the closed-end funds and making a profit on the initial principal rather than paying out the earnings to take care of Sánchez Carmona’s medical bills, which the trust was supposed to cover. UBS also is accused of making it appear as if Hargen was a Puerto Rico resident even though he had been living in Florida since 2001. UBS allegedly did this to comply with regulations, which stipulate that investors of proprietary Puerto Rican closed-end bond have to be residents of the U.S. Commonwealth (or liquidate their holdings upon changing residencies). The plaintiffs want UBS to pay them about $3.5 million in damages and $1 million for lost income and fees.

In the last year and a half, hundreds of claimants have come forward filing claims against UBS over its Puerto Rico bond funds, which quickly lost value in August 2013 as the territory's debt imploded after years of warnings to UBS and other market participants that the Commonwealth might not be able to meet its excessive debt obligations. Many of the investors on the island contend that the bond funds were recommended to them even though they were not suitable for their goals and came with risks beyond what their portfolios could handle.

UBS is already facing around $1 billion in Puerto Rico muni bond fraud claims from investors on the island and in the mainland.

UBS Puerto Rico Bond Fraud Attorneys
Our UBS Puerto Rico bond fraud lawyers have been working hard to help investors get their money back. Contact Shepherd Smith Edwards and Kantas, LTD LLP today. Your initial case consultation with us is free.

Puerto Rico investors sue UBS for $4.5 million, InvestmentNews, December 31, 2014


More Blog Posts:
UBS To Nominate Executive from BlueMountain Hedge Fund That Challenged Puerto Rico Law on Debt Restructuring to Its Board, Stockbroker Fraud Blog, December 17, 2014

Puerto Rico’s Prepa Sees 219% Rise in Overdue Accounts With At Least $1.75 Billion Owed, Stockbroker Fraud Blog, November 18, 2014

Hedge Funds Are Moving in on Municipal Debt, Including Puerto Rico Debt, Institutional Investor Securities Blog, November 15, 2013

December 29, 2014

Financial Firm News: NH Regulator Fines Merrill Lynch $400K for Telemarketing Compliance Shortfalls, Court Orders Vasquez Global Investments to Pay More Than $1.3M for Commodity Pool Fraud, and FINRA Sanctions Monex Securities Inc.

New Hampshire Says Merrill Lynch Must Pay $400,000 For Not Complying with Telemarketing Rules

Bank of America (BAC) Merrill Lynch has consented to pay $400,000 to resolve claims made by the New Hampshire Bureau of Securities Regulation accusing the firm of improperly soliciting business when it called people who were on do-not-call lists and were not clients. As part of the deal, Merrill Lynch will improve its telemarketing procedures and policies. A spokesperson for the brokerage firm says it has already enhanced internal controls to avoid making inappropriate calls moving forward.

According to the regulator, not only did the broker-dealer fail to fully comprehend how to comply with the state’s rules for telemarketing but also the firm did not reasonably supervise its agents’ telemarketing activities in New Hampshire.


Vasquez Global Investments to Pay Over $1.3M For Bilking Participants in Commodity Pool
A federal judge has ordered Edwin Arden and his Vasquez Global Investments, LLC to pay over $1.3 million for running a commodity pool fraud. Per the order, issued by the U.S. District Court for the Western District of North Carolina, both Vasquez and VGI must pay over $330,000 in restitution and a monetary penalty of $994,668. They also must contend with permanent solicitation, trading, and registration bans. The order is the result of a U.S. Commodity Futures Trading Commission complaint issued earlier this year charging both Vasquez and his firm with solicitation fraud, misappropriation, and making false statements related to the Vasquez pool, which is an unregistered commodity trading pool.

The court order states that beginning in August 2011, Vasquez bilked and deceived at least 19 participants that had collectively invested over 580K in the Vasquez pool. He purportedly told prospective participants that he had a successful track record as a trader and investing in the pool was not high risk.

The order said that of the money Vasquez solicited from participants, VGI lost $65,374 when trading commodity futures and misappropriated $331,556 by using the money to cover the company’s operating costs and Vasquez’s personal spending. Still, Vasquez purportedly chose not to disclose the misappropriation and trading losses and sent pool participants bogus statements about the value of their pool shares and their “profitability.”


Monex Securities Inc. Ordered by FINRA to Pay $1.3M Sanction for Inadequate Supervision
FINRA has sanctioned Monex Securities Inc. and is ordering the firm to pay $1.1 million in disgorgement of commissions and interest that foreign individuals who were not registered with the regulator obtained when selling the securities for the firm. The self-regulatory organization fined Monex $175,000 for not registering the individuals, as well as for related supervisory deficiencies that took place for more than two years.

FINRA said that Monex Chief Compliance Officer and President Jorge Martin Ramos Landero executed an agreement for the firm with its parent company in Mexico that allowed employees to conduct securities business for Monex. The individuals were paid compensation for their work, which included collecting client data for opening accounts, transmitting orders, and making investment recommendations. However, these persons were not registered with FINRA.

Under the regulator’s rules, an associated individuals who works in the securities business or investment banking has to be registered with the SRO under the right registration category. This person must also pass a qualification exam.

Shepherd Smith Edwards and Kantas, LTD LLP is a securities fraud law firm.


Merrill to pay $400,000 over telemarketing compliance shortfall, Investment News, December 30, 2014

FINRA Sanctions Monex Securities Inc. $1.3 Million for Failing to Register and Supervise Foreign Personnel, FINRA, December 30, 2014

Federal Court Orders North Carolina Resident Edwin A. Vasquez and His Company, Vasquez Global Investments, LLC, to Pay over $1.3 Million for Commodity Pool Fraud, CFTC, December 30, 2014


More Blog Posts:
NASAA Wants Life Partners Held Accountable for Texas Securities Act Violations, Stockbroker Fraud Blog, December 28, 2014

OppenheimerFunds Increases Its Exposure to Puerto Rico Debt Despite Downgrade by Moody’s, S & P, and Fitch to Junk Status, Stockbroker Fraud Blog, February 14, 2014

Ex-Oppenheimer Fund Manager to Pay $100K To Settle Private Equity Fund Fraud Charges, Institutional Investor Securities Blog, January 25, 2014

December 23, 2014

FINRA Orders Wells Fargo Units to Pay $1.5M For Anti-Money Laundering-Related Lapses

The Financial Industry Regulatory Authority is ordering Wells Fargo Advisors Financial Network (WFAFN) and Wells Fargo Advisors (WFA) to collectively pay $1.5M for anti-money laundering (AML) failures. According to the self-regulatory organization, the two brokerage firms did not comply with a main component of the anti-money laundering compliance program when it did not require some 220,000 new customer accounts to go through an identify verification process. The failures purportedly occurred from 2003 to 2012.

The AML compliance program mandates that brokerage firms set up and keep up a written Customer Identification Program that lets them confirm the identity of every customer setting up an account. The broker-dealer should use the CIP to get and verify a minimum amount of identifying data before opening a new customer account. The firms must also keep records of the verification process and let customers know that data is being gathered to confirm their identities.

FINRA said that the firms had a CIP system but it was deficient because of the electronic systems involved. Of the 220,000 new accounts that never had to undergo customer identify verification, some 120,000 of them were closed by the time the problem was identified.

By settling, Wells Fargo Advisors and Wells Fargo Financial Advisors, which are both Wells Fargo units, are not denying or admitting to the charges. They are, however, consenting to the entry of findings.

In other Wells Fargo-related news, homeowners suing mortgage companies that belonged to Wachovia won a $54.8 million verdict in their class action securities case over excessive fees. Wells Fargo acquired Wachovia in 2008.

The plaintiffs are borrowers with mortgages that were serviced or belonged to HomeEq serving or the lender, the now-defunct The Money Store. Homeowners have been trying to get back around $29 million for alleged excessive charges plus interest. Joseph Mazzei, the lead plaintiff claimed that both entities continued to charge late fees each month to borrowers even after mortgages went into default.

A jury said that the mortgage companies were liable for late fees. Wells Fargo never owned either The Money Store or Home Eq. Wells Fargo owned the latter, while the former, which belonged to First Union, later came under Wachovia’s fold.

FINRA Fines Wells Fargo Advisors and Wells Fargo Advisors Financial Network $1.5 Million for Anti-Money Laundering Failures, FINRA, December 18, 2014

Wells Fargo faces payout after $54.8 mln loan fee verdict, Reuters, December 19, 2014


More Blog Posts:
FINRA Bars Ex-Wells Fargo Broker From Industry For Allegedly Bilking Customers, Expels HFP Capital Markets LLC for Securities Fraud, Stockbroker Fraud Blog, September 19, 2014

Wells Fargo Sued Over Allegedly Biased Lending in Chicago, Institutional Investor Securities Blog, November 28, 2014

Wells Fargo to Pay $5M Over Inadequate Controls, Altered Documents, Institutional Investor Securities Blog, October 21, 2014

December 22, 2014

Ex-Edward Jones Financial Adviser is Criminally Charged with Bilking Disabled Woman of Over $160K

Jason Cox, a former Edward Jones financial adviser, is criminally charged with allegedly defrauding a disabled woman. Robert C. Yeamans, who is the woman’s now deceased father, had tasked Cox with managing her account. The woman, who is in her fifties, is developmentally disabled.

According to a federal complaint, Cox took at least $160,000 from the investment account set up for her. He allegedly structured transactions by taking out small amounts during a short time period so he wouldn’t have to fulfill bank reporting requirements for bigger sums.

When worried banking officials asked the woman about the money, she told them she put it in a business that Cox owned but did not know what kind of enterprise it was. The bank closed her account.

The woman then opened another account at a different bank where Cox also had an account. Over $145,000, primarily from her Edward Jones account, then went into Cox’s account there. Meantime, her Edward Jones account was emptied out. In just a three-month period, $118,000 of the woman’s funds from the new account was taken out in 21 cash withdrawal transactions.

During an investigation, special agents for the Internal Revenue Service started probing Cox’s activities. He reportedly organized a sale of the woman’s condo. They also discovered that Edward Jones had fired him for stealing another client’s funds.

Unfortunately, there are financial representatives that will take advantage of a mentally disabled investor and bilk them of their funds. Elderly investors with dementia are also at risk of being defrauded. When these types of investors are harmed, this can make it hard for the victims to cover medical expenses, special care, and living expenses, as often they are no longer bringing in other steady income.

This week, in an unrelated case, the Financial Industry Regulatory Authority announced that Jeffrey C. McClure has been permanently barred from the securities industry. McClure is accused of converting close to $89,000 from the bank account of an elderly customer while he worked for Wells Fargo Advisors, LLC (WFC) and an affiliate bank. The bank has paid back the customer’s loss.

According to the self-regulatory organization, over almost two years, ending in August 2014, McClure wrote 36 checks to himself totaling $88,850 from the customer’s bank account at the affiliate. He did this without her consent or knowledge.

McClure had access to her account because the elderly customer had given him permission to pay for her expenses, including rent. Instead, he used her money to cover his personal costs.

You want to speak with an elder financial fraud attorney who can help you or your loved one get the money that was taken. Filing a civil claim is a separate action from criminal charges. Working with an experienced securities law firm can increase your chances of maximum financial recovery. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.


FINRA Bars Broker for Stealing $89,000 From an Elderly Customer
, FINRA, December 22, 2014

Feds accuse financial adviser of taking disabled woman's money, Dispatch.com, December 23, 2014


More Blog Posts:
Reliance Financial Advisors, Owners Face SEC Fraud Charges Involving Hedge Fund, Stockbroker Fraud Blog, December 15, 2014

Ex-California Insurer Charged with Running $11M Ponzi Scam, Stockbroker Fraud Blog, December 8, 2014

Morgan Stanley Fined $4M by the SEC for Market Access Rule Violation, Institutional Investor Securities Blog, December 11, 2014

December 17, 2014

UBS To Nominate Executive from BlueMountain Hedge Fund That Challenged Puerto Rico Law on Debt Restructuring to Its Board

UBS, AG (UBS) says that it intends to nominate BlueMountain Capital Management Executive Jes Staley to its board in May. Staley formerly served as a JPMorgan Chase & Co. (JPM) executive.

In a statement, UBS Chairman Axel Weber said that Staley is perfect for the role due to his professional expertise from working in global banking leadership roles for three decades. However, that may not be the only reason.

Earlier this year, BlueMountain, which is a New York-based hedge fund, joined a legal challenge against a law that would let some of the Commonwealth of Puerto Rico's agencies restructure their massive debt. UBS Puerto Rico (UBS-PR) is one of the banks accused of inappropriately placing clients’ money into closed-end funds that had high exposure to Puerto Rico municipal bonds.

When the bonds fell significantly in value last year, many investors sustained huge losses. Since then, UBS has been subject to hundreds of bond fraud arbitration cases by investors seeking to get their money back. Many claimants are alleging that the firm marketed Puerto Rico bonds to them even though the investments were unsuitable.

Following a recent meeting between officials of Puerto Rico’s power utility and investors, the prices on the territory’s bonds hit a record low. Puerto Rico Electric Power Authority is seeking to restructure $8.6 billion of debt. Under an agreement with creditors to pay back bank loans, PREPA has to submit a five-year strategic plan. The utility company recently presented an unfinished business plan. PREPA has told investors that they want more time to restructure.

On Tuesday, Puerto Rico general obligations set to mature in 2035 traded at around 84 cents on the dollar, which is the lowest it has traded since their original sale in March.

Puerto Rico Bond Fraud
In addition to representing investors who purchased securities from UBS, our Puerto Rico municipal bond fraud attorneys at Shepherd Smith Edwards and Kantas LTD LLP represent customers that bought securities from Merrill Lynch (MER), Banco Popular, and Banco Santander (SAN). Our investigation has uncovered many investors who lost much of their savings in Puerto Rican debt, with some of them seeing their life savings completely wiped out.


Shepherd Smith Edwards and Kantas, LTD LLP represents investors in both the U.S. and in Puerto Rico. Please contact our muni bond fraud lawyers today and ask for you free case consultation.



Puerto Rico Debt Sets Record Low After Utility Meets Investors
, Bloomberg, December 16, 2014

UBS Nominates BlueMountain Executive Jes Staley to Board
, The Wall Street Journal, December 17, 2014


More Blog Posts:
Puerto Rico’s Prepa Sees 219% Rise in Overdue Accounts With At Least $1.75 Billion Owed, Stockbroker Fraud Blog, November 18, 2014

Investors File Close to $1B of Puerto Rico Bond Fraud Claims against UBS
, Stockbroker Fraud Blog, October 9, 2014

Hedge Funds Are Moving in on Municipal Debt, Including Puerto Rico Debt
, Institutional Investor Securities Blog, November 15, 2013

December 16, 2014

FINRA Orders Merrill Lynch to Pay $2.4M in Fine, Restitution for Hundreds of Securities Transactions That Violated Fair Price Guidelines

FINRA is ordering Bank of America’s (BAC) Merrill Lynch to pay a $1.9M fine for violating fair price guidelines over seven hundred times during a two-year period. The financial firm also must pay restitution of over $540K to customers that were affected.

According to the self-regulatory organization, Merrill’s credit trading desk purchased MLC notes from retail customers at up to 61.5% under the market price. General Motors had issued the notes prior to its bankruptcy. MLC Notes stands for Motors Liquidation Company Senior Notes.

Out of 716 transactions, 510 of them involved notes bought at markdowns that were greater than 10%. The desk would then sell the notes to brokers at market cost.

Issuing a statement, FINRA EVP and market regulation head Thomas Gira said that the SRO expects firms to abide by their duties to customers in regards to fair pricing. Gira said Merrill Lynch’s markdowns of the MLC Notes were not acceptable.

FINRA says the firm lacked a proper supervisory system that could identify this kind of violation. It is accusing the firm of failing to perform assessments of the credit desk after trades were made.

Merrill Lynch is settling without denying or admitting to the securities charges. It has, however, consented to an entry of the regulator’s findings.

As part of the agreement, over the next year and a half, Merrill Lynch will provide reports related to the credit desk’s supervisory system and its effectiveness. The firm says that it has since enhanced its supervisory efforts and taken disciplinary action.

FINRA Fines Merrill Lynch $1.9 Million and Orders Restitution of $540,000 for Fair Pricing and Supervisory Violations Related to Purchases of Distressed Securities, FINRA, December 16, 2014

Reliance Financial Advisors, Owners Face SEC Fraud Charges Involving Hedge Fund, Stockbroker Fraud Blog, December 15, 2015

Morgan Stanley Fined $4M by the SEC for Market Access Rule Violation, Institutional Investor Securities Blog, December 12, 2014

Madoff Ponzi Scam Victims Recover Over $10 Billion, Institutional Investor Securities Blog, December 5, 2014

November 24, 2014

FINRA Orders Houston-Based USCA Capital Advisors LLC to Pay $3.8M to 19 ExxonMobil Retirees

A Financial Industry Regulatory Authority arbitration panel said that USCA Capital Advisors LLC must pay over $3.8 million to 19 ExxonMobil retirees whose investments were mismanaged the Houston-based wealth management firm. The self-regulatory organization also says that the Texas investment advisory firm misled the investors about its trading strategy.

It is not uncommon for Houston financial advisers to target ExxonMobil retirees as clients. The oil company has a huge outfit and other operations in the area. According to the investors, USCA was tasked with handling their retirement savings because of promises the investment advisors made to protect, oversee, and grow their accounts.

At a presentation by USCA RIA LLC, which is USCA’s investment advisory arm, advisers told investors about their Total Return model program, which they claimed would up S & P 500 gains while lowering the risks involved in trading equities. Investors said they were told the strategy would hold primarily exchange-traded funds and U.S. stocks in a rising market and turn the money into cash when the markets dropped. Trades were to be stimulated by “objective technical factors.”

While some investors thought the program would handle trading, others thought that the firm would monitor computerized results, using the information to trade. They invested close to $40 million. They believe that they could have made $3 million from the strategy they thought the firms’ advisers were going to employ. Instead, they sustained $1.25 million in losses.

Of the $3.8 million FINRA arbitration award, $853,000 is punitive damages. $1.9 million are damages and interest. Nearly $1 million will go to legal bills and other expenses.

Shepherd Smith and Kantas, LTD LLP is a Texas stockbroker fraud law firm.

Texas Advisory Firm Ordered to Pay Exxon Retirees $3.8 Million, NASDAQ.com, November 20, 2014

Houston wealth management firm must pay $3.8 million to retirees: panel, Reuters, November 19, 2014


More Blog Posts:
Texas Pension Fund Sues Tesco For Securities Fraud, Stockbroker Fraud Blog, November 5, 2014

Ex-LPL Financial Adviser, James Bashaw from Texas, Lands at New Brokerage Firm, Stockbroker Fraud Blog, October 30, 2014

National Planning Holding Temporarily Stops Selling American Reality Capital Properties’ Nontraded REIT sales After Disclosure of $23M Accounting Error, Institutional Investor Securities Blog, October 31, 2014

November 22, 2014

SEC Enforcement: Wedbush Settles SEC Probe for $2.4M, High-Frequency Trading Firm Gets $16M Penalty, and the Regulator Suspends Companies Touting Ebola Treatment

Wedbush Settles Market Access Violation Case for $2.44M
Wedbush Securities has agreed to settle a market access violations case with the U.S. Securities and Exchange Commission by admitting to wrongdoing and paying $2.44 million. The brokerage firm has also agreed to hire an independent consultant.

According to the SEC order, Wedbush violated the market access rule because it didn’t have the proper risk controls in place before giving customers access to the market. Among the customers that were given this access were thousands of anonymous overseas traders.

Per the SEC’s order instituting administrative proceedings, from July 2011 into 2013, Wedbush let most of its market access customers send orders straight to U.S. trading venues via platforms to which the firm did not have exclusive and direct control.

Also settling with the SEC ex-Wedbush executive vice president Jeffrey Bell and senior VP Christina Fillhart, who are accused of causing the firm’s violation of market access rules. The SEC said that Bell should have known that the firm’s risk management controls and supervisory procedures were not in compliance with the market access rule.

The agency claims that Fillhart, whose job it was to oversee the market access business and get notice of possible violations by Wedbush and its customers, did not get the firm to implement reasonably designed risk management controls even when there were red flags. In combined total, the two of them will pay over $85,000 in disgorgement, penalties, and prejudgment interest.


SEC Imposes $16M Penalty Against High-Frequency Trading Firm Latour
In the SEC’s first enforcement action against a high-frequency trading company, Latour Trading LLC will pay a $16M penalty. The regulator claims that the high-frequency trading firm employed faulty calculations in complex trading strategies, which allowed it to purchase and sell stocks without retaining substantial capital. The SEC says that the New York firm violated rules that are supposed to prevent trading firms from taking on too much risk.

By settling, Latour is not denying or admitting wrongdoing. The $16 million penalty, however, is the largest one to date for violating the net capital rule. The rule offers different methods that brokerage firms must employ to ensure that they are properly factoring in the risk they are exposing themselves to when engaged in the market. The Commission says that Latour routinely violated these requirements in 2010 and 2011.

The SEC also charged Nicolas Niquet, the ex-Latour COO, with violating the net capital rule. Niquet, who designed the method that Latour employed to determine risks exposure to net capital, must pay a $150,000 fine.

Trading is Suspended in Companies Involved in Supposed Ebola Treatment or Prevention
The Commission has suspended trading in four companies claiming to develop services or products related to the treatment or prevention of the Ebola outbreak. The agency said there wasn’t enough information available to the public about their operations. The four companies are Bravo Enterprises, Wholehealth Products, Immunotech Laboratories, and Myriad Interactive Media Inc.

The SEC has put out an Investor Alert warning about financial scams involving Ebola-related companies. In the alert the agency noted that it is not uncommon for fraudsters to try taking advantage of a news development. The SEC noted that microcap stocks are especially at risk of fraudulent investment schemes.

Read the SEC Order Against Wedbush (PDF)

Investor Alert: Investment Scams Involving Ebola-Related Companies, SEC, November 20, 2014

High-Frequency Trading Firm Latour to Pay $16 Million SEC Penalty, The Wall Street Journal, September 17, 2015

SEC Suspends Trading in Ebola Companies (PDF)


More Blog Posts:
Puerto Rico’s Prepa Sees 219% Rise in Overdue Accounts With At Least $1.75 Billion Owed, Stockbroker Fraud Blog, November 18, 2014

Insider Trading Roundup: Ex-Broker Pleads Guilty to Securities Fraud Involving IBM Acquisition, BNP Officials Are Under Scrutiny, and Ex-Billionaire Is Tried In Historic Brazilian Case, Institutional Investor Securities Blog, November 19, 2014

Rajaratnam Brother Settles Insider Trading Charges Involving Hedge Fund Advisory Firm Galleon Management, Stockbroker Fraud Blog, October 23, 2014

November 20, 2014

RBS Must Pay $88M to UK Regulators

Royal Bank of Scotland Group Plc (RBS) will pay an $88 million fine to Britain’s Financial Conduct Authority and the Bank of England’s Prudential Regulation Authority for the 2012 computer system failure that left millions of customers without account access for weeks. Some 6.5 million customers, which is about 10% of the U.K. population, were impacted.

According to FCA enforcement head Tracey McDermott, the technical glitch happened because of RBS Groups’ failure to identify and handle the risks that can occur from IT incidents. The failure, he noted, exposed customers to the risks.

The system failure happened after a third-party contractor installed a software upgrade. Because of the collapse, bank customers, as well as those in its Ulster Bank and NatWest divisions were unable to take out, transfer, or withdraw funds.

RBS said it would invest a significant amount of money to enhance its computer system. Following the 2012 incident, the banks says it performed a complete accountability review, reduced compensation of 16 individuals that affected their bonuses and outstanding unvested awards, as well as lowered the bonuses of the division tasked with overseeing the IT services.

By settling early, RBS received a 30% discount off the fine from regulators. This is the first fine that the PRA has levied since it was established last year. The regulator is tasked with overseeing the stability of Britain’s financial system. PRA said RBS’s technology failure could have adversely impacted the nation’s banking system because it interfered with core operations of lenders, as well as affected third parties.

RBS has paid over 70 million pounds to customers, other individuals, and companies for the system failure.

If you suspect that you were the victim of securities fraud, please contact Shepherd Smith Edwards and Kantas, LTD LLP today. Your first case consultation with us is free.

RBS Fined $88 Million by U.K. Regulators for IT Failures, Bloomberg, November 20, 2014

Prudential Regulation Authority

Financial Conduct Authority


More Blog Posts:
Puerto Rico’s Prepa Sees 219% Rise in Overdue Accounts With At Least $1.75 Billion Owed, Stockbroker Fraud Blog, November 18, 2014

Insider Trading Roundup: Ex-Broker Pleads Guilty to Securities Fraud Involving IBM Acquisition, BNP Officials Are Under Scrutiny, and Ex-Billionaire Is Tried In Historic Brazilian Case, Institutional Investor Securities Blog, November 19, 2014

RBS Securities’ Japan Unit to Pay $50M Criminal Fine Over Libor Manipulation, Institutional Investor Securities Blog, January 7, 2014

November 18, 2014

Puerto Rico’s Prepa Sees 219% Rise in Overdue Accounts With At Least $1.75 Billion Owed

Puerto Rico’s Electrical Power Authority, also known as PREPA, is experiencing a surge in overdue accounts. According to a report from an FTI Consulting subsidiary, since 2012, the U.S. territory’s electrical authority has seen a 219% increase in the number of company and residential accounts that are at least 120 days late in making their payments. The report was generated as part of an agreement with the creditors, which retain more than $9 billion of the electrical utility company’s debt.

By September 2014, late balances owed to PREPA not just among businesses and residents, but also by government entities had hit $1.75 billion. At least $708.6 million were payments that were late by a minimum of four months.

Puerto Rico’s governmental entities owe about $758 million, with certain public corporations unable to even pay their electricity bills and refusing to agree to payment plans to get their accounts current. The FTI report recommends that Prepa put into place an amnesty period for clients that are delinquent, retain a collection agency, increase late fees and charges for reconnection, and push for timely payments.

Prepa is getting ready to unveil a plan early next year to restructure its $8.6 billion of debt. Its debt has been issued a junk rating by credit rating agencies.

Meantime, Puerto Rico is talking to four bond insurers to get at least part of up to $2.9 billion in bonds insured. These are bonds the financially beleaguered Commonwealth wants to put out later this year. The bond issues would let the territory access a deeper capital pool in the municipal bond market than the small hedge funds that purchased $3.5 billion of its debt earlier this year.

Puerto Rico is also seeking to refinance a $2.2 billion loan that the Government Development Bank made to its Highways and Transportation Authority to try and improve its poor financial health and give the territory more time to reverse its failing economy. To make the sale, the island has to pass laws that would increase an oil tax that could allow it to back the bonds.

Puerto Rico Bond Fraud
Puerto Rico’s muni bonds are the focus of hundreds of FINRA arbitration claims, with many investors complaining that they sustained huge losses because they were sold investments that were too risky for what they could afford.

Brokers for UBS (UBS), Banco Santander (BNC), and Banco Popular are among those identified as having made inappropriate recommendations to customers. A number of investors lost everything.

At Shepherd Smith Edwards and Kantas LTD LLP, our Puerto Rico muni bond fraud lawyers represent investors with FINRA arbitration claims that are seeking to recover their money. Contact our securities fraud law firm today to request your free case consultation.

Puerto Rico Electric Utility’s Late Accounts Surge 219% From ’12, Bloomberg, November 17, 2014

Read the FTI Capital Advisors Report

Puerto Rico's PREPA urged to get tough on $1.8 bln owed, Reuters, November 17, 2014

PREPA


More Blog Posts:
Investors File Close to $1B of Puerto Rico Bond Fraud Claims against UBS, Stockbroker Fraud Blog, October 9, 2014

Fidelity, Schwab, and Pershing Suspend Trading of Schorsch Nontraded Real Estate Investment Trusts, Institutional Investor Securities Blog, November 13, 2014

Hedge Funds Are Moving in on Municipal Debt, Including Puerto Rico Debt
, Institutional Investor Securities Blog, November 15, 2013


November 13, 2014

Citigroup, Bank of America Are Selling Soured Home Loans, Sources tell Bloomberg

According to Bloomberg.com, sources are telling them that Citigroup (C) and Bank of America (BAC) are selling soured U.S. mortgages to satisfy the demand from investment firms that are raising the prices. For example, say the individuals who asked not to be named, Bank of America recently placed approximately $1 billion of beleaguered debt, including nonperforming loans. Meantime, Citigroup purportedly sold around $1 billion of re-performing and nonperforming mortgages.

Lenders are reportedly selling more defaulted mortgages to avoid the cost of holding the debt. Meantime, private-equity firms and hedge funds are trying to make money off of increasing home values. The number of firms looking to acquire debt that has soured is growing.

According to some critics, that housing regulators and other agencies have recently announced rulings that would decrease credit and lending standard for home mortgages is a sign that the government is making the kinds of errors that led to the 2008 housing crisis. With housing giants Freddie Mac (FMCC) and Fannie Mae (FNMA), handing over the majority of their earning to the Treasury Department, government-sponsored enterprises are now lacking the capital buffer they would need in the event there are losses. If the economy gets into trouble again, it may be up to taxpayers once more to bail these GSEs out. It was the U.S. Treasury that helped save Freddie and Fannie with $180 million as the government seized them, placing both under conservatorship.

Last month, the Federal Housing Finance Agency announced that even though sellers of certain asset-backed securities have to keep a minimum of 5% of the asset’s credit risks, securities backed by qualified residential mortgages are exempt from this requirement.

Our mortgage-backed securities fraud lawyers are here to help investors recoup their losses.

Bank of America, Citigroup Said to Sell Soured Home Loans
, Bloomberg, November 12, 2014

Feds to Back Risky Home Loans Again
, The Washington Free Beacon, November 10, 2014


More Blog Posts:
Detroit Suburb Charged with Muni Bond Fraud, Institutional Investor Securities Blog, November 6, 2014

Texas Pension Fund Sues Tesco For Securities Fraud, Stockbroker Fraud Blog, November 5, 2014

National Planning Holding Temporarily Stops Selling American Reality Capital Properties’ Nontraded REIT sales After Disclosure of $23M Accounting Error, Institutional Investor Securities Blog, October 31, 2014

November 10, 2014

Two Former Merrill Lynch Brokers Contend with Unauthorized Trading Claims

According to the Financial Industry Regulatory Authority (FINRA), Ameriprise Financial (AMP) broker Lorene Fairbanks, formerly with Merrill Lynch. Pierce, Fenner & Smith Incorporated, was recently sanctioned over allegations that she effected over 57 discretionary transactions for several customers without getting the required written authorization from the clients or the approval of the firm. Fairbanks also allegedly mismarked over 50 order tickets, noting them as “unsolicited” when they were “solicited” orders. Brokers are not allowed to exercise discretionary authority in a client account without written authorization.

The Ohio broker was registered with Merrill Lynch from 8/06 to 3/12. The firm fired Fairbanks in February 2012 for purportedly taking discretion in client accounts and mismarking customer orders. She has been associated with Ameriprise since June 2012. There also have reportedly been other customer complaints accusing Fairbanks of excessive trading and unsuitable trading.

Also sanctioned by FINRA for allegations of unauthorized trading is George Zaki, another ex-Merrill Lynch broker. The self-regulatory organization contends that Zaki implemented or executed about 3,600 trades in some 80 accounts without written customer authorization between 6/10 and 8/12.

Zaki was let go by Merrill Lynch in October 2012. The firm said the termination was because of conduct related to exercising discretion in client accounts that were not discretionary. FINRA rules prohibits a registered representative from exercising discretionary power in the account of a customer without that client’s prior written permission and firm acceptance of the account.

After Zaki was terminated from Merrill Lynch, he was registered with Barclays (BARC) Capital Inc. until earlier this year.

Our broker fraud lawyers represent investors in the U.S., as well as those headquartered abroad with claims against brokerage firms in the country.

BrokerCheck, FINRA


More Blog Posts:
FINRA May Expel Ex-Broker For $6M Hedge Fund, Stockbroker Fraud Blog, July 15, 2014

SEC Stops Fraudulent Bond Offering by Chicago Suburb, Institutional Investor Securities Blog, June 25, 2014

AIG Advisor Group, Securities America, LPL Financial, Cambridge, And Even Schorsch’s Broker-Dealer Stops Selling His REITs, Institutional Investor Securities Blog, November 7, 2014

November 3, 2014

SEC Sanctions UBS, Charles Swab, Oppenheimer, & 10 Other Firms For Improper Sales of Puerto Rico Junk Bonds

The Securities and Exchange Commission has sanctioned thirteen financial firms, including UBS Financial Services (UBS), Charles Schwab and Co. (SCHW), J.P. Morgan Securities (JPM), and Stifel Nicolaus & Co. (SF), for the improper sales of Puerto Rican junk bonds. A $100,00 minimum denomination had been established in junk bonds of $3.5 billion made by Puerto Rico several months ago. An SEC probe, however, revealed that there had been 66 instances when firms sold the bonds in transactions of under $100,000.

Municipal bond offerings are supposed to have a set minimum denomination that determines the smallest amount that a firm can sell to an investor during a single transaction. Typically, municipal issuers will establish high minimum denominations for junk bonds with a greater default risk. This is done to limit the bonds from ending up in the accounts of investors who may not be able to handle the risks.

The firms and their fines: UBS Financial Services for $56,400, Charles Schwab & Co. for $61,800, Oppenheimer & Co. (OPY) for $61,200, Wedbush Securities Inc. for $67,200, Hapoalim Securities USA for $54,000, TD Ameritrade (AMTD) for $100,800, Interactive Brokers LLC for $56,000, Stifel Nicolaus & Co. (SF) for $60,000, Investment Professionals Inc. for $67,800, Riedl First Securities Co. of Kansas for $130,000, J.P. Morgan Securities for $54,000, National Securities Corporation for $60,000, and Lebenthal & Co. for $54,000.

The firms are accused of violating Rule G-15 of the Municipal Securities Rulemaking Board. The rule sets the minimum denomination requirement. The SEC says that by conducting sales under the minimum denomination, the firms violated the Securities Exchange Act of 1934’s Section 15B(c)(1), which does not allow for any MSRB rule to be violated.

All 13 firms agreed to settle the SEC’s findings without admitting to or denying them. The firms also agreed to be censured. They will review their respective procedures and policies, as well as make the needed changes to ensure appropriate compliance moving forward.

Our Puerto Rico muni bond fraud lawyers represent investors in the Commonwealth and on the mainland. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

SEC Sanctions 13 Firms for Improper Sales of Puerto Rico Junk Bonds, SEC, November 13, 2014

Rule G-15, Municipal Securities Rulemaking Board

Securities Exchange Act of 1934
, Legal Information Institute

More Blog Posts:
Investors Have Filed Close to $1B of Puerto Rico Bond Fraud Claims against UBS, Stockbroker Fraud Blog, October 29, 2014

Hedge Funds Are Moving in on Municipal Debt, Including Puerto Rico Debt, Institutional Investor Securities Blog, November 15, 2013

UBS Brokers Are Still Selling Puerto Rico Muni Bonds, Stockbroker Fraud Blog, October 20, 2014

October 30, 2014

Ex-LPL Financial Adviser, James Bashaw from Texas, Lands at New Brokerage Firm

James “Jeb” Bashaw, the former star financial adviser at LPL Financial (LPLA) from Texas is now registered with International Assets Advisory, a small brokerage firm. LPL Financial fired Bashaw last month over allegations involving selling away. Then, for a while this month, he was with Wunderlich Securities Inc.

Selling away typically involves engaging in private securities transactions sans the required written disclosure or brokerage firm approval. It can also include borrowing from a client, as well as engaging in a transaction that is a potential conflict interest, again without the required disclosure in writing or firm approval.

Responding to the selling away allegations, Bashaw noted that he was “home supervised” and underwent more than a dozen perfect audits while affiliated with LPL. After his firing, Wunderlich took steps to hire Bashaw but there was a delay in transferring his license to the firm. In the end, the broker-dealer and Bashaw reportedly decided not to pursue a working relationship.

In 2011, Bashaw was ranked the number one financial adviser in Texas. He founded a dually registered firm in Houston, which was one of the biggest affiliated LPL practices. He reportedly managed assets of $3.8 billion.

In other LPL Financial news, this week Mark Casady, its chief executive, apologized to shareholders for the time it has taken to resolve the company’s compliance issues. The problems have cost the brokerage firm millions of dollars in settlements, restitution payments, and fines.

Casady’s statement comes a week after parent company LPL Financial Holdings Inc. announced that the broker-dealer expected to incur some $23 million in charges to settle undisclosed regulatory issues. That’s $18 million more than what had been anticipated. Following the announcement, LPL shares dropped 7%.

LPL said the regulatory matters primarily involve LPL Financial’s policies, systems, and procedures. Without going into detail, Casady said that the nature of the issues made it hard to identify or evaluate the “timing or magnitude of their resolution.”

For the last two years, LPL Financial has been contending with regulators over different issues. Earlier this month, regulators in Massachusetts announced that LPL had consented to pay back senior investors $541K for surrender charges from switching variable annuities. In June, LPL Financial was told to pay $820K in restitution and a $2 million fine to Illinois regulators for not properly mantaining books and records that documented 1035 exchanges.

Last year, FINRA fined LPL $7.5 million for close to three dozen system failures involving emails. The firm paid investors in Massachusetts $4.8 million in restitution related to their purchase of nontraded real estate investment trusts.

Our Texas broker fraud lawyers represent investors who wish to recoup their losses. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Ex-LPL Adviser’s Talks With Wunderlich Scuttled, The Wall Street Journal, October 14, 2014

CEO Mark Casady apologizes to LPL Financial shareholders for compliance missteps, Investment News, October 30, 2014


More Blog Posts:
LPL Financial Fires Texas Branch Manager Over Selling Away Claims, Settles with Senior Investors in Massachusetts for $541,000 Over Faulty Variable Annuity Switches, Stockbroker Fraud Blog, October 15, 2014

Former LPL Financial Broker Must Pay Almost $2 Million For Bilking Clients, Including Elderly Investors, Stockbroker Fraud Blog, August 29, 2014

LPL Financial Ordered to Pay $7.5M FINRA Fine Over E-Mail Failures, Institutional Investor Securities Blog, May 22, 2013