Securities Fraud Cases Lead to Industry Bars and Suspensions for Valentine Capital Asset Management Founder and LPL Brokers

The U.S. Securities and Exchange Commission has barred John Leo Valentine from working in the financial services industry, but he can re-apply after two years. The adviser is the founder and president of Valentine Capital Asset Management.
According to the regulator, Valentine did not disclose to clients that he had certain conflicts of interest related to a commodities fund in which they invested.  The SEC contends that from ’07 to late ’11, Valentine recommended that clients, who were mostly retirees, purchase shares of Bridgeton Global Directional Fund, which invested in commodity futures contracts. After Valentine could no longer make commissions from the managed futures fund, he purportedly advised the investors to put their money in Valt, which was a commodities fund he created that allowed him to earn compensation.
However, said the SEC, Valentine did not tell clients that he had a financial incentive to recommend Valt instead of Bridgeton. After just a few months in operation, Valt’s clearing broker and custodian filed for bankruptcy related to a fraud involving the broker’s CEO, and Valt stopped almost all trading activity. In addition to the industry bar, Valentine must pay $140K in penalties.

In a bar that the SEC is seeking but has yet to obtain, the regulator is charging registered investment adviser Marc D. Broidy and his Broidy Wealth Advisors with fraud. The Commission claims that Broidy and his firm illegally took $1.4M from clients by purposely overcharging and stealing assets out of their trusts between 2/2011 and 2/2012.

The SEC said that Broidy used investor money to pay for travel abroad, two Mercedes-Benz vehicles, and his mortgage. The Commission wants a bar, civil monetary penalties, disgorgement of ill-gotten gains, and a permanent injunction from future violations.
A parallel criminal case has been brought against Broidy by the U.S. Attorney’s Office for the Eastern District of New York.
Meantime, the SEC issued a bar against an ex-LPL Financial (LPLA) broker over allegations of churning, charging excessive fees, and excessive trading involving mutual funds in the accounts of customers that would have taken place between ’08 to ’14. Paul Lebel allegedly excessively traded mutual fund shares that came with “large front-end load fees” and made $50K in commissions. The SEC said that the trading Lebel engaged in was not in line with the investment objectives of customers.
Lebel, who has settled with the SEC, will pay $56,500 in addition to agreeing to the industry bar.  
Another ex-LPL broker who is in trouble with regulators is Mark Tauzin, who has been suspended by the Financial Industry Regulatory Authority. Tauzin is not allowed to work with any registered brokerage firm for eight months.
The self-regulatory organization said that Tauzin took part in unsuitable short-term trading involving unit investment trusts. As part of his settlement, Tauzin will pay $205K plus interest to 14 client sets for commissions he made from 11/2012 to 11/2014, which was when he sold and bought UITs. He also will pay a  $20K fine.  LPL fired Tauzin in 11/2014.
Tauzin is accused of recommending to clients that they purchase UITs, which usually come with substantial upfront charges, and then, within a year of the securities’ purchase, recommending that they sell them. The UITs came with upfront sales fees of 2.5% to 2.95%. The regulator said that Tauzin had no reasonable grounds to believe that these products should be short-term traded or were even suitable for the investor.
FINRA said that Tauzin effected 215 transactions involving the 14 households and customers paid him almost $317K in commissions.
Our broker fraud law firm works with investors to try to get back losses they sustained because of the negligence, mistakes, or deliberate wrongdoing of financial representatives and/or their firms.  Contact Shepherd Smith Edwards and Kantas, LTD LLP today.
SEC Bars Former LPL Broker for Churning Accounts, Financial Planning.com, October 19, 2016
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