March 19, 2015

Over $44M Lost in Alleged Investment Adviser Scam Involving Total Wealth Management

According to a court-appointed receiver, investors who were the victim of a financial scam allegedly run by Total Wealth Management founder Jacob Cooper lost more than $44 million of assets. The investors are suing Cooper and other principals of the investment adviser.

Cooper pursued investors using “Uncommon Wealth,” his weekly radio show in which he’d discuss retirement planning. According to InvestmentNews, He capitalized on his past history as an Eagle Scout, as well as he was a Mormon and his dad had been in the U.S. Marine Corps, to grow a more than $100 million business with over 600 clients.

Cooper and other firm principals allegedly pooled about 6% of the $100 million and placed them in the Altus Funds, which are proprietary investment funds. These funds then invested in unsuccessful ventures, as well as in Private Placement Capital Notes—the latter did pay interest until two years ago.

After investors filed securities fraud case to get their money back, Total Wealth Management allegedly blocked fund access and Cooper told clients that if they wanted to speak with him they would need to sign a waver that indemnified him. He then upped his clients’ fees, charging over $300,000—money he is accused of using to pay for the lawyer defending him against both the complaints and the U.S. Securities and Exchange Commission. He also purportedly used $150,000 of client funds to cover a settlement he owed the SEC.

Now, the receiver is saying that most of that money appears to have been put into funds and private placements that were insolvent or losing money but offered revenue sharing agreements to Total Wealth Management. Cooper also is accused of taking money for his personal spending. To date, only $2 million has been recovered.

Contact our securities fraud law firm today to request your free case assessment.

Client losses total $44 million in 'Madoff of Main Street' case, InvestmentNews, March 19, 2015

Read the SEC Order (PDF)


More Blog Posts:

Brookeville Capital Partners Ordered by FINRA to Pay $1.5M for Private Placement Fraud, Stockbroker Fraud Blog, March 12, 2015

Bank of New York Mellon Corp. Settles Currency Fraud Lawsuits Involving Pension Funds for $714M, Institutional Investor Securities Blog, March 19, 2015

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

March 17, 2015

Financial Fraud Victims’ Suffering is More Than Just Monetary, Affirms FINRA Report

According to “Non-Traditional Costs of Financial Fraud,” which is a new research report by the FINRA Investor Education Foundation, almost two-thirds of financial fraud victims who reported that they’d been bilked experienced at least one non-financial consequence to a serious degree. The findings show other ways in which this type of crime takes a toll on its targets.

Some 600 fraud victims took the survey online. Respondents were at least 25 years of age. Among the findings:

• The most commonly named non-financial fraud costs included serious stress, anxiety, sleeping problems, and depression.

• Other negative emotional reactions included anger, regret, betrayal, feeling like a victim, embarrassment, sadness, shame, helplessness, guilt, and confusion.

• There may have been fees, interest rates, legal fees, bounced checks and resulting fees from losing money because of the fraud.

• 9% of respondents reported bankruptcy.

• Almost half of respondents experienced self-blame. Many felt that they shouldn’t have been too trusting.

• The larger the amount of money stolen, the more non-financial costs were experienced.

• Victims who were confused about the fraud’s details were more likely to suffer from non-financial consequences.

• Just 15% of respondents had a significant amount of interaction with the fraudster.

• The smaller the financial loss, the less interaction there was with the alleged perpetrator.

• Respondents with higher incomes (at least $75K) were more likely to lose more money than those with lower incomes.

• The age of the respondent wasn’t a factor in terms of how much someone might lose from financial fraud.

• An introduction from a family friend or relative was the most common way cited for how the victim became acquainted with the fraudster.

• 68% of respondents told family or friends about the fraud.

• Just 35% of respondents told authorities.

• 48% of those that did not report the fraud said that doing so would not have changed the outcome.

Other reasons for not reporting fraud: embarrassment, not sure what to do, lack of time, and other reasons.

Some of the financial fraud incidents involved:

• Email solicitation from a stranger outside the US asking for a fee or deposit.
• A notification that the target had won a lottery or prize but needed to pay a fee to claim it.
• Learning about an investment through a free lunch seminar.
• Notification of grant eligibility but that a fee was required.
• A commission offered for referring people an investment.
• Phone solicitation.
• Notice of an unclaimed inheritance.


At Shepherd Smith Edwards and Kantas, LTD LLP, we understand that the toll of financial fraud is more than just monetary. We are here to help investors get their losses back. Your initial case consultation with our investment fraud lawyers is free. We can help you explore your legal options.

Non-Traditional Costs of Financial Fraud,

FINRA Foundation Research Reveals Fraud Victims Vulnerable to Severe Stress
, Anxiety and Depression, FINRA March 9, 2015


More Blog Posts:

Ex-Green Bay Packers’ Bruce Wilkerson Awarded $2M Against Resource Horizons Group Over Ponzi Scam Involving Rogue Broker, Stockbroker Fraud Blog, March 16, 2015

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

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

March 16, 2015

Ex-Green Bay Packers’ Bruce Wilkerson Awarded $2M Against Resource Horizons Group Over Ponzi Scam Involving Rogue Broker

Bruce Wilkerson, the former tackle of the Green Bay Packer, has been awarded $2 million against Resource Horizons Group. The ex-NFL player lost $650,000 in an alleged Ponzi scam run by Robert Gist, an alleged rogue broker at the Georgia-based financial firm.

Unfortunately for Wilkerson the former pro football player is unlike to get his money back, which was a substantial chunk of his net worth. The now defunct broker-dealer closed shop in November after it was slapped with more $4 million in judgments in two arbitration awards that it could not afford to pay. The Financial Industry Regulatory Authority has suspended the firm for not complying with the award, as well as canceled its license.

The arbitration awards are also linked to Gist, who in 2013 consented to pay $5.4 million to resolve Securities and Exchange Commission charges accusing him of running the Ponzi scam and converting the money for personal use over a 10-year period. At least 32 customers were allegedly bilked.

Gist is accused of using his Gist, Kennedy & Associates Inc., an entity that is not registered nor is it affiliated with Resource Horizons, to make false customer statements. The firm hired him in 2001 even though he already had customer disputes on record.

The $4 million FINRA arbitration awards were also against Resource Horizons executives David Miller and Kelly Miller. They are accused of failing to supervise Gist, not recognizing warning signs that something was amiss, as well as of negligence. The couple was held jointly liable with the firm, and they have since filed for bankruptcy protection. According to InvestmentNews, Miller is now with Kovack Securities Inc.

Unfortunately, professional athletes are among those targeted for securities fraud. Our securities fraud law firm represented many who have lost millions of dollars because their investments were improperly handled, they received bad investment advice, or were blatantly defrauded. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Ex-NFL player left out in the cold after $2 million award, InvestmentNews, March 16, 2015


More Blog Posts:
Resource Horizons Group’s Future Hangs in Balance Following $4M FINRA Arbitration Award, Stockbroker Fraud Blog, September 25, 2014

Sun Antonio Spurs Star Tim Duncan Files Texas Investment Adviser Fraud Case, Stockbroker Fraud Blog, January 31, 2015

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

March 13, 2015

Consumer Groups Accuse SEC of Not Protecting Retail Investors and Poorly Regulating Investment Advisers

A letter to the SEC from consumer groups claims that the agency is not meeting its obligation to make sure that retail investors are getting the protections they need. The Consumer Federation of America, Americans for Financial Reform, Fund Democracy, Consumer Action, Public Citizen, and AFL-CIO gave an outline of how they want the regulator to enhance financial adviser regulation, which they believe could be more robust.

They are calling on the Commission to execute “concrete steps” to up the standards bar for brokers when it comes to giving investment advice. For right now, brokers only have to recommend investments that in general are a fit for the clients’ investment goals and risk tolerance level, even as investment advisers must abide by a fiduciary obligation.

The letter from the groups also talks about improving financial adviser disclosure in regards to compensation and conflicts, reforming the sharing of revenue, placing limits to mandatory arbitration for disputes between investors and their financial representatives, strengthening regulations for high-risk financial products, and enhancing required disclosures from financial advisers to investors about financial products.

The Dodd-Frank Act Wall Street Reform and Consumer Protection Act authorized the SEC to put into effect one fiduciary standard that would be applicable for both investment and retail advice, obligating every financial adviser to make sure their actions take clients’ best interests into account. This is a mandate that the agency has yet to act upon, even as the U.S. Labor Department is preparing to re-propose a fiduciary duty rule involving advice for retirement accounts.

However, the regulator has had a lot to deal with in regards to rulemaking ever since Dodd-Frank went to effect, making certain mandates that the agency has been required to execute. Now, the consumer groups want the Commission to focus once more on retail investors to make sure they are properly protected.

The reason for a push for a fiduciary rule for brokers is that there is concern that because these representatives get compensation from mutual funds and other companies for pushing their products, investors’ best interests may not be getting served. According to White House economists, reports Bloomberg, investors may be losing up to $17 billion annually because they invested in products that their brokers recommended.

A lot of Republicans and business groups claim that the SEC, not the DOL, should be the one to come up with the regulations first. They believe that rules by the Labor Department would only make the situation confusing while limiting a brokers’ ability to work with smaller investor clients.

Please contact our broker fraud lawyers today. Shepherd Smith Edwards and Kantas is here to help investors and their families recoup their securities fraud losses.

Read the Letter (PDF)

A Split Over Protecting Investors, Bloomberg, March 12, 2015

March 12, 2015

Brookeville Capital Partners Ordered by FINRA to Pay $1.5M for Private Placement Fraud

The Financial Industry Regulatory Authority said that Brookeville Capital Partners must pay over $1 million to victims and a $500,000 fine for securities fraud related to private placement offering sales. The self-regulatory organization has barred the firm’s president, Anthony Lodati, from the securities industry.

According to FINRA, from 1/11 to 10/11 Brookeville and Lodati bilked customers in the sale of Wilshire Capital Partners Group, LLC, a private placement offering in which investors were to have an indirect interest in pre-IPO offering shares of Fisker Automotive. The SRO said that while the firm was soliciting customers to invest in the private placement offering, Lodati discovered that John Mattera, a person with a regulatory and criminal background, made transactions for Wilshire as its CEO and managing director.

Rather than disclosing that the Securities and Exchange Commission had sanctioned Mattera in 2010 for securities fraud, and also that he’d been convicted of a felony in the state of Florida in 2003, the firm and Lodati purportedly withheld this information, as well as information about Mattera’s connection to Wilshire, on purpose and kept soliciting investors. Brookeville sold more than $1 million of interests in the Wilshire offering to 29 customers and was paid over $104,000 in commissions.

In 2011, the Commission filed a fraud case against Mattera and other individuals over a scam that involved Wilshire and his bilking of investors of $13 million. Mattera was also convicted in criminal court and ordered to serve prison time.

The regulator was able to get a court order to freeze Wilshire’s assets, including the interests belonging to Brookeville customers. These customers lost all of their investment.

By settling, Brookeville and Lodati are not denying or admitting to the SEC charges.

At Shepherd Smith Edwards and Kantas, LTD LLP, our securities lawyers help investors recover their fraud losses. Contact our private placement fraud law firm today.

Read the FINRA Action

FINRA Sanctions Brookville Capital Partners $1.5 Million and Bars President Anthony Lodati for Fraud, FINRA, March 12, 2015


More Blog Posts:
Wealthfront CEO Claims Schwab is Fooling Investors Over “Free” Automated Investment Platform, Stockbroker Fraud Blog, March 9, 2015

Appellate Court Says Charles Schwab & Co. Must Face Financial Advisory Firm’s Lawsuit Over Mortgage Debt Involving Bond Funds, Institutional Investor Securities Blog, March 9, 2015

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

March 7, 2015

District Court Imposes $26M Commodity Pool Fraud Penalty

The U.S. District Court for the Southern District of New York says that Mark Evan Bloom and his North Hills Management, LLC (NHM) must together pay a $26 million civil penalty for running North Hills LP, a fraudulent commodity pool, and misappropriating customer monies.

It was in June 2010 that the court submitted a Consent Order of permanent injunction against the two defendants. The court said that both Bloom and his firm misappropriated around $13 million from North Hills, which they ran for at least seven years. During that period, Bloom kept up a fancy lifestyle, even buying a more than $5 million apartment in Manhattan.

Bloom and NHM were accused of hiding their misappropriation, making misrepresentations and material omissions to pool participants, and issuing false statements about North Hills. A permanent injunction, as well as permanent trading, registration, and solicitation bans were imposed.

Less than a year before the order was issued, Bloom was charged in a parallel criminal case on allegations not unlike those filed by the U.S. Commodity Futures Trading Commission. The regulator charged Bloom and North Hills Management with misappropriation from North Hills LP, as well as bilking participants in relation to distributions issued in the fund’s name in a 2005 anti-fraud action brought against the Philadelphia Alternative Asset Management Company (PAAM) and Paul Eustace.

Bloom purportedly failed to notify said participants that he was paid $1.6 million in referral fees for recommending that prospective investors consider PAAM. He’d also invested about $17 million of the North Hills Fund’s assets in a risky commodity futures and options fund run by PAAM.

Meantime, in the criminal case, Bloom, who pleaded guilty to the criminal charges, is waiting to hear his sentence. He will also have to pay investors restitution under the terms of that case.

In another and unrelated commodity pool fraud case, the U.S. District Court for the Western District of Michigan has put out an emergency order that freezes and preserves the remaining assets controlled by Jerry Stauffer.

The CFTC is accusing Stauffer of fraudulently soliciting at least $868K from investor to trade foreign exchange in a commodity pool. He purportedly guaranteed a monthly return according to profits to be earned from forex trading. Instead, false account statements boasting huge profits were generated while Stauffer took a chunk of the money for his own spending. He also allegedly ran the commodity pool illegally.

Read the CFTC Complaint Against Bloom and North Hills Management (PDF)

Hedge Fund Trader Paul Eustace and Philadelphia Alternative Asset Management Co. Ordered to Pay More Than $279 Million to Defrauded Customers and More than $20 Million in Civil Monetary Penalties in CFTC Action, CFTC, August 19, 2008

The complaint against Stauffer (PDF)


More Blog Posts:

Money Manager Paul Greenwood Gets 10 Years in Prison for $1.3B Investment Fraud, Institutional Investor Securities Blog, December 4, 2014

CFTC, FINRA, and SEC Fight Investor Fraud Together, Stockbroker Fraud Blog, December 5, 2014

CFTC Notifies Justice Department of Criminal Rate Rigging, Looks at Possible Swaps Loophole, Institutional Investor Fraud, September 9, 2014

March 6, 2015

Texas-Based Broker-Dealer Faces SEC Charges Over Supervisory and Customer Protection Violations

The Securities and Exchange Commission is charging H.D. Vest Investment Securities with violating customer protection rules. The regulator contends that the Texas-based broker-dealer did not adequately supervise registered representatives that are accused of misappropriating customer monies.

H.D. Vest will pay a penalty to settle the charges. It has consented to get an independent compliance consultant that will help the firm enhance its supervisory controls.

The SEC’s order, which institutes a settled administrative proceeding, said that the firm did not have proper procedures and policies to oversee the external business activities of representatives. This allowed some of them to use outside businesses to bilk the brokerage firm’s customers. Some even deposited or moved customer brokerage funds into these external business accounts.

The Commission contends that the Texas-based brokerage firm did not abide by customer protection rules. The rules required H.D. Vest to conduct certain calculations and, if needed, place monies in a reserve account in case customers are hurt by misconduct. The firm did not make these calculations nor did it keep a reserve account. The SEC also said that the broker-dealer did not have the adequate supervisory controls that would have allowed it to track the movement of customer funds to the outside businesses run by registered representatives.

Last month, an ex-H.D. Vest broker was arrested and charged with wire fraud. Lewis Joseph Hunter allegedly contacted five elderly persons—they were his clients while he was at the firm— after he had already left the broker-dealer. He allegedly persuaded them to put their money in what ended up proving to be worthless stocks. They gave him some $661,500 to invest. He is accused of persuading one investor to let him transfer $150,000 from his account at HD Vest to an account that he controlled.

Hunter purportedly gave them investment advise, notified the individuals that he was using their money to buy securities, and gave them stock certificates to back up his statements. According to a federal prosecutor, Hunter was, in fact, using the money for personal enrichment, to cover his personal expenses, and pay back other investors who had become suspicious and demanded their funds back.

The SEC has already ordered Hunter to cease and desist from activities related to investments. The agency told him to pay a $150,000 civil penalty and $296,000 in restitution.

Our Houston securities fraud lawyers are here to help investors get their money back. We have helped thousands of individual and institutional investors recoup their funds, representing clients in arbitration and the courts. Contact our Texas securities law firm today. Your initial consultation with Shepherd Smith Edwards and Kantas, LTD LLP is a free, no obligation case assessment.

Read the SEC Order (PDF)


More Blog Posts:
Texas Wyly Brothers Must Pay SEC $299.4M for Securities Fraud, Stockbroker Fraud Blog, February 28, 2015

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

DOJ Gets Ready to Wrap Mortgage Bond Case Against Standard & Poor’s, Probes Moody’s, Institutional Investor Securities Blog, January 31, 2015

March 5, 2015

Doral Bank In Puerto Rico Fails

The Federal Deposit Insurance Corp. announced that The Office of the Commissioner of Financial Institutions of Puerto Rico has shut down Doral Bank in San Juan. The FDIC is now the bank’s receiver. Many investors have lost money through the Puerto Rico Conservation Trust Fund.

Banco Popular de Puerto Rico has now purchased $3.25 billion of Doral’s assets to acquire the defunct bank’s operations, including its deposits. A day after Doral shuttered its doors, 26 of its former branches reopened. Eight of them are now run by Banco Popular (OTCMKTS: BPESY), which resold the other 18 branches and their deposits to FirstBank Puerto Rico, Banco Popular North America, and Centennial Bank. The latter two now run Doral’s U.S. branches.

Doral Bank had approximately $5.9 billion in overall assets and $4.1 billion in deposits ending in 2014. Regulators determined that it was “critically under-capitalized.” After the FDIC notified the bank that it wouldn’t be able to use a $229 million tax refund for its Tier 1 capital, it was unable to raise more capital.

On Friday, Doral’s shares dropped 46% after the FDIC released information of the bank’s shuttering by accident before stock markets had closed.

Banco Popular purchased $3.25 billion of Doral assets, paying a 1.49% premium to the FDIC for the bank deposits. The FDIC also arrived at two other agreements, allowing it to sell $1.3 billion of the assets to other parties. The rest of the assets will be kept for disposition later.

Fitch Ratings has since downgraded Doral Bank’s long-term Issuer Default Rating (IDR) from ‘C’ to ‘D’ in the wake of the shutdown/receivership news. It is giving the bank a ‘F’ Viability Rating, which indicates that regulatory intervention was involved.

Doral Financial Corp. (DRL), which is Doral Bank’s parent company, got a ‘D’ rating, which is also a downgrade. Fitch thinks Doral Financial will default or file for bankruptcy soon since its ability to meet its financial duties has been hurt by the bank’s seizure.

Our Puerto Rico investment fraud lawyers represent investors on the mainland and the islands who have sustained losses from Puerto Rico municipal bonds. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Doral Bank’s Struggles End, CFO, March 2, 2015

The Big Winners in Doral's Failure, The American Banker, March 5, 2015

The Federal Deposit Insurance Corp.

The Office of the Commissioner of Financial Institutions of Puerto Rico


More Blog Posts:
UBS Financial Puerto Rico’s Chairman Told Brokers to Sell More Bond Funds in 2011, Stockbroker Fraud Blog, February 7, 2015

Texas Wyly Brothers Must Pay SEC $299.4M for Securities Fraud, Stockbroker Fraud Blog, February 28, 2015

SEC Examines The Way Companies Deal with Whistleblowers, Institutional Investor Securities Blog, February 28, 2015

February 28, 2015

Texas Wyly Brothers Must Pay SEC $299.4M for Securities Fraud

Sam Wyly and his late brother Charles Wyly’s estate must pay $299.4 million for committing securities fraud. The final judgment comes months after a jury found them civilly liable.

The SEC sued the Texas billionaire brothers in 2010. The regulator accused them of making $553 million in undisclosed profits when they traded in four companies that used trusts in the Isle of Man. The companies included Scottish Annuity & Life Holdings Ltd., Sterling Commerce Inc., Michaels Stores Inc., and Sterling Software Inc.

The SEC contends that the Wylys established the complex trust system so they could make untaxed profits from concealed trades in companies that they controlled. The scam purportedly occurred over a period lasting a decade.

Charles Wyly died in 2011. The SEC is now going after his estate.

In the final judgment, U.S. District Judge Shira Scheindlin ordered Sam to pay $198.1 million in disgorged gains, in addition to interest. Charles’ estate must pay $101.2 million. The ruling could lead to an appeal in the wake of Sam Wyly’s bankruptcy case. He filed for Chapter 11 protection last year.

In a related ruling, Scheindlin found that the Wylys were entitled to receive an offset for amounts due to the IRS based on sums paid to the Commission.

Our Texas securities fraud lawyers represent investors with claims against brokers, investment advisers, and financial firms. Contact Shepherd Smith Edwards and Kantas, LTD LLP today. Your initial case consultation with our stockbroker fraud law firm is free.

Texas Wyly brothers must pay $299 million in SEC fraud case: judge
, Reuters, February 26, 2015

Wyly Brothers Ordered to Give up $299 Million in Fraud Suit
, AP/ABC News, February 27, 2015


More Blog Posts:

Jury Says Wyly Brothers From Texas Committed Fraud, Stockbroker Fraud Blog, May 14, 2014

Texas’ Wyly Brothers Ordered to pay More than $300M In Fraud Sanctions
, Stockbroker Fraud Blog, September 28, 2014

John Carris Investments Expelled by FINRA, Institutional Investor Securities Blog, January 27, 2015

February 27, 2015

Bill Seeks to Eliminate Mandatory Arbitration Clause From Brokerage Contracts, While SEC Approves New Public Arbitrator Limits

The Investor Choice Act in Congress, A U.S. House bill written by Keith Ellison, D-Minn., is looking to stop investment advisers and brokers from obligating investors to pursue their claims in arbitration instead of going to court. The proposed legislation would bar pre-dispute mandatory arbitration clauses in contracts between clients and their representatives.

As of now, almost all brokerage agreements, and an increasing number of investment adviser ones, come with provisions mandating that investors take their disputes to the arbitration system, which is run by the Financial Industry Regulatory Authority. There are those that believe that the forum favors brokers and advisers. Meantime, others say that the arbitration system is much more efficient for investors than going to court.

This is not the first time that Ellison has pushed for ending mandatory arbitration. He unveiled a similar bill in 2013 but it did not become law. The Public Investors Arbitration Bar Association has put out a statement voicing its support for Ellison’s latest bill, which it says gives investors back their right to choose whether they want to take their dispute to court or arbitration.

The 2010 Dodd-Frank Act granted the U.S. Securities and Exchange Commission the power to put a stop to mandatory arbitration. However, the SEC has yet to tackle the issue.

Our FINRA arbitration lawyers are here to help investors recoup their losses in claims against a broker or investment adviser. Contact our securities fraud law firm today.


FINRA Arbitration and Arbitrators
Nearly all customer claims against broker-dealers are resolved in FINRA arbitration. Each case is heard by a three-arbitrator panel. The parties decide who can be on the panel by eliminating candidates until there are three left. Parties are allowed to choose all-public panels.

The SEC has just approved a proposal by FINRA that would put limits on who can become a public arbitrator to be able to preside over such disputes. The rule categorizes anyone who has ever worked in the financial industry as an industry (or nonpublic) arbitrator.

Also, anyone who spent at least 20% of their time over the previous five years representing investors with securities claims would go from being a public arbitrator to a nonpublic one. They could go back into the public arbitrator category after a cooling off period of five years.

Anyone who has been a plaintiff’s lawyer for over 15 years is permanently barred from serving as a public arbitrator. Also disqualified as public arbitrator are accountants, lawyers, and others who worked for financial firms for over 20 years. If they worked for firms for less time, they could go back under the public arbitrator category five years after they stop working for them. In its regulatory order, the SEC said that it believes the proposed rule change would tackle any perceived bias toward Wall Street on the part of public arbitrators by moving certain individuals that fit the specific criteria into the nonpublic arbitrator category.

Bill would end mandatory arbitration in brokerage contracts, Investment News, February 26, 2015

Order Approving a Proposed Rule Change Relating to Revisions to the Definitions of Non-Public Arbitrator and Public Arbitrator, FINRA, February 26, 2015


More Blog Posts:
Investors Name Icon Investments in Securities Arbitration Claims, Stockbroker Fraud Blog, December 19, 2014

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

Judge Temporarily Blocks Meredith Whitney Fund From Making Investor Payouts in the Wake of BlueCrest Capital Opportunities Lawsuit, Institutional Investor Securities Blog, February 27, 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