Securities America :: Stock Broker Fraud Blog

Securities America, Inc. agreed to a $375,000 fine to settle charges by the NASD that it received improperly directed mutual fund commissions on behalf of one of its brokers, failed to supervise and failed to disclose the arrangements to the affected mutual fund owners.

The NASD said that this situation, in which a mutual fund company directed brokerage fees specifically for the benefit of a lone broker, is the first known case of its kind. NASD rules prohibit registered firms from allowing sales personnel to participate in directed brokerage arrangements. NASD fair dealing regulations also require disclosure to clients of such fees and other compensation received through arrangements involving their accounts.

A directed brokerage arrangement is one in which a client, such as a pension fund, directs a planner to use a certain broker-dealer for trade executions. In return for the commissions received on the transactions, the broker-dealer provides other services to the advisor or these can be rebated to the clients. The Securities America broker arranged for such commissions from union-sponsored retirement plan clients to be directed to his firm for his own benefit.

In its sanctioning order, the NASD said the broker negotiated an arrangement with a mutual fund company to have thousands of dollars of brokerage commissions directed to him every month and that Securities America approved the arrangement for almost two years while it received $420,000 in directed commissions from the fund company for the broker’s benefit, of which $262,000 was paid to the broker.

Shepherd Smith and Edwards represents clients that are the victims of securities fraud. If you have lost money in because of misconduct by someone in the securities industry, hiring an experienced law firm can greatly increase the chances of recovering your losses. Contact us to arrange a free consultation with one of our attorneys.

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Posted In: Mutual Funds , NASD Enforcement , Securities America

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The NASD fined Omaha, Neb.-based Securities America Inc. a total of over $15 million for luring 32 long-term employees of Exxon Corporation into early retirement using false promises of high returns. The NASD stated that supervisors at Securities America largely ignored such actions by its registered representative who has been charged with violating securities regulations.

The NASD is focusing much of its enforcement resources on brokers and investment firms specializing in retirement planning services. The NASD's chief counsel of the New Orleans region said retirement-age workers are extremely vulnerable to retirement planning investment scams. In many cases, the workers have little financial sophistication, but huge portfolios of assets that must be invested for post-employment purposes.

Employees of large companies such as Exxon are tempting targets for unscrupulous brokers touting inflated predictions of earnings to generate huge fees for the brokers. The target employees are able to "rollover" their retirement accounts, sometimes worth over a million dollars, to banks or brokerage firms. Often these workers hive little or no experience in investing and must rely entirely upon an investment advisor. This problem will grow as the baby boom generation retires.

The NASD counsel described how hungry salespersons go into companies to pitch themselves, their firms and claims of superior returns on retirement assets. They use free lunches and dinners to attract candidates aiming to get the trust of long-time workers, enticing some to even retire early. While many of these salespersons have proper motives and operate appropriately, he added, but "clearly, there is potential for abuse."

The NASD spokesman indicated that it will focus its efforts to address incompetence, unsuitability, over-concentration, illiquidity, abusive fees, hyped predictions, misleading written and oral representations and omissions, and failures to supervise. He specifically discussed abusive practices using annuities and more recently invented ETF's (exchange traded funds).

While the NASD claims it is employing heightened scrutiny to protect retires, abuses are likely to continue. Enforcement of NASD regulation is mostly reactive and often inadequate. It currently has oversight responsibilities over some 650,000 registered representatives at over 5,000 licensed brokerage firms. The task will soon grow because the New York Stock Exchange is divesting itself of regulatory duties over its membership, which includes most large large brokerage firms.

NASD member firms collectively hold trillions of dollars in assets and receive hundreds of billions in revenues. Critics point out that the millions of dollars in fines of its members by the NASD adequately deter wrongdoing in the industry.

The law firm of Shepherd Smith and Edwards represents companies, pension funds and individual investors of all types to recover losses. Retirees and senior citizens have a higher rate of sucess in recovering than other investors. To learn whether our firm may be able to assist your pension fund, you, a relative or a friend contact us to arrange a free confidential consultation with an attorney.

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Posted In: NASD Enforcement , Securities America , Senior Investors

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Stock Broker Fraud Blog

Published by Houston Securities Fraud Lawyers Shepherd Smith & Edwards

Securities America Fined $375,000 Over Secret Commissions Directed to Its Broker

Securities America Fined $15 Million for Luring Retirees Using Exaggerated Promises

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