Articles Posted in FINRA

A Financial Industry Regulatory Authority hearing panel has barred New York broker Hank Mark Werner for excessive trading and churning in the accounts of an elderly, blind widow. Now, Werner must pay over $155K in restitution to his former client, disgorge more than $10K for commissions from recommending that she buy a variable annuity (VA) that was not suitable for her, and pay an $80K fine.

Werner is accused of employing an “active trading strategy” that allowed him to charge high commissions while making it “impossible” for her to “make money.” He was the broker of the widow and her blind husband, who died in 2012, for two decades.

According to the panel, the widow was in poor health and 77 years of age when he started churning her accounts after her husband passed away. FINRA, in its 2016 complaint, said that only was the client blind, but also she required in-home care. She relied on Werner to keep her abreast of her accounts.
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Former Ameriprise (AMP) Jack McBride has been ordered by the Financial Industry Regulatory Authority to pay a $12,500 fine and serve a 40-day suspension over alleged violations involving margin trades. He was registered with Ameriprise from 1994 to 2014.

FINRA contends that it was during this period that he committed a number of violations, including settling a customer complaint without telling Ameriprise, sending emails that had inflated account values to two clients, and mismarking order tickets as unsolicited when they had been solicited.

Regarding the margin trade violations, the regulator notes in the Letter of Acceptance, Waiver, and Consent that McBride settled with one couple by sending them almost $12,845 from his personal account rather than reporting their complaint to Ameriprise. The couple was charged margin interest after incurring a margin balance because McBride mistakenly bought $320K in securities for them using their Ameriprise account that did not have the balance to cover the cost. They had multiple accounts with the brokerage firm.

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The Financial Industry Regulatory Authority has suspended broker Cecil Ernest Nivens for two years for allegedly causing harm variable annuity (VA) investors who were his customers. According to the self-regulatory organization’s filing, Nivens failed to abide by his firm’s written supervisory procedures when he didn’t properly process certain variable universal life purchase transactions as replacement trades even though he was the one who recommended that each purchase be paid for from an existing variable annuity fund.

Nivens earned over $185K in commissions for the variable annuity life purchase transactions, in addition to commissions he was already paid for the variable annuities when they were sold to the same customers. Now, Nivens must disgorge those commissions.

FINRA accused Nivens of causing “considerable” harm to customers. In addition to the excessive commissions, eight of his customers paid over $4K in unnecessary surrender charges. His former firm has paid over $55K to settle VUL fraud customer complaints involving him.

A Financial Industry Regulatory Authority arbitration panel has ruled that J.J.B. Hilliard, W.L. Lyons LLC must pay claimants Troy and Elizabeth Benitone $569K. Also known as Hilliard Lyons, the wealth investment firm is accused of overconcentrating the Benitones’ accounts in Breitburn Energy Partners stock.

The claimants, in their oil and gas fraud case, alleged breach of fiduciary duty, negligent misrepresentation and omission, common law fraud, breach of contract, and negligence supervision. The Benitones contend that Hilliard Lyons and its registered representative sold all of the claimants’ blue chip stocks, investing the money that was in their joint account and in Troy’s IRA in Breitburn. They lost $350K, with statutory damages at 10% on the purchase cost at $441K, from being overconcentrated in Breitburn.

The Benitones believe that it was the lack of diversification in their investments that put them at high risk of loss, especially as they had conservative investment goals and could not handle much risk at all. Also, Hilliard Lyons was the underwriter for the Breitburn Energy Partners stock.

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SEC Charges SunTrust With Collecting Over $1.1M in Excess Mutual Fund Fees

The US Securities and Exchange Commission has filed charges accusing SunTrust Investment Services of collecting over $1.1M in unwarranted fees from mutual fund clients. The SunTrust Banks subsidiary will pay an over $1.1M penalty to resolve the regulator’s civil charges.

According to the regulator’s order, SunTrust Investment Services improperly recommended costlier mutual fund share classes to clients when less expensive shares of these funds were available. The SEC says this was a breach of the investment services firm’s fiduciary duty to take actions in the client’s best interests.

Financial Adviser Who Bilked Athletes, Including Mike Tyson, is Sentenced
Former SFX Financial Advisory Management Enterprises financial advisor Brian Ourand is sentenced to thirty years behind bars after he bilked a number of professional athletes, including former heavyweight champion Mike Tyson, ex-NBA basketball players Glen Rice and Dikembe Mutombo, and others. Ourand must also pay back $1M of what he stole.

Not only is he accused of forging the pro athletes’ signatures on checks that he cashed but also of taking credit cards out against these clients’ accounts to cover his own spending, including restaurants, clothing, and other bills. SFX fired him in 2011.

In 2015, Ourand was charged with wire fraud, federal mail fraud, and aggravated identity theft charges. He pleaded guilty to one criminal count of wire fraud.

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The Financial Industry Regulatory Authority is barring Jaime R. Rodriguez, an ex-HSBC Securities (HSBC) broker, in the wake of a charge accusing him of bilking an older customer, who is also legally blind, of $200K. HSBC fired Rodriguez in 2014.

Rodriguez is accused of using about $70K of the client’s money in 2012 to buy an apartment that was supposed to be for the customer. However, because the man couldn’t read or see the documents related to the purchase, he did not know that Rodriguez had named himself as the sole beneficial owner.

According to InvestmentNews, Rodriguez met the man in 2010 and began helping him with his errands. Also in 2012, Rodriguez purportedly recommended to the client that they set up a joint account together so that the then-HSBC broker could assist him in paying his bills. The account was opened using about $42K of the client’s money and at one point it held $153K.

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Aaron J. Johnson, a former registered investment adviser who ran Capital Advisors until state regulators took back his firm’s registration in 2013, is sentenced to five years behind bars for financial fraud. Johnson, 37, claimed that he stole over $600K from clients because he suffered a mental health breakdown.

According to prosecutors, Johnson took money from middle-class clients’ retirement accounts and charged them excessive fees to the point that he’d practically drained their funds. After Capital Advisors lost its registration, Johnson became affiliated with Trade PMR, a Florida-based firm that offers custody and brokerage services for investment advisers that are registered. Prosecutors contend that even then Johnson kept stealing from clients despite the fact that he was now under investigation. Prosecutors said that after Trade PMR began to question the fees that Johnson charged clients, including $3200 in client fees for an account that only held $13K in assets, the ex-adviser generated fraudulent documents as proof that his actions were warranted. He drained the account of the client, who was a single mom with three kids, until there was only $5 left.

Johnson has been ordered to pay back everyone that he defrauded.

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Two years after the Financial Industry Regulatory Authority (FINRA) barred former UBS Financial Services of Puerto Rico (UBS-PR) broker Jose Ramirez, nicknamed the Whopper, our UBS Puerto Rico fraud attorneys are continuing to provide representation to investors who sustained losses because they took his and other UBS-PR brokers’ advice to borrow from credit lines in order to invest in even more securities. If you are one of these investors and you would like to explore your legal options, please contact Shepherd Smith Edwards and Kantas, LTD LLP today.

It was in 2015 that the US Securities and Exchange Commission (SEC) brought charges against Ramirez accusing him of fraud in the offer and sale of $50 million of UBS-PR affiliated, non-exchange traded closed-end mutual funds. The former UBS broker allegedly enriched himself by advising certain customers to use non-purpose credit lines that a firm affiliate, UBS Bank USA, was offering so that they could buy even more shares.

These customers were not, in fact, allowed to use credit lines to buy the securities and Ramirez allegedly knew this. He is accused of getting around restrictions by telling customers to move money to a bank that had no affiliation with UBS and then re-depositing the funds to their UBS Puerto Rico brokerage account in order to buy additional closed-end mutual funds or Puerto Rico bonds. Such a scheme was a violation of numerous rules and regulations and, if misrepresented to the investors as the SEC has alleged, would have been a major legal violation.

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After Pleading Guilty, Massachusetts Money Manager Must Repay Investors
Stephen Eubanks is sentenced to 30 months behind bars for bilking investors of $437K. He also must pay restitution in that amount to his more than 20 victims.

Eubanks presented himself as a hedge fund manager at Eubiquity Capital, which he founded. He raised over $700K from investors and claimed that he was running a hedge fund that had ties with UBS (UBS), TD Ameritrade (AMTD), Fidelity, and Goldman Sachs (GS).

While Eubanks invested some of the clients’ funds for them he also spent a healthy amount of their money on his own spending. Eubanks also is accused of on occasion operating his fund as if it were a Ponzi scam.

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