April 22, 2015

Trader Blamed in 2010 Flash Crash is Arrested in London

Almost five years after the 20-minute Flash Crash when the Dow Jones Industrial Average plunged nearly 600 points and then quickly rebounded, the U.S. Department of Justice has arrested trader Navinder Singh Sarao. He is accused of allegedly playing a major part in the brief turmoil because of his involvement in a number of market manipulating trades.

The crash, on May 6, 2010, caused certain stocks to trade at a penny before thousands of trades were cancelled and placed substantial downward pressure on shares of big companies. The Flash Crash generated a lot of worries about just how stable the U.S. stock markets were and triggered scrutiny into high frequency trading firms and electronic trading venues.

Now, following a joint probe with the Commodity Futures Trading Commission, the DOJ is putting a lot of blame for the crash on Sarao. He is accused of multiple counts of commodities manipulation, one count of wire fraud, and one count of spoofing. Sarao’s alleged manipulation took place over a number of years up, including up through this month.

The government said that Sarao tweaked an algorithmic trading program to layer together big sell orders on several futures contracts on the S & P 500. The orders came at different price levels and were continually modified to stay outside market price where trades might happen. Sarao allegedly cycled the algorithm on and off several times, creating an imbalance on the sell orders. He is accused of making profits by selling the futures contracts before market declines and repurchasing them prior to market recovery.

The government claims that on May 6, Sarao used the layering algorithm for two hours before the crash. He applied nearly $200 million of downward pressure on the E-mini S& P price. The trades happened right before the market crash yet the contributed to an “extra” imbalance of the E-mini S & P order book. This purportedly created the market conditions that resulted in the Flash Crash.

Sarao allegedly made around $897,018 during the flash crash The U.S. government said that over the years he engaged in manipulative trading, Sarao made around $40 million.

This is the first time authorities in this country have indicated that illegal activities may have played a part in the flash crash. In October 2010, market regulators had pinned the causes on different reasons, including a computer-driven trade by a mutual fund.

Shepherd Smith Edwards and Kantas, LTD LLP helps investors recover their lost investments. Contact our securities law firm today to request your free case assessment. We represent clients in arbitration and throughout the litigation process. Over the years, we have helped thousands to get their money back that they lost due to fraud.

CFTC Charges U.K. Resident Navinder Singh Sarao and His Company Nav Sarao Futures Limited PLC with Price Manipulation and Spoofing, CFTC, April 21, 2015

Accused British 'flash crash' trader fights extradition to U.S., Reuters, April 22, 2015


More Blog Posts:

“Flash Crash” – Why is This So Hard to Understand?, Stockbroker Fraud Blog, November 9, 2010

Securities Class Action Says ARCP Made Over $900M From Acquisition Binge, Institutional Investor Securities Blog, April 20, 2015

Texas-Based Broker-Dealer Faces SEC Charges Over Supervisory and Customer Protection Violations, Stockbroker Fraud Blog, March 6, 2015

April 18, 2015

Texas Securities Scam Allegedly Bilked Investors of $4.4M

The Securities and Exchange Commission has filed a lawsuit accusing Mieka Energy Corporation of Texas Securities Fraud. The oil and gas company and Daro Ray Blankenship, its president and founder, allegedly defrauded at least 60 investors located in different states of about $4.4 million. The regulator is also charging Vadda Energy Corporation, the publicly traded parent company of Mieka, of fraud and reporting violations, including deceptively promoting Mieka’s investments as a successful venture.

The scam is said to have taken place between 2010 and 2011, when investors were purportedly fooled into investing funds that were supposed to purchase energy-related investments while making big returns on other investments. The SEC said that Blankenship and Mieka engaged in boiler room cold calling to market these investments related to drilling, production, and oil and gas exploration.

To get around federal securities regulations, Mieka and Blankenship called their securities offering a “joint venture” and said that the investment interests were not securities, when really, under federal securities law, they were. The regulator said that Blankenship took all of the offering proceeds and spent the money on unrelated projects and expenses. He then used deceptive updates and misleading public filings to mislead investors.

Mieka salesmen Stephen Romo and Robert Myers are accused of taking part in the scam by selling and marketing the joint venture offerings to the public and receiving about $190,000 in commissions. The SEC has charged them with acting as unregistered brokers.

The Commission wants permanent injunctions against everyone, as well as penalties, disgoregement, and prejudgment interest. It is seeking to permanently bar Blankenship from serving as a director and officer of a public company.

Our Texas securities fraud lawyers are here to help investors get their money back.

SEC Charges Texas Oil Company and Its Founder with Securities Fraud, SEC, April 10, 2015


More Blog Posts:
Two Firms Charged in Texas With Running Fraudulent Commodity Pool Must Pay Over $7.5M, Texas Securities Fraud, April 6, 2015

Texas-Based Broker-Dealer Faces SEC Charges Over Supervisory and Customer Protection Violations, Stockbroker Fraud Blog, March 6, 2015

Plaintiffs Appeal Federal Court’s Ruling Dismissing Their 401(K) Lawsuit Against Fidelity, Institutional Investor Securities Blog, April 13, 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 14, 2015

FINRA Bars Owner of Broker-Dealer, Seller of Illiquid Equipment-Leasing Funds for Misusing Investor Money

The Financial Industry Regulatory Authority has barred the owner of Commonwealth Capital Corp. from the securities industry. Kimberly Springsteen-Abbott is accused of misusing investor funds.

Commonwealth Capital Securities Corp., a wholesaling brokerage firm, packages and distributes illiquid equipment-leasing funds. Springsteen-Abbott is broker-dealer director and the president of the parent company.

According to FINRA, Abbott and her husband charged thousands of dollars of personal spending on the same credit card that they used for business expenses. She would then allocate the investors’ money to cover her own expenses, including an Alaskan cruise, holiday family meals, a trip to Disneyland, holiday décor for her home, clothing, grocery bills, pharmacy expenses, and car rentals. Springsteen-Abbott allegedly tried to hide her misconduct by lying to the self-regulatory organization, which was looking into the allegations, as well as to the FINRA hearing panel about what she did with the money.

The SRO said that her conduct violated the regulator’s rule 2010, which mandates that registered brokerage firms and their reps meet“ high standards of commercial honor and equitable principals of trade” when doing business.

A FINRA panel said that Springsteen-Abbott abused her authority when she improperly allocated the funds to two kinds of expenses that were not related to the business of the funds. FINRA said that she misused money that belonged to the funds’ investors and violated the restrictions in the investments’ offering documents. Her intentional misuse of investor money was to their “detriment.”

Springsteen-Abbott was ordered to pay disgorgement of $209,000 plus interest. She must also pay a $100,000 fine. FINRA’s probe encompasses the period from early 2009 to early 2012.

Springsteen-Abbott, however, disagrees with the panel’s ruling. Commonwealth Capital Corp. sent an email to InvestmentNews saying she believes the FINRA panel made a mistake and she plans to appeal.

In 2013, Springsteen-Abbott settled with the Securities and Exchange Commission for $1.5 million over allegations that a related fund group misled investors about compensation practices at the equipment leasing funds. According to the agency’s cease-and-desist order, Commonwealth Capital Securities Corp. made disclosures that were misleading about the expenses it charged to several equipment leasing funds that Commonwealth Funds’ sponsored. When settling, Springsteen-About and the Commonwealth Income & Growth Fund did not deny or admit to the findings.

Equipment Leasing Funds
These funds let investors pool capital to purchase equipment and become lessors. Investors that become part of equipment leasing fund programs gain the possibility to get predictable, frequently tax-deferred equipment during the equipment’s life or when it is re-leased or sold. Unfortunately, there are risks involved.

Some or all of distributions received could b juste a return of capital. Distribution rates are not necessarily a clear sign of profitable fund returns. Equipment leasing funds are blind pool offerings in which the fund has not identified a specific investment as of the prospectus's date. This means all of the possible risks cannot be determined. Poor economic conditions may hurt the fund, resulting in investor losses. Shares are illiquid.

Our securities fraud law firm is here to help investors get their money back. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.


Finra bars owner of B-D that sells equipment-leasing funds, Investment News, April 14, 2015

Read the SEC Order (PDF)


More Blog Posts:
Pacific West Faces SEC Fraud Charges Over Life Settlements, Stockbroker Fraud Blog, April 11, 2015

SIFMA Says White House Isn’t Entirely Right About The Cost of Abusive Trading to Investors, Stockbroker Fraud Blog, March 30, 2015

Barclays Must Pay Former Trader $9M, Ex-Raymond James Broker Gets Back $650K Award, Institutional Investor Securities, April 6, 2015

April 11, 2015

Pacific West Faces SEC Fraud Charges Over Life Settlements

The Securities and Exchange Commission is charging Pacific West Capital Group Inc. with securities fraud and other violations. The regulator contends that the investment firm and its owner, Andrew B. Calhoun IV, misled clients about life settlements.

According to the SEC, Calhoun and Pacific West raised close to $100 million over the last decade from more than 3,200 investors that bought life settlements in 125 life insurance polices. For more than two years, the two of them allegedly used proceeds from the sales to pay the premiums on life settlements that had been previously sold, while concealing that the life insurance policyholders were living beyond their projected life expectancy. Calhoun and his company are accused of make their life settlements seem more successful than they actually were even as they spent the primary reserves to pay policy premiums.

With life settlements, an investor purchases a life insurance policy share with the understanding that he/she will get part of the death benefit later. The investor is the one responsible for the premium payments and keeps the policy until the insured’s passing. Upon the insured’s death the investor is entitled to the policy’s death benefit.

The insured’s life expectancy plays a factor on the rate of return. The sooner the original policyholder passes away, the more to the investor’s benefit. If the insured lives longer than expected, the investor has to keep paying premiums, which decreases eventual earnings.

The Commission believes that Pacific West and Calhoun failed to give investors their right to fair disclosure about the risks involved with life settlements, purposely concealing and minimizing them instead. Among the risks that they failed to disclose was that investors’ premium payments would go up if the insured parties lived longer than anticipated. They told investors the policies would mature in four to seven years and to expect returns of up to 150%. The firm claimed that it never drew on premium reserves or made a premium call.

The SEC is charging Calhoun and Pacific West with violating federal securities laws related to securities registration, antifraud, and brokerage firm registration. The case also names as defendants PWCG Trust, which serviced and held the insurance policies, five pacific sales agents, and two of the agents’ companies, BAK West and Century Point. They are charged with securities registration violations and broker-dealer registration violations. The Commission wants permanent injunctions against the defendants and is seeking to impose a penalty and recover the alleged ill-gotten gains plus interest.

The Government Accountability Office has warned consumers about investing in life settlements because of a lack of clear oversight in many states. The North American Securities Administrators Association has said that life settlements are prone to different kinds of fraud, including Ponzi scams, bogus life expectancy assessments, false promises of big money with low risks, and inadequate premium reserves which end up costing investors.

At Shepherd Smith Edward and Kantas, LTD LLP, our life settlement fraud lawyers work with investors to recoup their losses. Contact our securities law firm today.

Read the SEC Complaint (PDF)


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

Barclays Must Pay Former Trader $9M, Ex-Raymond James Broker Gets Back $650K Award, Institutional Investor Securities Blog, April 6, 2015

Financier Lynn Tilton Sues the SEC After She is Charged with Securities Fraud, Institutional Investor Securities Blog, March 31, 2015

April 8, 2015

SEC Sues Ex-New York Giants Cornerback Over Alleged Ponzi Scam

The U.S. Securities and Exchange Commission is suing a former New York Giants player for allegedly helping to run a Ponzi scam. According to the regulator, Will Allen and his business partner Susan Daub raised over $31 million from investors, promising them profits from loans made to professional athletes. Allen and Daub managed Capital Financial, which was compromised of several companies.

The SEC said that the alleged financial scam took place from 7/12 through 2/15 and involved over 40 people investors, who were told they could make up to 18% in interest. The Commission contends that Allen and Daub misled investors about the circumstances, terms, and the existence of certain loans.

For example, according to the complaint, last year, at least two dozen investors handed over approximately $4 million that was supposedly going to go toward a $5.6 million loan for an NHL player. They were given a copy of a promissory note and loan agreement that was supposed to have been signed by both Allen and the player. The player was to make monthly payments.

However, says the regulator, the loan was a sham and the player never signed the agreement or promissory noted nor did he ever receive a $5.65 million loan. That said, earlier this year, Capital Financial submitted proof of claim, after the NHL player filed for bankruptcy, listing the company as one of its creditors. The amount was for $3.429,750, along with a $3.4 million promissory note that the player signed, as well as a loan agreement. Still, that figure is a far cry from the $5.6 million loan that investors told they were getting involved in.

Also, some $7 million of client funds was allegedly used to fill a payment shortfall to other investors, while other of their funds is said to have gone toward personal spending at nightclubs and casinos. A federal court has since frozen the assets related to the alleged Ponzi scam and the Commission wants to impose penalties.

If you were the victim of a Ponzi scam and sustained substantial losses, contact our securities fraud law firm today.

SEC Accuses Ex-Giants Cornerback Allen of Running Ponzi Scheme
, Bloomberg, April 7, 2015

Did Ex-NFLer Will Allen's Alleged Ponzi Scheme Prey On Jack Johnson?, DeadSpin, April 7, 2015


More Blog Posts:
LPL Financial Should Pay $3.6M in Fines, Repayments for REIT Sales to Older Investors, Says NH Regulator, Stockbroker Fraud Blog, April 7, 2015

SIFMA Says White House Isn’t Entirely Right About The Cost of Abusive Trading to Investors, Stockbroker Fraud Blog, March 30, 2015

Barclays Must Pay Former Trader $9M, Ex-Raymond James Broker Gets Back $650K Award, Institutional Investor Securities, April 6, 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

April 6, 2015

Two Firms Charged in Texas With Running Fraudulent Commodity Pool Must Pay Over $7.5M

A district court in Texas is ordering a permanent injunction against RFF GP, LLC, KGW Capital Management, LLC, and Kevin White. The order is related to a 2013 Commodity Futures Trading Commission complaint charging them with fraud and misappropriation related to the running of a commodity pool.

The regulator says that defendants bilked participants when they got them to invest in the hedge fund and the commodity pool, named Revelation Forex Fund, LP. The fund was supposed to trade in off-exchange foreign currency. According to the CFTC, however, the defendants fraudulently solicited about $7.4 million from over 20 participants, misappropriating some $1.7 million from their money to cover personal spending and other matters. They allegedly fabricated the fund’s performance and lied about White’s experience in investing.

The Securities and Exchange Commission also filed its Texas securities case against White and the firms, along with a few other entities. The SEC said that White promoted a sophisticated forex trading strategy that was low risk but would lead to huge earnings. He also touted the Revelation Forex as a $1 billion hedge fund that managed to bring in returns of over 393% returns while earning an over 36% compound yearly return rate. White marketed himself as having 25 years of experience working in Wall Street when he had worked just six years as a licensed securities professional in Texas before the NYSE barred him.

Earlier this year, White was sentenced to eight years for mail fraud after pleading guilty to the charge in connection with his commodity trading fraud scam. He started his sentence this week.

Our Texas securities fraud lawyers are here to help investors recoup their losses. Unfortunately, there are those in the securities industry who continue to get away with wrongdoing and it is investors who suffer. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Read the Consent Order (PDF)

Federal Court Orders Texas-based RFF GP, LLC, KGW Capital Management, LLC, and Kevin G. White to Pay over $7.5 Million for Operating a Fraudulent Commodity Pool, CFTC, April 6, 2015


More Blog Posts:
Texas-Based Broker-Dealer Faces SEC Charges Over Supervisory and Customer Protection Violations, Stockbroker Fraud Blog, March 6, 2015

Barclays Must Pay Former Trader $9M, Ex-Raymond James Broker Gets Back $650K Award, Institutional Investor Securities Blog, April 6, 2015

SIFMA Says White House Isn’t Entirely Right About The Cost of Abusive Trading to Investors, Stockbroker Fraud Blog, March 30, 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 30, 2015

SIFMA Says White House Isn’t Entirely Right About The Cost of Abusive Trading to Investors

The Securities Industry and Financial Markets Association claims that the White House is employing a methodology that is flawed to make the claim that investors are losing around $17 billion in retirement funds yearly because of trading practices that are abusive. SIFMA is against imposing tougher rules against brokers, including a draft rule expected to be released by the U.S. Department of Labor mandating that those who offer retirement plan advice meet a fiduciary standard and place their clients’ best interests before their own. Right now, brokers must only satisfy a suitability standard of care with the requirement that they make appropriate recommendations even if they aren’t necessarily the best.

President Obama wants the Labor Department to go ahead with the rule proposal. In February, the White House put out a report finding that some brokers use excessive trading and costly investments to enhance their commission, as well as take part in other practices that end up costing investors big time.

SIFMA, however, in its new report, claims that the White House is disregarding how similar rule changes such as the one the DOL is expected to propose, impacted investors in the United Kingdom where approximately 310,000 lost their brokers during the first quarter of 2014 alone because their accounts were too small for the representative to handle. Another 60,000 investors were rejected by brokers for their low balances. However, while the U.K.’s rule prohibits brokers from getting paid commissions from mutual funds, the DOL doesn’t plan to institute such a ban.

The SIFMA report, by NERA Economic Consulting, claims that the White House doesn’t appreciate the intangible benefits clients get from brokers or the fact that mutual fund fees have gone down over the past 15 years. Also, the report notes that aggregate number used by the White House factors in the whole $600 billion annuities market for individual retirement account annuities without anyone explaining why all of that is included. SIFMA chief executive and president Kenneth Bentsen Jr. said that the White House was employing data that was “nonconclusive” to arrive at conclusions that were “questionable.”

Earlier this month, Securities and Exchange Commission (SEC) chairwoman Mary Jo White gave testimony in front of the House Financial Services Committee. She said that the regulator is moving forward with its fiduciary standards drafts that would mandate for tougher disclosure requirements.

When Republican lawmakers said that she should do a better job of coordinating with the DOL when it comes to crafting financial adviser regulations, she noted that the SEC and the Labor Department are distinct agencies, each responsible for its own rules. Republicans and the business community, however are worried that having two different rules from the respective agencies would lead to market confusion while low-income Americans will find that the financial advisory industry is no longer accessible to them.

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

SIFMA claims White House figures on DOL rule flawed, InvestmentNews, March 16, 2015

Republicans grill SEC chief over financial adviser regs, The Hill, March 24, 2015

SIFMA


More Blog Posts:
U.S. Department of Labor’s Fiduciary Rule for Retirement Advisers Hits Another Snag, Stockbroker Fraud Blog, February 6, 2015

U.S. Department of Labor’s Fiduciary Rule for Retirement Advisers Hits Another Snag, Stockbroker Fraud Blog, February 6, 2015

Hanson McClain Sues Investment Adviser, Ameriprise Financial Services Over Client Information, Institutional Investor Securities Blog, January 12, 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