July 16, 2016

AOG Wealth Management President Ordered to Pay Couple $331K for Private Placement Investments

A Financial Industry Regulatory Authority Arbitration Panel is ordering AOG Wealth Management chief executive and president Frederick Baerenz to pay Roger and Barbara Bond $331K in compensatory damages. The panel found Baerenz liable for unsuitable trading because he allegedly misled the Bonds about the risks involved in the direct private placements they invested in from ’06 to ’09. At the time, Baerenz was affiliated with Pacific West Securities.

The Bonds invested about $941K in private placements. Their legal team contends that these were not suitable investments for them.

Private Placements
Private placements are offerings of a company’s securities that are not registered with the SEC. They are not offered to the general public.

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June 22, 2016

Securities Cases: Medical Capital Executive To Pay Almost $40M for Private Placement Fraud, Momentum Investment Partners Accused of Not Disclosing Fees, and First Mortgage Corp. Settles Mortgage Fraud Claims

Ex-Medical Capital Holdings COO Gets 10 Years in Prison
Joseph J. Lampariello, the ex-president and COO of Medical Capital Holdings, has been sentenced to 10 years and one month in prison for his involvement in a private placement fraud that became the Ponzi scam responsible for the shutdown of dozens of brokerage firms. Lampariello must also pay investors almost $40M in restitution.

Medical Capital Holdings, a medical receivables financing company, supervised funds that were supposed to buy account receivables from medical providers that were credited, provide money for general operating costs, and make loans that were secure. Instead, for almost a year, Lampariello misappropriated the money investors had given for MedCap deals, using the funds to pay earlier investors and himself.

Over 700 investors were bilked of close to $49M. Meantime, the independent brokerage firms that sold MedCap notes also suffered. They got in trouble over allegations that they did not conduct the proper due diligence on Medical Capital and other private placements that ended up being scams. A lot of broker-dealers had to close up shop because of the securities fraud cases brought by investors wanting their money back from the Medical Capital fraud.

Momentum Investment Partners Faces SEC Fraud Charges
Investment advisory firm Momentum Investment Partners , doing business as Avatar Investment Management, and principal Ronald Fernandes are charged with fraud. The U.S. Securities and Exchange Commission claims that the firm and Fernandes did not disclose to clients that they were charging them additional fees. Avatar is no longer in operation.

Continue reading "Securities Cases: Medical Capital Executive To Pay Almost $40M for Private Placement Fraud, Momentum Investment Partners Accused of Not Disclosing Fees, and First Mortgage Corp. Settles Mortgage Fraud Claims" »

May 4, 2016

Nine Brokers Charged in $131M Stock Scam

Nine financial professionals are charged with scamming investors in a $131M financial fraud involving Forcefield Energy Inc. According to authorities, from 12/09 to 4/15 the defendants, which include brokers, stock promoters, and investor relations officials, manipulated the LED lighting provider’s stock by trading it in secret, using undisclosed accounts, hiding kickbacks that were paid to brokers and stock promoters to tout the stock, and inflating the volume of trades to make it seem as if there was a real demand for the stock. Also this week the U.S. Securities and Exchange Commission filed civil fraud charges against the nine defendants and former ForceField executive chairman Richard St. Julien who was arrested last year on charges accusing him of running scams to inflate his company’s stock price.

Speaking about the criminal case, U.S. Attorney Robert Capers said that the defendants took a business that didn’t have much revenue and “essentially no business” and fooled their clients and the market into thinking that it was worth hundreds of millions of dollars. The nine defendant are charged with securities fraud, and conspiracies to commit wire fraud, securities fraud, and money laundering. They are former Stratton Oakmont Inc. broker Christopher Castaldo, unregistered broker Louis F. Petrossi, Mitchell & Sullivan Capital LLC managing partner of investor relations Jared Mitchell, registered representatives Richard L. Brown, Naveed A. Khan, Gerald J. Cocuzzo, Maroof Miyana, and Pranav V. Patel, and Kenai Capital Management LLC head Herschel Knippa III.

Continue reading "Nine Brokers Charged in $131M Stock Scam" »

February 5, 2016

SEC Files Fraud Charges Against American Growth Funding II

The Securities and Exchange Commission is pursuing a securities fraud case against American Growth Funding II, LLC. The regulator contends that the company, which raises money for business loans, lied to investors that bought high-yield securities. Also subject to charges is brokerage firm Portfolio Advisors Alliance, Ralph Johnson, Kerri Wasserman, and Howard Allen III.

In its complaint, the regulator said that AGF II sold about $8.6M AGF II units to at least 85 investors through Portfolio Advisers Alliance. The sales occurred in a private placement between 3/11 and 12/13.

However, investors were purportedly not told that AGF II’s principal asset had significantly dropped in value, which lessened the chances that investors would be repaid in full let alone make the12% interest yearly they were promised.

In private placement memoranda that were put out in ’11 and ’12, Johnson is accused of misrepresenting that the lending company’s financial statements had been audited and would continue to be audited periodically. The statements for ’11 and ’12 were not audited until 2014.

The SEC believes that Johnson, who played a central part in preparing the private placement memoranda, knew and acted in reckless disregard and was aware that misrepresentations were made to investors. He also is accused of causing investors to get an email in 2013 that contained false statements noting that an accounting firm was working on an audit, which was not, in fact, the case, and issuing monthly statements that concealed the company’s financial woes. Investors were not made aware that because most of AGF II’s loans were likely uncollectible, the firm wouldn’t be able to pay the account balances that were noted in the statements.

Continue reading "SEC Files Fraud Charges Against American Growth Funding II" »

November 21, 2015

Securities News: Barclays to Pay $120M to Settle Libor Rigging Litigation, Investment Advisor Firm Settles Charges Over Custody Rule Violations, and SEC Accuses Man of $190M Scam Involving Private Placements, Nursing Homes

Barclays Resolves Securities Fraud Claims Related to Libor Rigging
Barclays PLC (BARC) has consented to pay $120 million to resolve securities fraud claims accusing the bank of conspiring with competitors to manipulate the London Interbank Offered Rate, also known as Libor. Barclays is the first to settle allegations made by “over-the-counter” investors.

It was just last month that the British bank consented to pay $94M to resolve litigation accusing it of trying to rig Euribor, which is the euro-denominated equivalent of Libor. Barclays has admitted to rigging both benchmarks. The bank paid settlements to regulators in the United States and in Great Britain.

Libor is used to establish rates on hundreds of trillions of dollars of transactions, such as those involving student loans, credit cards, and mortgages. Banks use Libor to assess how much it will cost to borrow from each other. To date, over a dozen banks have been sued for conspiring to rig Libor.

U.S. District Judge Naomi Reice Buchwald in New York, who approved the class action settlement, said in August that the plaintiffs could win fraud claims if they proved that panel banks lied to the administrator of Libor about borrowing costs and the plaintiffs had depended on these fallacies. Buchwald, in 2013, threw out a “substantial” chunk of this private case, which included federal antitrust claims.

Investment Advisory Firm, Co-Founders to Pay $1M to Settle Custody Rule Violation Charges
Sands Brothers Asset Management LLC and co-founders Steven Sands and Martin Sands will pay a $1 million penalty to resolve Securities and Exchange Commission charges accusing them of violating the custody rule. They also have consented to a year suspension from raising funds from existing or new investors. The firm will under go compliance monitoring for three years. Ex-COO and CCO Christopher Kelly will pay a $60K penalty and serve a one-year suspension from acting as a COO or practicing in front of the SEC as a lawyer.

Under the custody rule, firms have to get independent confirmation of assets when they can control or access client funds or securities. This is so that investors know their money is protected from misuse or theft. The firm, the two Sands brothers, and Kelly settled the charges without or denying or admitting to them.

Continue reading "Securities News: Barclays to Pay $120M to Settle Libor Rigging Litigation, Investment Advisor Firm Settles Charges Over Custody Rule Violations, and SEC Accuses Man of $190M Scam Involving Private Placements, Nursing Homes" »

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 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

December 13, 2014

Atlas Energy’s Oil and Gas Private Placement May Not Be Such a Good Investment for Outside Investors

Atlas Energy LP Is inviting investors to put in at least $25,000 in an oil and gas drilling partnership in Texas and other states in exchange for shared revenue from the output from the wells. Its subsidiary, Atlas Resources LLC, is seeking to raise up to $300 million by the end of the year, with the company saying it will put in up to $145 million of its own money. However, according to Reuters, a closer look at the company’s confidential offering memorandum reveals that outside investors may not end up reaping as much as they think.

The private placement venture is called Atlas Resources Series 34-2014 LP. Private placements are unregistered securities sold to a limited number of investors via brokerage firms. Brokers can only market them to accredited investors (investors that have $1 million in assets—primary residence not included—or $250,000/year income) or institutions. Because of inflation, the number of those that qualify to be able to invest in private placements has gone up and not every investor is a high-income one. There are even retirees who now qualify.

According to the Atlas memorandum, $45 million of the money raised will go to Anthem Securities, an affiliate, to pay commissions to brokerage firms. Up to $39 million will go toward purchasing drilling leases from a different affiliate. Some of the $53 million for transport and drilling equipment may also go to affiliated suppliers. $8 million is a markup for estimated equipment costs. Atlas will get $53 million for markups and fees once drilling starts. All this lowers Atlas’s exposure by at least 40%. Once revenue starts coming in, the company is entitled to 33% of this.

After looking at the marketing materials and offering memoranda of half a dozen oil and gas private placements in the last 15 years, Reuters discovered that Atlas’s deal, placing the issuer at greater advantage than outside investors, is not uncommon. And out of over half of the 43 private placements it has put out in the last thirty years, outside investors either broke even or sustained financial losses. In 29 private placement deals, Atlas faired better than investors.

Energy ventures are typically high risk. Wells can end up producing nothing and returns may be impacted by gas and oil costs. Granted, there are tax benefits, with investors able to write off over 90% of initial outlay the first year. However, the risks can outweigh the benefits.

It doesn’t help that brokers, who are supposed to conduct due diligence on every issue they sell to make sure it is suitable for each investor, sometimes depend on due diligence companies that are paid by the issuers. Regulators still don’t have much oversight over private placements, which are not subject to a lot of reporting requirements. Also, oil and gas private placements often come with hidden fees.

If you suspect you were the victim of fraud, contact one of our private placement fraud law firm today. Shepherd Smith Edwards and Kantas LTD LLP is a Texas securities law firm.

Special Report: For these oil and gas bets, the odds favor the house, Reuters, November 11, 2014

More Blog Posts:
SEC Commissioner Wants Elder Fraud at Top of 2015 Agenda, Stockbroker Fraud Blog, November 29, 2014

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

Goldman Sachs Must Pay $7.6M to Two Brokers for Wrongful Termination, Institutional Investor Securities Blog, December 8, 2014

September 19, 2013

FINRA Suspends and Fines GlobaLink Securities Principal

FINRA is fining GlobaLink Securities Registered Principal Junhua Michael Liao $20,000. According to the SRO’s findings, through Liao, the firm executed an agreement to sell and market a Regulation D offering comprised of promissory notes for a medical receivables financing company. The financial firm then is said to have sold over $1.2 million of the notes to certain customers, resulting in about $56,700 in commissions.

FINRA also said that during the period in question, it was Liao’s job as the compliance officer for the firm to makes sure that GlobaLink Securities set up, kept up, and enforced a supervisory system and written supervisory procedures designed to ensure compliance with regulations and laws and rules that were applicable. The agency said that while the financial firm did keep up written supervisory procedures regarding private placement sales, the WSPs were not sufficient and lacked specific details about how the firm was to perform due diligence, handle transactions, ensure that a Regulation D product was appropriate for investors, and document GlobaLink’s actions and decisions pertaining to the transactions.

FINRA said that because of the deficient WSPs and inadequate supervision, the firm did not perform proper due diligence on the offerings and that this stopped GlobaLink and Liao from finding out that the issuer had previous payment problems on other note offerings, which resulted in the private placement memorandum misrepresenting the past performance of that issuer. Liao consented to the described sanctions as well as to the SRO’s entry of findings. In addition to the fine, he received a one-month suspension from associating with any other FINRA member in any type of principal role.

Please contact our securities fraud law firm to request your free case consultation. Shepherd Smith Edwards and Kantas, LTD LLP has helped thousands of investors throughout the US get back their investments losses.

FINRA Disciplinary Actions, FINRA (PDF)

More Blog Posts:
Securities and Exchange Commission Report: Enforcement Division & OCIE Collaborate, Broker-Registration in Private Funds, Conflict Minerals Regulation, Short Sale Rules, and New Commissioner Confirmations, Institutional Investor Securities Blog, August 30, 2013

Securities Headlines: UBS to Pay $4.5M Over Unregistered Assistants, $6M Ponzi Scam Allegedly Funded Reality Show, & Cherry Picking Allegations Lead to SEC Charges, Stockbroker Fraud Blog, August 30, 2013

Texas Money Manager Sued by SEC and CFTC Over Alleged Forex Trading Scam, Stockbroker Fraud Blog, August 6, 2013

July 29, 2013

Investor Sues Berthel Fisher Over TNP 2008 Participating Notes Program LLC

Investor Jon Hanson is suing Berthel Fisher & Co. Financial Services Inc. for allegedly not conducting the necessary due diligence on the TNP 2008 Participating Notes Program or making the proper disclosures to parties like him that backed the high-risk investment. The private placement went into default in 2012.

The independent brokerage firm, which not so long ago settled the majority of investor claims over real estate deals involving Diversified Business Services and Investments Inc., (a real estate manager that is now bankrupt), could be facing a class action securities case involving a failed deal with Tony Thompson, the real estate investor. This would be the first time that a broker-could be hit with a class action over a Thompson National Properties LLC-sponsored product.

According to Hanson’s securities fraud lawsuit, Berthel Fisher allegedly know there were misrepresentations and omission in the TNP 2008 Participating Notes Program memorandum yet did not probe further into the red flags. Instead, the financial firm used the “misleading TNP 2008 PPM” to help collect about $26.2M from more than 200 investors. Although the independent broker-dealer did not sell all of the TNP 2008 Notes Program and not all of the $26M was sold to its clients, it is a defendant of this private placement case because it was the underwriter of the deal.

Also named as a defendant is Berthel Fisher CEO and founder Thomas Berthel. He contends that the investment in the TNP 2008 private placement was disclosed as a risky investment and its business plan revealed that this was an effort to avail of opportunities from the real estate and debt crisis.

Meantime, the legal problems against Thompson continue to grow. Last month, an investor in the TNP 6700 Santa Monica Boulevard submitted likely class action securities case against him and other executives associated with that company. Carol Prock contends that there were “misrepresentations, mismanagement, misappropriation...” and other misconduct involving the investment, also referred to as the TNP Kodak, and that such behavior was the case in other TNP-sponsored deals.

In May, TNP Kodak sold the property at a $6.4 million loss so foreclosure wouldn’t happen. Investors then got back about 37% of their initial investment.

Thomson’s legal team says that the allegations in the two potential class action securities case are untrue and based on an earlier settlement between FINRA and ex- Thompson CFO Wendy J. Worcester that was “inaccurate.” Worcester, who also served as co-chief compliance officer of Thompson-controlled broker dealer TNP Securities LLC, was suspended from the industry for allegedly not conducting independent and proper due diligence in a number of Thompson’s real estate deals. She was ordered to pay a $15,000 fine. Thompson settled without denying or admitting to the allegations.

Our private placement fraud lawyers are here to help investors recoup their losses. Contact Shepherd Smith Edwards and Kantas, Ltd, LLP today.

Investor sues Berthel Fisher over failed Tony Thompson deal, Investment News, July 26, 2013

Carol Prock v. Thompson National Properties LLC et al, Justia

More Blog Posts:
Wells Fargo Settles Securities Lawsuit Over Medical Capital Holdings Ponzi Scam for $105M, Stockbroker Fraud Blog, May 11, 2013

Texas Broker-Dealer Pinnacle Partners Financial is Expelled by FINRA Hearing Officer Over Allegedly Fraudulent Sales of Unregistered Securities and Private Placements of Oil and Gas, Stockbroker Fraud Blog, April 25, 2012

Sale of Interest in Private Placement Offerings by Medical Capital Holdings, Provident Royalties DBSI Leads to FINRA Order that Investors Get $3.2M in Restitution, Institutional Investor Securities Blog, November 29, 2011

May 11, 2013

Wells Fargo Settles Securities Lawsuit Over Medical Capital Holdings Ponzi Scam for $105M

Wells Fargo & Co. (WFC) has consented to pay $105M to investors of the now failed Medical Capital Holdings Inc. The bank had served as trustee for Medical Capital securities.

The medical receivables financing company got about $2.2 billion from thousands of investors between 2001 and 2009 via the private placement offerings that were promissory notes. The private placement was a high commission financial instrument that promised annual returns of 8.5% to 10.5%. Per court filings, investors paid Medical Capital nearly $325 million in administrative fees. Dozens of independent brokerage firms sold the notes.

It was in 2009 that the SEC accused affiliates of Medical Capital of committing securities fraud against investors. The financial scam was quickly shut down and the company soon entered receivership but investors got back just half their money. Many of them would go on to file a securities lawsuit against trustees Bank of New York Mellon Corp. (BK) and Wells Fargo accusing the financial firms of failing to fulfill their role as trustees by neglecting to detect the fraud. Meantime, many of the brokerage firms that sold the MedCap notes are no longer in business because they sank from the securities arbitration payments and legal costs that followed as a result.

Even as Wells Fargo is settling this MedCapital securities case, the bank maintains that it did nothing wrong and that the one to blame is Medical Capital. This settlement comes a few months after Bank of New York Mellon resolved similar claims against it for $114M.

In that class action securities case, investors are sharing a $90.68M payment, with $13.6M going to legal fees and another $1.8M to expenses. Bank of New York Mellon also denied any wrongdoing.

Wells Fargo Settles Medical Capital Investor Suit for $105 Million, Wall Street Journal, April 30, 2013

Wells Fargo agrees to pay $105M to end MedCap suit, Investment News, May 1, 2013

Bank of NY Mellon to pay $114 million in Medical Capital accord, Reuters, February 22, 2013

More Blog Posts:
Medical Capital Fraud Lawsuit Against Wells Fargo Must Proceed, Institutional Investor Securities Blog, April 10, 2013

FINRA Bars Former Wells Fargo Advisors Broker that Bilked Child with Cerebral Palsy, Stockbroker Fraud Blog, April 26, 2012

April 25, 2012

Texas Broker-Dealer Pinnacle Partners Financial is Expelled by FINRA Hearing Officer Over Allegedly Fraudulent Sales of Unregistered Securities and Private Placements of Oil and Gas

In a default decision, San Antonio broker-dealer Pinnacle Partners Financial, Corp. has been expelled by a FINRA hearing officer for Texas securities fraud. The company’s president Brian Alfaro has also been barred. The financial firm and its head are accused of running a boiler room, engaging in the fraudulent selling of unregistered securities and private placements for gas and oil, and making numerous misrepresentations related to these investments. Alfaro is also accused of taking some of the investors’ money to pay for personal spending and unrelated business costs. The default decision was issued after Alfaro failed to show up at the FINRA panel hearing.

It was a year ago that FINRA issued an indefinite suspension against Alfaro and Pinnacle for not complying with a temporary order to cease and desist from making fraudulent misrepresentations. The two parties, however, allegedly kept making them, in addition to omissions related to the sale and offering of specific oil and gas joint interests.

According to the hearing officer, the Texas securities firm and its president operated the boiler room between August 2008 and March 2011. 10 brokers made cold calls numbering in the thousands to draw in investors for drilling investments involving gas and oil that was controlled or owned by Alfaro. They were able to get over 100 investors to put in more than $10 million.

Allegedly, between January 2009 and March 2011, Alfaro misused some of these monies, which investors thought were going toward well production and drilling, to cover some of his personal spending and other businesses. The misrepresentations and omissions that they are accused of purposely making in numerous private placements about a number of matters, include those involving inflated natural gas prices, cash flow, gross returns, and projected returns for natural gas. For example, they allegedly gave out a document claiming that over $14 million had been distributed to investors when, in fact, that figure was closer to under $1.5 million. Alfaro and Pinnacle also supposedly got rid of unfavorable, key information from well operator reports and gave investors maps that didn’t show undesirable wells that were located close to sites where drilling was supposed to take place.

To make restitution, Pinnacle and Alfaro will have to rescind the contracts of those that invested in the fraudulent offerings. They also must pay back the sales commission to clients who don’t ask for rescission.

FINRA Hearing Officer Expels Pinnacle Partners Financial Corp. and Bars President for Fraud, MarketWatch, April 25, 2012

Texas broker-dealer expelled by FINRA hearing officer, Reuters, April 25, 2012

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Texas Securities Fraud: US Supreme Court Turns Down Ex-Enron Corp Chief Executive Jeffrey Skilling’s Appeal to Have His Criminal Conviction Overturned, Stockbroker Fraud Blog, April 18, 2012

Texas Securities Fraud: State Law Class Action in R. Allen Stanford’s Ponzi Scam Not Barred by SLUSA, Stockbroker Fraud Blog, March 20, 2012

Three Oil Service Executives Face SEC Charges in Texas Court For Allegedly Bribing Nigerian Customs Officials, Stockbroker Fraud Blog, March 22, 2012

Continue reading "Texas Broker-Dealer Pinnacle Partners Financial is Expelled by FINRA Hearing Officer Over Allegedly Fraudulent Sales of Unregistered Securities and Private Placements of Oil and Gas" »

October 27, 2011

Boogie Investment Group Inc. Fails Because of Fraudulent Private Placements by Provident Royalties LLC and Medical Capital Holdings Inc.

Boogie Investment Group Inc. has submitted its withdrawal request to the Financial Industry Regulatory Authority. The small broker-dealer is the 20th financial firm that sold Provident Royalties private placements to either leave the brokerage business or announce its intentions to depart. According to Investment News, that’s nearly 40% of independent broker-dealers. Just this year alone, 11 broker-dealers that sold the private placements closed shop. Provident’s bankruptcy receiver reports on its Web site that 52 broker-dealers sold the shares.

Boogie sold about $410K in private placements. Its revenue at the end of the fiscal year was $422K—a definite reduction from the $1.2M of three years back. One of the reasons Boogie decided to bow out of the industry is because of the litigation expenses stemming from the failed private placements. Not only is Boogie contending with a class action lawsuit, but also, it is faced with a securities case filed by investors that purchased Provident's Shale Royalties products and other arbitration cases not related to Provident private placements.

The Financial Industry Regulatory Authority has been tough on the financial firms and individuals that sold interests in private placements while allegedly failing to thoroughly investigate these products or even have reasonable grounds to believe that placements were suitable for clients. The failure to do the appropriate due diligence resulted in the firms being unable to know what were the risks involved. FINRA also says that the principals it has sanctioned lacked a reasonable basis for allowing their financial firms’ registered representatives to keep selling the offerings.

Other broker-dealers that are now out of business or plan to close after selling Provident offerings:
• Workman Securities Corp.
• Harrison Douglas Inc.
• Investlinc Securities LLC/Meadowbrook Securities LLC
• WFP Securities Corp.
• QA3 Financial Corp.
• Securities Network LLC
• Asset Management Strategies LLC
• Okoboji Financial Services Inc.
• Matheson Securities LLC
• Main Street Securities LLC
• United Equity Securities LLC
• CapWest Securities Inc.
• Private Asset Group Inc.
• Community Banker Securities LLC
• E-Planning Securities Inc.
• Empire Financial Group Inc.
• GunnAllen Financial Inc.
• Barron Moore Inc.
• Jesup & Lamont Securities Corp.

The Securities and Exchange Commission has charged Provident and Medical Capital Holdings with securities fraud. The two private placement issuers made about $2.7 billion through pushing these offering through a number of independent broker-dealers. This eventually resulted in huge losses for investors.

For instance, after broker-dealer Securities America sold about $700 million in Medical Capital notes, the investors in these private placements would go on to lose over $1 billion even though the notes were touted as low risk. Meantime, between 2001 and 2009 MedCap raised about $2.2 billion from more than 20,000 investors through several private placement offerings of promissory notes.

Our securities fraud attorneys have been investigating claims for clients that purchased private placement units.

And another broker-dealer bites the dust, Investment News, October 23, 2011

FINRA Sanctions Two Firms and Seven Individuals for Selling Private Placements Without Conducting a Reasonable Investigation, FINRA, April 7, 2011

Shepherd Smith Edwards & Kantas LLP Investigates Claims for Clients of Various Brokerage Firms in Connection with the Sale of Private Placement Units in Provident Royalties, LLC, Globenewswire, July 28, 2009

More Blog Posts:

FINRA Wants Brokers Selling Regulation D Private Placements to Take Part in Tougher Due Diligence Process, Stockbroker Fraud Blog, June 7, 2011

National Securities Corp., Independent Financial Group LLC, & Centaurus Financial Inc. among broker-dealers sought by Massachusetts securities regulators over private placements, Stockbroker Fraud Blog, April 19, 2010

SEC to Propose Rule Banning “Felons and Bad Actors” From Involvement in Private Offerings, Institutional Investor Securities Blog, May 29, 2011

June 7, 2011

FINRA Wants Brokers Selling Regulation D Private Placements to Take Part in Tougher Due Diligence Process

The Financial Industry Regulatory Authority is calling on broker-dealers that sell high-risk Regulation D private placements to step up their due diligence efforts, including “pushing and pulling” for information about the financial products. FINRA chief executive and chairman Robert Ketchum says that although granted, levels of due diligence will not be the same for each deal, broker-dealers still need to play an active role when examining a Reg D offering.

Due diligence related to the sale of private placements has become a focus of attention since the Provide Royalties LLC and Medical Capital Holdings Inc. deals collapsed and the Securities and Exchange Commission charged them with fraud. With both deals, many of the broker-dealers that sold them depended on third-party firms to write the due diligence reports about the offerings. Yet, despite not doing any due diligence of their own, these broker-dealers still received a 1% “due-diligence fee” as part of the sale.

Ketchum says that attending a “canned information session” or just reading a document is not enough when part of one’s job is to actively sell or offer advice about private placements. He even suggested that in certain instances, such as when selling gas and oil well partnerships, broker-dealers should visit some of the key production areas.

Regulation D Private Placements
Regulation D Private Placements are usually sold to “accredited” investors” and a limited number of non-accredited investors. In addition to investigating Regulation D private placements before selling them, a broker-dealer must have reasonable grounds to believe that the investment is suitable for each customer and that each client fully comprehends the risks involved in investing.

Related Web Resources:

Finra's Ketchum: B-Ds must ‘push and pull' for Reg D details, Investment News, June 8, 2011

FINRA Sets Regulatory Guidance for Investigating Private Placements, FINRA, April 20, 2010

More Blog Posts:
Ameriprise to Sell Securities America Even as it Finalizes Securities Settlement with Investors of Medical Capital Holdings and Provident Royalties Private Placements, Stockbroker Fraud Blog, April 26, 2011

Provident Royalties Faces $485 Million Texas Securities Fraud, Says SEC, Stockbroker Fraud Blog, July 26, 2009

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April 19, 2010

National Securities Corp., Independent Financial Group LLC, & Centaurus Financial Inc. among broker-dealers sought by Massachusetts securities regulators over private placements

The Massachusetts Securities Division is requesting information from six broker-dealers regarding the sales of two private-placements that were marketed by Provident Royalties, LLC and Medical Capital Holdings Inc. The investment firms that have been subpoenaed are Centaurus Financial Inc., Investors Capital Corp., Independent Financial Group LLC, CapWest Securities Inc., National Securities Corp., and QA3 Financial Corp.

According to a statement issued last month by Secretary of the Commonwealth William Galvin, Provident and Medical Capital put forth billions in securities that were purchased from the brokerage firms. Now, the state’s securities regulators want information from the broker-dealers regarding suitability data, due-diligence efforts, and promotional materials involving the private placement sales.

The six broker-dealers have expressed surprise that they received the subpoenas. Financial Group claims that the brokerage firm never approved the sale of any offerings from Provident Royalties or Medical Corp. Centaurus Financial is also claiming that it never approved any offerings that were bought from either company.

Investors Capital’s president and CEO, Tim Murphy, says the broker-dealer has never had a selling agreement with Medical Capital, while CapWest CEO Dale Hall says that the brokerage firm has just one client in Massachusetts. QA3 says that two of its clients in Massachusetts purchased $175,000 in Provident offerings but that the brokerage firm did not sell any Medical Capital offerings to investors in the state.

The Massachusetts Securities Division has been intensifying its efforts to examine private placement sales made by independent broker-dealers. Earlier this year, regulators in the state filed a securities fraud lawsuit against Securities America accusing the broker-dealer of misleading investors that bought risky private placements, which included $7.2 million in promissory notes.

Related Web Resources:
Broker-dealers dumbfounded by private-placement subpoenas, Investment News, March 23, 2010

Massachusetts Securities Division

Continue reading "National Securities Corp., Independent Financial Group LLC, & Centaurus Financial Inc. among broker-dealers sought by Massachusetts securities regulators over private placements" »