April 16, 2015

Former JPMorgan Chase Investment Adviser Faces Criminal and Civil Charges for Allegedly Stealing $20M from Clients

Michael Oppenheim, an ex-JPMorgan Chase (JPM) investment adviser, was arrested this week and charged with bilking clients of at least $20 million. Oppenheim worked for the firm from 2002 until March of this year.

Authorities claim that starting as early as 2011, Oppenheim convinced clients to allow him to take money out of their accounts to invest in low-risk municipal bonds. Instead, he allegedly used the funds to get cashier’s checks that he put into brokerage accounts that he controlled. He also used the money to trade options and stocks in different companies.

Because his options trading activities were generally unprofitable, most of his investments lead to losses. By last year he’d lost some $13.5 million. Oppenheim was also purportedly using client money to pay for a home loan and cover bills. He is accused of concealing his embezzelment by using fraudulent client statements and transferring funds among his clients.

Meantime, the U.S Securities and Exchange Commission has filed a parallel claim against the New York-based financial adviser. The regulator says that Oppenheim abused his role as a private client advisor, promising customers that he would put their funds in secure and safe investments but instead using the money to aggressively play the market in stocks that belonged to him.

The SEC is accusing Oppenheim of numerous violations, including those involving the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940. It wants penalties, disgorgement, and an injunction.

Contact our investment adviser fraud law firm today.


Ex-JPMorgan banker charged with taking $20 million from clients, Reuters, April 16, 2015

SEC Says Bank VP Swiped $20 Million From Clients, Courthouse News Service, April 16, 2015

Read the SEC Complaint (PDF)

More Blog Posts:
Former UBS Puerto Rico Executives File a $10M FINRA Arbitration Claim Against the Firm, Stockbroker Fraud Blog, April 15, 2015

SEC Settles With Ex-Freddie Mac Executives Over Allegations They Mislead Investors Over Mortgage Risks, Institutional Investor Securities Blog, April 15, 2015

FINRA Bars Owner of Broker-Dealer, Seller of Illiquid Equipment-Leasing Funds for Misusing Investor Money, Stockbroker Fraud Blog, April 14, 2015

April 15, 2015

Former UBS Puerto Rico Executives File a $10M FINRA Arbitration Claim Against the Firm

Siblings Teresa and George Bravo, who formerly worked as financial advisors at UBS Financial Services Inc. of Puerto Rico (UBS-PR), have filed a $10 million Financial Industry Regulatory Authority (FINRA) arbitration claim against the firm. The Bravos, both were senior vice presidents at the broker-dealer, claim that management deceived not just customers but also employees about proprietary closed mutual funds.

The Bravos said that they thought working with UBS would help them be of better service to their clients, which is why they left their old firm. However, the allegedly fraudulent conduct taking place at UBS created material conflicts of interest for them and other employees. The Bravos are contending that during the three years they worked at UBS, they were repeatedly deceived, mistreated, threatened, and coerced before being forced out.

They collectively managed over $120 million in client assets while working for UBS. According to their complaint, the Bravos said that UBS created a high-pressure atmosphere to get brokers to find and sell more of UBS’s proprietary closed-end mutual funds or risk termination otherwise. Teresa Bravo says that she was even duped into buying $100,000 in mutual funds herself. She and her brother are accusing UBS of deceiving customers for its own protection and trying to artificially preserve the Puerto Rican closed-end funds market.

It was in 2012 that the U.S. Securities and Exchange Commission submitted charges against UBS for allegedly making misleading statements to investors and downplaying that there was a liquidity crisis. UBS Puerto Rico settled the claims for $26 million. UBS executives Carlos J. Ortiz and Miguel A. Ferrer were cleared of the charges during a later hearing with an SEC administrative judge. Since that decision from the SEC, Ferrer made headlines concerning UBS’s closed-end funds when a recording of his voice was released. On it he can be heard pressuring UBS brokers to sell the Puerto Rican closed-end funds despite their list of concerns about the investments.

The Bravos say UBS’s behavior has hurt their business and earning potential. They believe that the firm should be liable for their loss of business and reputation, as well as for UBS’s actions stemming from fraudulent misrepresentation, fraud, negligence, breach of duty to inform an agent, negligent misrepresentation and other claims. Specifically, the Bravos have asked for $10 million in compensatory damages. They would like UBS to pay them punitive damages, too.

Puerto Municipal Bond Fraud Cases

For the past two years, our Puerto Rico bond fraud lawyers have been working with clients to file claims against UBS Puerto Rico, Banco Santander (SAN), Banco Popular, and other brokerage firms because of losses in these same closed-end funds or in similar investments. Many investors should not have been involved with these investments, which were not suitable for their portfolios, risk tolerance levels, or investment goals in the first place.

Please contact our Puerto Rico bond fraud law firm today. We represent investors from the U.S. mainland and the Commonwealth.


More Blog Posts:
Puerto Rico’s Debt Gets Downgraded to "B" by Fitch Ratings, Stockbroker Fraud Blog, March 28, 2015

Doral Bank In Puerto Rico Fails, Stockbroker Fraud Blog, March 5, 2015

April 7, 2015

LPL Financial Should Pay $3.6M in Fines, Repayments for REIT Sales to Older Investors, Says NH Regulator

The New Hampshire Bureau of Securities Regulation wants LPL Financial (LPLA) to pay clients $2.4 million in buybacks and restitution for 48 sales of nontraded real estate investment trusts that were purportedly unsuitable for elderly investors. The regulator, which says the firm did not properly supervise its agents, is also fining LPL $1 million plus $200,000 in investigative expenses.

The securities case springs from transactions involving an 81-year-old state resident that purchased a nontraded REIT from the firm in 2008. The investor, whose liquid net worth was $2.5 million and invested $253,000 in the financial instrument, would go on to lose a significant amount of money. A probe ensued.

The state regulator contends that the 48 REIT sales, totaling $2.4 million lead to concentration that went beyond LPL guidelines and that the firm sold hundreds of nontraded REITs to clients in New Hampshire on the basis of “clearly erroneous “client financial data, while frequently violating its own policies. LPL has reportedly admitted that 10 of the 48 transactions deemed unlawful by the state were unsuitable according to its own guidelines. The Securities Bureau wants to take away the firm’s license to sell securities in New Hampshire.

Meantime, a former LPL Financial broker has been permanently barred from the securities industry by the Financial Industry Regulatory Authority. Raymond Daniel Schmidt, previously affiliated with LPL Financial Holdings Inc. in Southern California, violated industry rules when he borrowed funds from seven clients between ’09 and ’12. He settled with the self-regulatory organization without denying or admitting to FINRA’s findings.

Schmidt borrowed close to $2.3 million to build the Pakalana Sanctuary, a vacation rental property on Hawaii’s big island. He admitted his involvement in the retreat center/vacation center in a public regulatory filing in 2013. However, said FINRA, Schmidt actually purchased the property in 2009, opening it for business as its owner and operator three years later.

Brokers are not allowed to borrow money from clients. They also can’t take part in business activities outside the firm without telling the company and typically require the latter’s approval.

FINRA says that Schmidt failed to tell LPL about the property or the loans from customers even when he filled out yearly questionnaires required by the firm. Even when he eventually told the firm about the real estate, he denied that he owned interest in the property.

Earlier this year, Schmidt told the regulator's enforcement unit that he wouldn’t give over documents or cooperate with its probe. He is currently the subject of an elder abuse and negligence case related to the Hawaiian real estate investment that the plaintiff made.

Contact our REIT losses lawyers to explore your legal options.

NH regulators seek $3.6m judgment against LPL Financial over risky real estate, Union Leader, April 7, 2015

Watchdog bars ex-LPL broker who tapped client funds for Hawaii retreat, Reuters, March 26, 2015

New Hampshire Bureau of Securities Regulation


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

CNL Lifestyle Properties REIT Dips in Value, May Sell Ski Resorts, Institutional Investor Securities Blog, March 16, 2015

Broker and Adviser News: Morgan Stanley Sues Ameriprise Broker, Former UBS Broker Alleges Investor Risk Levels Were Mischaracterized, and Ex-Bank of America Merrill Lynch Trainees Seek Overtime, Institutional Investor Securities Blog, March 5, 2015

March 31, 2015

Investor Fraud News: NFL Free Agent Sues Bank of America For $20M, FINRA Arbitration Panel Awards $1.3M to Investor in Case Involving Ex-Stifel Broker, and Tony Thompson and His Brokerage Firm are Barred from Industry

Former Colts Football Player Sues Bank of America for $20M
Dwight Freeney, formerly with the Indianapolis Colts and currently an NFL free agent, is suing Bank of America (BAC) for securities fraud. He and his Roof Group LLC say they were bilked of over $20 million.

In his securities fraud case, Freeney contends that the bank’s wealth management division is to blame for taking part, aiding, and abetting in the scam that cost him money. He noted that Bank of America went after him in 2010 to become one of its high net worth and affluent clients.

Aside from losing money, Freeney said that he was forced to close his restaurant venture. He wants compensation and punitive damages.

However, the bank disagrees with the claims, noting that the people accountable for fraud—an ex-bank adviser and a business associate—already were arrested for wiring $2.2M from the pro football player’s account. A spokesperson noted that the ex-employee committed the fraud after she was no longer with Merrill Lynch and Freeney had retained her services personally.

Ex-Daughter-in-Law of Ex-Stifel Broker Gets $1.3M FINRA Arbitration Award
A Financial Industry Regulatory Authority Panel has awarded Tracy Noble Gilbert $1.3M in damages for the way that her former father-in-law, ex-Stifel Nicolaus & Co. (SF) broker Lanis Dale Noble handled her finances. Gilbert claims that while still with Stifel, Noble engaged in churning and breach of fiduciary duty related to the use of margin in her account, ManuLife and SunLife variable annuities, and a Friedman Billings Ramsey real estate investment trust (REIT). Stifel denied the allegations.

The three-person panel awarded Gilbert $1.29 million in compensatory damages and $250,000 in legal fees. However, it denied her request for punitive damages.

Tony Thompson, TNP Securities Barred by FINRA
Tony Thompson and his brokerage firm TNP Securities have been barred from the industry. FINRA said that Thompson and his broker-dealer misled investors about tenant-in-common deals. Because of this, contends the self-regulatory organization, every investor that bought Guaranteed Notes LLC notes after January 1, 2009 was misled and at the very least unjustly experienced loss of the principal on their investment.

Thompson raised some $50 million through private placement securities sales from 2008 into 2012. Thompson purportedly was responsible for marketing P Notes, 12% Notes, and PPP Notes. However, material misrepresentations and omissions were made to investors during the sales.

Thompson has said that the misrepresentations and omissions were because he depended in good faith on the advice and information that others gave him.

FINRA panel initially sought to have Thompson pay restitution. However, it didn't find sufficient basis that investor losses in the private placements were because of the misstatements and omissions that he made. He will, however, have to pay $6 million for administrative proceedings.

FINRA Bars and Fines Rep, Broker-Dealer $39.6M, ThinkAdvisor, April 2, 2015

Ex-Colt Dwight Freeney sues for $20 million in fraud case, IndyStar, March 31, 2015

Finra arbitration panel awards investor $1.3 million from ex-Stifel broker, Investment News, April 1, 2015


More Blog Posts:
Oppenheimer Must Pay $2.5 Million Fine, $1.25 Million in Restitution for Not Supervising Ex-Broker, Stockbroker Fraud Blog, March 29, 2015

Ex-F-Squared CEO Still Battling SEC, Firm Dealing With Fallout from Securities Fraud Charges, Stockbroker Fraud Blog, March 27, 2015

March 29, 2015

Oppenheimer Must Pay $2.5 Million Fine, $1.25 Million in Restitution for Not Supervising Ex-Broker

The Financial Industry Regulatory Authority is fining Oppenheimer & Co (OPY) $2.5M for not supervising Mark Hotton. The ex-broker stole from customers and excessively traded in their accounts. Oppenheimer must also pay $1.25 million in restitution.

To date, the brokerage firm has paid over $6 million to settle customer securities arbitration claims involving Hotton. This latest restitution will go to another 22 customers who did not file claims.

According to the self-regulatory organization, Oppenheimer did not properly investigate Hotton before hiring him, despite the fact that FINRA’s own records linked him to several customer complaints and criminal charges. After discovering that Hotton’s business partners sued him for bilking them out of millions of dollars, still the firm did not heighten supervision over him.

FINRA also said that Oppenheimer disregarded “red flags” in wire transfer requests and correspondence that indicated he was wiring money from customer accounts to entities that he controlled or belonged to him. Because of this, says the SRO, Hotton was able to move over $2.9 million of customer funds. (FINRA said that the firm did not properly supervise his trading of customer accounts even though its surveillance analysts noticed that he was trading at levels that appeared excessive.)

The regulator said that Oppenheimer made over 300 required filings to the SRO in an untimely fashion, with many submitted over 230 days late. Because of this, said FINRA, the public did not become aware of the serious claims made against some of the firm’s registered representatives, including Hotton, until later. By settling with the SRO, Oppenehimer is consenting to an entry of FINRA’s findings. It has not, however, admitted to or denied the charges.

Meantime, last year, Hotton was sentenced to 34 months in prison last year. Among his victims were the producers of the Broadway play “Rebeccca the Musical.” He also bilked a real estate firm in Connecticut.

The Letter of Acceptance, Waiver, and Consent
(PDF)

FINRA Sanctions Oppenheimer & Co. $3.75 Million for Supervisory Failures, FINRA, March 26, 2015


More Blog Posts:

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

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

SEC Commissioners Oppose Regulator’s Leniency Toward Oppenheimer, Despite Violations, Institutional Investor Securities Blog, February 12, 2015

March 9, 2015

Wealthfront CEO Claims Schwab is Fooling Investors Over “Free” Automated Investment Platform

Adam Nash, the CEO of Wealthfront, claims that Charles Schwab & Co. (SCHW) is deceiving investors by claiming that Intelligent Portfolios, its automated investing platform, is free. Nash, whose company competes with Schwab’s new service, contends that the platform will cost consumers thousands of dollars in opportunity expenses involving expensive “smart beta” exchange-traded funds and high cash allocations. These costs, he argues, are concealed in disclosure documents.

Intelligent Portfolios lets consumers manage, rebalance, and oversee their portfolios through the Internet. The program allows investors to evaluate their goals and risk tolerances using specific questions. Investors must have at least $5,000 and they would get recommendations based on their responses.

Algorithms are supposed to help clients build and maintain their portfolios in low cost ETFs with asset classes of up to 20. Intelligent Portfolios joins Wealthfront and Betterment in the robo-field for automated investing.

Nash, however, called Schwab out on his blog, referring to the firm as the new “Merrill Lynch.” As one example of why the competitor’s robo program isn’t free, he pointed to Schwab’s SEC filing, which said that every investment strategy will have a sweep allocation in which 6-30% of the value of an account will be kept in cash and consumers cannot use this for investments or get rid of it.

Schwab has responded with its own blog post, accusing the Wealthfront CEO’s post of being misleading. The firm argued that the cash Nash points to is an investment and should not be considered a source of revenue for the company.

With its new robo-advisor service, Schwab is touting that there are no advisory or accounts service fees as well as no commissions. It says it will instead collect fees on fourteen of the ETFs that it manages and are part of the Intelligence Portfolios’ program, as well as from eight other ETFs, which are run by other fund groups that pay Schwab for services. And while the firm has admitted to possibilities for conflicts of interest, it says that it has acted to minimize these.

Robo-Advisors
This type of online wealth management service gives portfolio advice that is automated and algorithm-based and doesn’t involve human financial planners. Robo-advisers work with the same software that traditional advisors do but only provide portfolio management and not wealth management. This service is typically low-cost, requiring low account minimums. They are proving to be a draw for younger investors, who are used to doing a lot on the Internet.

Excessive Fees
Excessive and hidden fees paid to broker-dealers and investment advisers can cost investors, who may not be factoring these figures in when determining whether or not they are making a profit or sustaining losses. Any fees that are charged must be made known to an investor.

If you believe that you have sustained financial losses that you shouldn’t have, you may want to speak with an experienced investment adviser fraud law firm right away. At Shepherd Smith Edwards and Kantas, LTD LLP, we have helped thousands of investors recoup their money.

Read Nash's blog post, Medium.com

Response to Blog by Wealthfront CEO Adam Nash, AboutSchwab

Schwab raises eyebrows, new issues with robo-investment tool, SFGate, Kathleen Pender, March 9, 2015

Schwab to launch adviser robo in Q2; consumer version unveiled today, Investment News, March 9, 2015


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

FINRA Panel Orders Morgan Stanley Unit to Pay Banamex Unit $4.5M Over Alleged Unauthorized Third Party Loans
, Institutional Investor Securities Blog, August 15, 2014

District Court Imposes $26M Commodity Pool Fraud Penalty, Stockbroker Fraud Blog, March 7, 2015

February 25, 2015

Morgan Stanley, DOJ Arrive at $2.6B Mortgage Bond Settlement

Morgan Stanley (MS) has reached an agreement in principal with the U.S. Department of Justice to resolve claims related to its sale of mortgage bonds. The government probe looked into allegations that the financial firm misrepresented the quality of home loans that were packaged into bonds.

The broker-dealer, however, still needs to negotiate with the DOJ about other terms, including what would be included in a signed statement of facts. The settlement doesn’t resolve probes by state litigators.

Morgan Stanley’s financial agreement is much smaller than what other firms have paid when settling with the Justice Department. Citigroup Inc. (C) paid $7 billion, J.P. Morgan Chase & Co. (JPM) paid $13 billion, and Bank of America Corp. (BAC) paid $16.65 billion.

According to The Wall Street Journal, Goldman Sachs Group (GS) is expected to be the next firm to settle with the government over mortgage bond claims. Earlier this week, that firm disclosed in a filing that the U .S. Attorney’s Office for the Eastern District of California sent notice that the government had “preliminarily” found that Goldman Sachs violated federal law pertaining to mortgage bond sales.

The bank said that it is estimating at least $2.5 billion in legal losses but that this doesn’t factor in future claims that may arise from future federal probes into misconduct over residential mortgage-backed securities (RMBSs).


U.S. Attorney General Eric holder recently said that federal prosecutors have 90-days to determine whether they can bring mortgage bond cases against individuals for parts they may have played in the 2008 financial crisis.

Earlier this month the DOJ, 19 states, and the District Columbia reached a $1.375 billion settlement with Standard & Poor’s Financial Services LLC and McGraw Hill Financial Inc. The agreement resolves claims that the credit rating agency schemed to bilk investors in Collateralized Debt Obligations (CDOs) and RMBS (S).

The RMBS lawsuits contend that investors suffered substantial losses because S & P put out inflated ratings that did not accurately reflect the true credit risks of the securities. The credit rater is also accused of falsely representing that it was putting out objective ratings that were not influenced by its business ties with the investment banks that issued the securities.

Unfortunately, many investor suffered substantial losses during the financial crisis. In many instances, financial firms are being blamed for putting their own interests before investors.

Contact our mortgage-backed securities lawyer if you suspect you were the victim of financial fraud.

Morgan Stanley to Pay $2.6 Billion to Settle Mortgage Cases, The Wall Street Journal, February 25, 2015


More Blog Posts:
Morgan Stanley to Pay a $280,000 Fine to CFTC for Records and Supervision Failures Involving SureInvestment and $35M Ponzi Scam, Stockbroker Fraud Blog, September 16, 2014

Morgan Stanley Must Pay Connecticut Regulators $5M for Supervisory Violations, Stockbroker Fraud Blog, June 18, 2014

US Probing Whether Morgan Stanley Data Breach Was Linked to Fired Financial Adviser, Institutional Investor Securities Blog, February 18, 2015


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