September 30, 2015

UBS Puerto Rico to Pay $18.5M to Settle FINRA Sanctions Over Supervisory Failures Related to Closed-End Fund Sales

The Financial Industry Regulatory Authority (FINRA) is fining UBS Financial Services Incorporated of Puerto Rico (UBS PR) $7.5 million for supervisory failures involving its transactions in UBS sponsored Puerto Rican closed-end funds (CEF). The brokerage firm also must pay $11 million in client restitution for losses related to those shares.

According to FINRA, a self-regulatory organization for the brokerage industry, for over four years, UBS PR neglected to monitor the combined concentration and leverage levels in customer accounts to make sure transactions were suitable for the respective profiles and objectives of its customers. FINRA said that considering that the firm’s retail customers typically kept high concentration levels in the country’s assets and frequently used these concentrated accounts as cash loan collateral—and in light of the U.S. territory’s volatile economy—UBS should have put into place a system that could reasonably identify and prevent unsuitable transactions.

Instead, the regulator said, UBS PR persuaded certain customers to establish credit lines that were collateralized by their securities accounts. If the value of the account dropped under the required collateral level, the customer would have to deposit more assets or liquidate securities. A credit line that is collateralized by an account that is very concentrated could significantly increase an investor’s risk of loss. When the market dropped in 2013, and a lot of the CEFs lost value, customers were forced to sustain hefty losses to satisfy the calls they received notifying them that their account’s value was now under the required collateral level.

Continue reading "UBS Puerto Rico to Pay $18.5M to Settle FINRA Sanctions Over Supervisory Failures Related to Closed-End Fund Sales" »

September 23, 2015

LPL to Pay $3.2M Over Nontraded REIT and ETF Sales

LPL Financial (LPLA) has agreed to pay 3.2 million fine to settle penalties related to its sale of nontraded real estate investment trusts and leveraged exchange-traded funds. The settlements were reached with the Non-Traded REIT Task Force of the North American Securities Administrators Association and regulators in Massachusetts and Delaware. The firm sold the REITs at issue for six years beginning in 2008.

Under the agreement, LPL will pay $1.425 million in civil penalties for its purported failures to put into place a supervisory system that was adequate enough to handle its nontraded REIT sales and enforce written procedures related illiquid trust sales. The money will be divvied up between the District of Columbia, 48 states, the U.S. Virgin Islands, and Puerto Rico. By settling with NASAA, LPL is not denying or admitting wrongdoing.

Also, the Delaware Attorney General and the Massachusetts Attorney General have arrived at their own settlements with LPL’s Boston arm. The firm consented to pay $1.8 million for putting about 200 clients from Massachusetts in high-risk leveraged ETFs. The broker-dealer and Massachusetts had come to an earlier settlement about nontraded REIT sales two years ago.

Continue reading "LPL to Pay $3.2M Over Nontraded REIT and ETF Sales" »

September 1, 2015

FINRA Orders UBS to Pay Investors Over $2.9M For Puerto Rico Bond and Fund Losses

UBS (UBS) must pay over $2.9M to investors Andres Ricardo Gomez and Ana Teresa Lopez-Gonzales for losses related to their investments in Puerto Rico securities. Mr. Ricardo, Ms. Lopez-Gonzales and their relatives filed an arbitration case with the Financial Industry Regulatory Authority (“FINRA”) claiming breach of fiduciary duty, fraud, breach of contract, negligence, unsuitability, misrepresentation and omission, overconcentration, and failure to supervise under FINRA rules and Puerto Rican law.

Mr. Ricardo’s and Ms. Lopez-Gonzales’ relatives resolved the securities fraud case for an undisclosed sum before the FINRA arbitration panel issued its ruling. The allegations are related to investments in Puerto Rico municipal bonds, UBS proprietary closed-end funds, and the use of Claimants’ investments as collateral to borrow money through credit lines. UBS Financial Services and UBS Financial Services Inc. of Puerto Rico denied all claims.

The Claimants had initially sought $10 million in compensatory damages and other appropriate relief, the cancellation of all loan balances, disgorgement of fees and commissions earned by UBS, pre- and post-award interest, legal fees, expenses, and other fees. Claimants also sought punitive damages.

In response, UBS sought to have the Puerto Rico bond fund case dismissed. In addition, UBS requested that the FINRA panel order Mr. Ricardo and one of the other claimants pay $500,000 in damages.

Continue reading "FINRA Orders UBS to Pay Investors Over $2.9M For Puerto Rico Bond and Fund Losses" »

August 31, 2015

11th Circuit Revives City of Miami’s Mortgage Fraud Lawsuits Against Wells Fargo, Citigroup, and Bank of America

The 11th U.S. Circuit Court of Appeals said that a lower court made a mistake when it threw out the city of Miami’s claims accusing Bank of America Corp. (BAC), Wells Fargo & Co. (WFC ), and Citigroup Inc. (C) of engaging in predatory mortgage lending to Hispanic and black borrowers. The Florida city brought its claims under the Fair Housing Act.

Miami claims that the three banks directed non-Caucasian borrowers toward more expensive loans that were frequently not affordable to them even if their credit was good. The city said that because of this “reverse redlining,” there were a lot of foreclosures, a rise in spending to fight blight, and lower property tax collections.

A U.S. district court judge threw out Miami’s mortgage lawsuits last year. Judge William Dimitrouleas claimed that the city did not have the standing to sue and the harm alleged was too remote from the conduct of the banks.

The 11th circuit, however, said that standard was too strict. It believes that the banks could have foreseen that there would be attendant harm from such alleged discriminatory practices.

Continue reading "11th Circuit Revives City of Miami’s Mortgage Fraud Lawsuits Against Wells Fargo, Citigroup, and Bank of America" »

August 28, 2015

SEC Charges J.P. Morgan Ex-Investment Bank Analyst and Friends with Insider Trading

The Securities and Exchange Commission is charging ex-J. P. Morgan Securities, LLC (JPMS) bank analyst Ashish Aggarwal with illegally tipping confidential information about firm clients in impending acquisitions and mergers involving technology companies to his friend Shahriyar Bolandian. Bolandian then purportedly used the information to trade in his own accounts and in the accounts of his sister and father, while also tipping his friend Kevan Sadigh so that he too could insider trade. Together, Bolandian and Sadigh allegedly made over $672,000 in illicit profits. The regulator is also charging them both with insider trading.

According to the SEC Complaint, Aggarwal misappropriated confidential information about two deals in which J.P. Morgan had served as an adviser. After notifying Bolandian, the latter and Sadigh purchased the same call options in two companies: PLX Technology and ExactTarget. The two men allegedly traded prior to the public announcement of PLX Technology Inc.’s intended acquisition by Integrated Device Technology Inc. in 2012 and ExactTarget’s acquisition by and PLX Technology in 2013.

Continue reading "SEC Charges J.P. Morgan Ex-Investment Bank Analyst and Friends with Insider Trading" »

August 16, 2015

UBS Puerto Rico Branch Manager Had Warned that Brokers Were Pushing Improper Loan Practices

According to Reuters, internal correspondence records show that in 2012, a former branch manager at UBS Puerto Rico (UBS) warned the Swiss banking giant’s officials that its brokers were encouraging customers to get involved in improper loan practices. In a number of emails, Carlos Capacete, who was a branch manager at the time, wrote to at least two bank officers noting his suspicions of misconduct.

Reuters says that in the documents it reviewed, Capacete told regional manager Doel Garcia that he had encouraged Mariela Torres, a UBS Puerto Rico compliance director, to look into suspect loans. In another email, Capacete followed up with his inquiry to see if the loans had been investigated for possible misuse involving the bank’s credit lines.

Then, in yet another email, Capacete documented what he knew about the loans, which he believed were fraudulent, explained how he discovered the purported wrongdoing, and noted his efforts to notify Torres about the alleged misconduct. Capacete also wrote that a UBS attorney had told him that the firm had conducted an audit and found that his suspicions were wrong.

Despite this alleged audit, late last year UBS reached a $5.2 million municipal bond settlement with Puerto Rico's Office of the Commissioner of Financial Institutions to resolve allegations of improper loan practices. The bank settled that case without denying or admitting to the charges. It did, however, consent to enhancing its supervision of several brokers whom regulators said may have steered clients toward improperly borrowing money to purchase more funds. UBS also terminated a broker for the same allegations and received an arbitration award of $2.5 million against it in an early case concerning the same broker.

Continue reading "UBS Puerto Rico Branch Manager Had Warned that Brokers Were Pushing Improper Loan Practices " »

August 13, 2015

Edward Jones to Pay $20M to Resolve SEC Allegations that It Overcharged for Muni Bond Sales

Edward D. Jones & Co., the brokerage firm subsidiary of Jones Financial Companies, has consented to pay $20 million to resolve U.S. Securities and Exchange Commission allegations accusing the firm of overcharging clients by at least $4.6 million on new municipal bond sales. The regulator contends that the brokerage firm offered bonds at a higher price than what securities laws require.

Underwriters are supposed to sell new bonds at an initial offering price that was negotiated with the bond issuer. The SEC claims that instead of offering the municipal bonds to customers at the worked out price, the firm allegedly brought the bonds into its own inventory and then later sold them at high prices. Also, said the Commission, in certain instances the bonds were offered to customers after they had already started to trade in the secondary market at higher prices than what was initially offered.

The regulator said that at the very least Edwards Jones was negligent with the overcharges and its behavior was “inconsistent” with the standards and written agreements that govern municipal underwriting. The SEC says it will continue its probe into the matter.

Continue reading "Edward Jones to Pay $20M to Resolve SEC Allegations that It Overcharged for Muni Bond Sales" »

July 30, 2015

Cetera Shutters J.P. Turner, Claims Move Is Not Part of Broader Firm Consolidation

Cetera Financial Group is shutting down one of its brokerage firms, J.P. Turner & Co., shortly after its purchase. Larry Roth, the independent financial network’s CEO, told InvestmentNews that the move is not part of a broader consolidation involving its different firms.

About half of J.P. Turner’s 300 investment advisers have been invited to work at Summit Brokerage Services Inc., which is also owned by Cetera. Roth has indicated the reason for the closing of J.P. Turner is so its advisers can more swiftly access the complete spectrum of support and services offered by Cetera’s network through business-to-business provider Pershing, LLC. J.P. Turner had worked with a different clearing firm as, reportedly, Pershing had refused to do business with J.P. Turner because of their checkered past.

According to Securities Lawyer and Shepherd Smith Edwards Partner Sam Edwards, “It is not surprising Pershing did not want to clear trades for J.P . Turner as the firm has long had a reputation among those in the industry, and especially attorneys representing customers, as one willing to take on brokers and allow trading that other firms would not permit. This has resulted in our firm representing many J.P. Turner clients over the years and those cases have been among some of the more egregious we have seen.”

Continue reading "Cetera Shutters J.P. Turner, Claims Move Is Not Part of Broader Firm Consolidation " »

July 27, 2015

UBS Warns Investors to Stay Away from Puerto Rico Bond Funds

In a complete turnaround, UBS AG (UBS) is now telling clients to step away from Puerto Rico bond funds. Reuters reports that in a recent letter, the firm’s Puerto Rico arm told clients that they would be contacted shortly regarding alternative investments.

Reasons cited for the warning is that the funds can no longer be used as loan collateral in the wake of the U.S. territory’s financial woes. Puerto Rico is currently $72 billion in debt. Concerns over its economy were not eased when Governor Alejandro García Padilla recently asked the island’s debt holders for help in postponing bond payments and restructuring the Commonwealth’s debt.

Reuters also reported that in the letter to UBS customers – issued on July 13 – UBS said the firm would lower the collateral value given to every Puerto Rico closed-end fund share to zero. However, noted the news agency, despite the declaration of zero value for the funds’ shares, the brokerage firm continues to list share prices on its website.

UBS Puerto Rico’s decision to reject the funds as collateral shows just how high risk the firm now views these investments. According to Sam Edwards, a partner in Shepherd, Smith, Edwards & Kantas, who is currently representing dozens of Puerto Rico investors, “UBS came up with the scheme to use the Closed-End Funds as collateral for loans from UBS Bank since they were not eligible for margin loans. It was that leverage against already internally leveraged losses that causes some of the worst losses on the island. UBS is now pulling the plug on its own plan and effectively admitting this was a faulty idea and not only too risky for investors, but now, too risky for UBS, who designed the plan in the first place.”

Once again, the evidence appears to support that UBS is protecting itself at the expense of its customers.

Continue reading "UBS Warns Investors to Stay Away from Puerto Rico Bond Funds" »

July 24, 2015

SEC Probes Whether Mutual Fund Managers Are Charging Investors Undisclosed Fees

The Securities and Exchange Commission is looking into whether Franklin Templeton, Oppenheimer Funds (OPY), J.P. Morgan Chase & Co. (JPM), and other mutual fund managers are charging investors for fund fees that have not been fully disclosed. While money managers are allowed to use some of investors’ money to pay compensation to the brokers who sell a fund's shares, as well as for certain marketing purposes, the regulator wants to know whether firms are exceeding the allowed limits.

The Commission is trying to find out whether mutual fund companies have come up with ways to make extra payments to brokers by using investor assets to cover certain services, such as the consolidation of client trading records. The agency is worried that proper disclosure of these added fees are not being made to investors. The SEC is also wondering if brokers are more inclined to recommend funds that provide such additional payments, compelling them to prioritize profit over funds.

Fund companies have said that they do properly disclose fees for marketing. Oppenheimer, which is one of the companies that the SEC has investigated over this issue, has said that it doesn't bill mutual fund clients for recordkeeping costs but that the money comes from the firm.

Continue reading "SEC Probes Whether Mutual Fund Managers Are Charging Investors Undisclosed Fees" »

July 11, 2015

Massachusetts Regulator Charges Securities America Over Bait and Switch Ads By Broker Accused of Targeting Senior Investors

Massachusetts Secretary of the Commonwealth William Galvin is charging Securities America with inadequate supervision of a broker who is accused of using a “grossly deceptive” radio ad campaign to target older investors. The state regulator said that the financial firm shouldn’t have approved the spots that Barry Armstrong ran on his AM radio show. His show, which airs on WRKO-AM, is syndicated on different stations.

The broker purportedly ran ads asking listeners to call for information related to Alzheimer’s Disease when what Armstrong really was doing was collecting their contact information so he could offer to sell them financial advice. Galvin’s office said that the broker engaged in ‘bait and switch’ by falsely advertising one service when he was really selling another type of service.

The regulator contends that Securities America failed to identify or prevent Armstrong’s unethical conduct by neglecting to ask even one question about the content of the ads or attendant mailing materials. Now, the state wants a censure, a cease-and-desist order, and a fine imposed against the firm.

Continue reading "Massachusetts Regulator Charges Securities America Over Bait and Switch Ads By Broker Accused of Targeting Senior Investors " »

June 22, 2015

Investor Want Wells Fargo Advisers to Pay $100K in Damages Over F-Squared Investment Losses

A client of Wells Fargo Advisors (WFC) is looking to recover at least $100,000 in damages for losses he sustained from investing with F-Squared Investments Inc. The arbitration case comes six months after F-Squared consented to pay $35 million to resolve Securities and Exchange Commission charges accusing the asset manager of making false claims about its flagship investment product’s performance. The 68-year-old widower’s claim will test whether investors can pursue broker-dealers for selling F-Squared products.

The claimant, a moderately conservative investor who was looking for moderately conservative growth for his retirement account assets, began working with a Wells Fargo financial adviser in 2011. The brokerage firm made F-Squared managed-accounts available to advisors in 2013.

According to InvestmentNews, The investor’s advisor put about $900K of the client’s money—most of his savings, says his attorney—in products managed by two ETF strategists. Over 50% of the money went into F-Squared’s AlphaSector Allocator Select. Meantime, the investor said it paid Wells Fargo about $19,000 in fees for recommending the products. He believes that the firm had a conflict when it recommended investments because they came with such high commissions. Also, the fees erased potential capital gains for the claimant.

Continue reading " Investor Want Wells Fargo Advisers to Pay $100K in Damages Over F-Squared Investment Losses" »

June 15, 2015

FINRA Pursues Broker For Allegedly Trying to Bilk Elderly Investor with Alzheimer’s of $1.8M

The Financial Industry Regulatory Authority Inc. has filed an elder financial fraud case against broker John Waszolek, who worked for UBS Wealth Management (UBS) at the time of the allegations. According to the self-regulatory organization, in 2009, Waszkolek took advantage of an 81-year-old client when he had her appoint him as a beneficiary of her trust even though she lacked the “testamentary capacity” to make such decisions and would not have been able to protect herself from exploitation. Testamentary capacity refers to a person’s mental and legal ability to make or modify a will.

The elderly widow lived by herself and had been a client of Waszolek since 1982. However, contends FINRA, it wasn’t until 2008 as her health worsened that the broker allegedly began to go above and beyond his professional obligation to her. He was the one that purportedly took her to see the doctor, who diagnosed her with Alzheimer’s. The regulator also says that he met with an estate planning lawyer so that he could be appointed as his client’s agent and given power of attorney. He wanted her trust modified so that he would be named the residual beneficiary.

When the estate planning lawyer refused because the elderly women lacked testamentary capacity, Waszolek purportedly suggested that his client see another lawyer. The amendment made to her trust would cause some $1.3 million that was supposed to be divided among four charities to go to the broker instead. That figure would eventually go up to $1.8 million.

Continue reading "FINRA Pursues Broker For Allegedly Trying to Bilk Elderly Investor with Alzheimer’s of $1.8M" »

May 14, 2015

UBS Ordered to Pay Retired Investor $200,000 For Puerto Rico Bond Fund Losses

A Financial Industry Regulatory Authority (“FINRA”) panel has ordered UBS Financial Services, Inc. and UBS Financial Services of Puerto Rico (collectively “UBS”) to pay an investor $200,000 for losses she sustained by investing in UBS’s Puerto Rico closed-end bond funds. This is the first known ruling from a FINRA arbitration panel in the hundreds of municipal bond fraud lawsuits filed by investors over the last few years.

The investor, Yolanda Bauza, invested money she obtained in a car accident settlement. In her Puerto Rico bond fraud case, Bauza alleged misrepresentations, securities fraud, and other wrongdoing. In addition to the $200,000 award, the arbitrators denied the firm’s request to remove information about the case from the public records of David Lugo and Carlos Gonzalez, two of the brokers who advised Bauza.

According to Sam Edwards, a partner with Shepherd, Smith, Edwards & Kantas, who is representing a number of Puerto Rico bond fund investors, “We are very pleased that FINRA’s arbitrators recognized what those of us representing the many thousands of investors in Puerto Rico and abroad have known for almost two years: UBS’s Puerto Rico bond funds were highly conflicted, very risky and completely misrepresented to investors. They were suitable for almost no investors. As a result, those who invested in these bond funds, like Ms. Bauza, should be fairly compensated.”

The slew of Puerto Rico bond cases, which come in the wake of a number of funds losing up to two-thirds of their value between 2011 and 2013, have been weighing on UBS. This is the first award. In addition to UBS’s woes with the bond funds and local Puerto Rico bonds, the territory is now contending with $73 billion in debt, which, it is estimated, Puerto Rico cannot afford to repay.

Investors, including those who should have never invested in the municipal bonds because their portfolios were never equipped to handle the risks and had no need for tax-free income, have sustained huge losses. UBS Puerto Rico brokers, in particular, have been singled out for the way they made inappropriate investment recommendations to customers, including using loans against the bond funds to buy more funds.

Specifically, some investors have complained that UBS Puerto Rico brokers, including David Lugo, convinced them to borrow money so they could invest even more cash in the bond funds. Many of these investors are retirees, like Ms. Bauza, who have lost their entire savings because they followed UBS’ advice.

In 2012, the U.S. Securities and Exchange Commission filed charges against UBS. It accused the firm of concealing that there was a liquidity crisis, making misleading statements to investors, and hiding control of the secondary market for nearly two dozen proprietary closed-end funds. The regulator also filed charges against ex-chief executive Miguel A. Ferrer and capital markets head Carlos J. Ortiz. Without denying or agreeing to the charges, UBS settled with the SEC for $26.6 million.

In Puerto Rico and the U.S., Shepherd Smith Edwards and Kantas, LTD LLP is helping investor pursue their municipal bond fraud claims in arbitration. Please contact our Puerto Rico bond fraud attorneys today so we can help you explore your legal options. We also represent clients who purchased these municipal bonds through Banco Santander (SAN), Banco Popular, and other brokerage firms.

UBS must pay $200,000 to Puerto Rico fund investor, Reuters, May 13, 2015

More Blog Posts:
Puerto Rico’s General Obligation Rating is Downgraded to CCC+, Stockbroker Fraud Blog, April 28, 2015

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

Killeen Man Accused of Texas Securities Fraud Targeting Military, Stockbroker Fraud Blog, April 23, 2015

May 5, 2015

City of Los Angeles, CA Sues Wells Fargo for Fraud

The city of Los Angeles has filed a civil complaint against Wells Fargo Bank (WFC). The lawsuit accuses the bank of encouraging employees to take part in conduct that was illegal and fraudulent, including setting up unauthorized accounts for customers, charging them unwarranted fees, and ruining their credit.

The city is looking to get a court order stopping the alleged wrongdoing. It wants penalties for every violation, as well as restitution for customers that were hurt. The case is applicable to residents of Los Angeles County and perhaps even customers outside that area.

According to the complaint, employees purportedly misused the confidential data of customers and neglected to close unauthorized accounts when the latter complained. Certain employees even allegedly raided customer accounts for money to set up additional accounts. When unwarranted fees went unpaid, the bank purportedly put customers into collections because of unauthorized withdrawals and damaging data on their credit cards because of these unwarranted fees.

Such actions, contends the city, occurred because the bank was pressuring employees to generate sales. Customers sustained financial harm as a result, while Wells Fargo made a profit and employees were blamed.

Meantime, the California-based bank has pinned these problems on a few rogue employees, whom it says it fired or disciplined. However, the city of LA believes that Wells Fargo has made minimal efforts at making sure such abuses stop. For example, contends the complaint, when the bank took action against an employee for sales conduct that was unethical, it didn't notify customers of the breach, refund the fees that were owed to them, or offer remedies for other injuries its staff may have caused.

The Los Angeles Times, in 2013, investigated these allegations against Wells Fargo, which is known for cross-selling financial products to customers. The paper's probe echoed similar claims as this lawsuit, with many statements made coming from current and former Wells Fargo employees who worked at different branches.

Bank workers were purportedly coached on how to inflate sales figures. Employees set up duplicate accounts without letting customers know. Pre-approved credit cards were ordered without customer consent. Complaints about the never requested cards were dismissed as having been generate by computer glitch or "mistake," with cards accidentally issued to the wrong person with a similar name as the customer who’d supposedly placed the order. According to employees, Wells Fargo expected staff to sell at least four financial products to the majority of their customers, with some shooting to sell eight per household.

Since the LA Times published its findings from the probe, dozens of Wells Fargo employees and customers have come forward to report similar issues. Complaints are coming in even today.

Shepherd Smith Edwards and Kantas, LTD LLP represents investors in recovering losses they suffered because of securities fraud.

Wells Fargo Accused of Fraudulent Behavior, Taking Advantage of Customers, ABC News, May 5, 2015

Wells Fargo's pressure-cooker sales culture comes at a cost, Los Angeles Times, December 21, 2013

More Blog Posts:
RBC Capital Markets Must Pay $1M Fine and $434K Restitution to Customers Over Unsuitable Reverse Convertible Sales, Stockbroker Fraud Blog, April 30, 2015

FINRA and SEC Unveil Report on Senior Investors, Cite Concerns About Unsuitable Recommendations, Stockbroker Fraud Blog, April 27, 2015

FINRA Fines J.P. Turner, LaSalle St. Securities, and H. Beck For Report Supervision Lapses, Institutional Investor Securities Blog, March 30, 2015

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

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