It was recently reported that Keith M. Rogers, formerly employed by GLS & Associates, Inc., a FINRA broker-dealer, has been indicted and held on $2 million bond on securities fraud charges, where it was reported that he took investors’ money to pay for personal expenses and repay other investors, a classic Ponzi scheme scenario.  Previously, it was reported that Mr. Rogers was ordered by the Alabama Securities Commission to cease and desist from dealing in securities in the State of Alabama.  In September 2014, Mr. Rogers apparently consented to a bar from the securities industry was barred from the securities industry by the Financial Industry Regulatory Authority (FINRA) for failing to cooperate in FINRA’s investigation into Mr. Roger’s alleged diversion of customer funds away from GLS brokerage accounts.  According to the Administrative Order filed by the Alabama Securities Commission Mr. Rogers facilitated transactions in a company called R&P Development LLC from 2009 through 2013, when he was registered by GLS & Associates, Inc. and Warren Averett Asset Management.

FINRA specifies strict rules on a broker’s ability to solicit business to businesses that are not run by their employing broker-dealer.  Malecki Law attorneys have seen instances where employing broker-dealers fail to properly supervise a broker’s activities.  According to FINRA Rules, Broker-dealers like GLS & Associates Inc. have an important non-delegable duty to supervise the conduct of their financial advisors and employees.  The firm may be held liable for customer losses if the firm failed to properly supervise their employees.  If a broker violates FINRA Rules or securities laws, both the broker and the broker’s employing firm may be held liable for the customer’s losses.

Malecki Law has previously represented many investors successfully in FINRA arbitration proceedings involving outside business activities and firms’ failures to supervise their registered representatives and financial advisors.  If you believe you have suffered losses as a result of questionable actions taken in your securities account, please contact us immediately for a confidential consultation.

As the U.S. baby boomers look toward retirement, a larger percentage of the population will become senior-aged individuals who will have a substantial amount of savings that may be used to fund investments.  It is more important than ever to keep in mind that everyone needs to take as much care over their retirement nest egg now as they did when they were diligently saving.  The New Jersey Bureau of Securities has issued a new release to commemorate World Elder Abuse Awareness Day and remind senior-aged investors to be wary of financial fraud.

In the news release, the NJ Bureau noted that one in five Americans over the age of 65 are victims of financial fraud, making it one of the fastest growing forms of elder abuse.  However, the news release noted that anyone over than 55, whether working or retired, may be viewed as a potential target for financial fraud.

The NJ Bureau of Securities listed several types of financial fraud to be careful of, including:

  • Unsuitable Investments: this involve placing their senior clients with investments that are not suitable for their needs or age. For example, annuities and private placements are often inappropriately sold to seniors.  These products may include significant penalties for withdrawing money before a certain date, or for transferring the annuity to another person.  The also may provide high annual expenses as well as the loss of principal – leaving little or nothing for the investor to leave to his or her heirs.
  • Affinity Fraud: this happens when victims make investment decisions based on the recommendation of a trusted “friend” based on their similar age, ethnic background, religious affiliation, or other affinity. There is nothing inherently wrong about sharing deeply held traits or interests with your financial professional.  But there are plenty of scammers who have no qualms about using these connections to lure and keep victims.  One could certainly argue that Bernie Madoff, exploited victims he had an affinity to, his clients, who trusted him because he seemed to understand their specific concerns and support their causes.  We at Malecki Law have represented many groups of investors who were each led to trust a financial advisor based on common ties such as neighborhood involvement and church affiliation.
  • Free Lunch/Dinner Seminars: there is no such thing as a free lunch. Offers like this are sometimes made by scammers who invite senior citizens to “free lunch” seminars at which the guests are treated to a sales pitch for an unsuitable investment. Anyone who attends a “free lunch” event should be prepared for what follows the meal – and should remember that accepting the free lunch does not obligate anyone to make an investment.  Consumers should not confuse a sales pitch for sound financial advice. The presenter will not know each attendee’s specific financial circumstances and will not be in a position to know how they should best invest their money.  Finally, seniors should never provide their personal information at these events.
  • Telemarketing Scams: Telemarketing scammers often target seniors, knowing that seniors who live alone may be lonely, have time to listen and talk, and look forward to receiving telephone calls.  Anyone who listens to a telemarketing pitch should be very cautious.  Never buy anything over the phone or provide any personal or financial information to a caller.  If you are pressured in any way to answer questions or accept an offer, simply end the conversation and hang up.

The NJ Bureau of Securities also noted the following red flags to watch out for, which may be an indication of fraudulent conduct in a brokerage or investment account:

  • You cannot locate the person to whom you gave your investment money or power of attorney over your account.
  • You wrote the salesperson a check in his or her name, or the name of a business you do not recognize as a widely known company.
  • Your account has experienced unexplained, excessive losses.
  • You no longer receive brokerage statements.
  • You did not receive any documents in writing regarding your investment.
  • You signed investment documents that you did not understand.
  • You have added a new friend to a joint account, property title, will or mortgage. Or you have given a new friend power of attorney.

Malecki Law has previously represented many senior-aged investors successfully in FINRA arbitration proceedings involving unsuitable investments and fraudulent securities schemes, as well as others.  If you believe you have suffered losses as a result of questionable actions taken in your securities account, please contact us immediately for a confidential consultation.

Foreign investors continue to be targets of investment fraud.  Bloomberg Business has reported that broker-dealer Arjent LLC Chief Executive Officer Robert DePalo has been indicted by a New York Grand Jury on charges related to misappropriation of $6.5 million from U.K. investors for personal expenses, including his mortgage and luxury cars.  In addition to the action brought by the New York Manhattan District Attorney, the Securities and Exchange Commission has announced that it also brought its own parallel action in Manhattan federal court.

According to the article, Mr. DePalo is alleged to have misappropriated millions from foreign investors in a holding company called Pangaea Trading Partners LLC.  Mr. DePalo is alleged to have engaged in high-pressure sales tactics and stating falsehoods about the company’s assets and how it would invest the money received.  The Bloomberg article reported that according to the SEC, the Mr. DePalo transferred the money directly into bank accounts controlled by himself and his partner Joshua Gladtke.  The SEC is reported to also have alleged that Mr. DePalo sought to cover up the fraud from regulators.

Lately, the attorneys at Malecki Law have noticed an uptick in schemes, including high-pressure sales tactics, targeting foreign investors.  These tactics may include little-known securities investments, repeated calls and emails to the targeted investors and misrepresentations made concerning the viability of the company that issued the underlying securities.

According to Bloomberg, Mr. Depalo attempted to retaliate against the SEC by suing them in New York federal court in 2013 claiming injustice against small broker-dealers.  The court dismissed that case, stating the SEC was immune from such lawsuits.  Bloomberg reported that at the time of the scheme is accused of perpetrating, Mr. DePalo was near insolvency in his business.

Bankruptcies, both person or business-related, can serve as a major catalyst for unscrupulous activities by brokers and financial advisors.  When these financial professionals are pushed to the brink financially in their personal lives, they may be enticed to offer unsuitable investments, or even enter into wholly fraudulent schemes that serve only to line their own pockets at the expense of their customers.  Unfortunately, lax supervision and self-reporting at firms often does not uncover or report to regulators these bankruptcies.

Malecki Law has previously investigated and successfully handled securities arbitrations concerning investment advisors and brokers who were under financial hardships as a result of bankruptcies, then choosing to unsuitable or fraudulent investments.  If you believe you have suffered losses as a result of questionable actions taken in your securities account, please contact us immediately for a confidential consultation.

Broker Dealer Financial Services Corp. (BDFS) based out of West Des Moines, Iowa just learned the hard way that nontraditional Exchange Traded Funds (ETFs) are risky, speculative investments and are not appropriate for all investors.

The Financial Industry Regulatory Authority (FINRA) recently fined BDFS $75,000 for 1. failing to properly supervise the sale of leveraged ETFs to its customers, 2. not properly training its sales force about the appropriate use of leveraged ETFs in customer accounts, and 3. not adequately supervising nontraditional ETF activity in customer accounts.

According the Letter of Acceptance, Waiver, and Consent, from March of 2009 to April of 2012, BDFS “recommended nontraditional ETFs to more than 200 customers” without “a reasonable basis for believing that the nontraditional ETF transactions it recommended were suitable for any investor.”  BDFS’s ETF related misconduct was said to have violated NASD Rules 2310 and 3010 along with FINRA Rules 2010 and 2111.

Traditional ETFs are similar to mutual funds in that they are typically designed to offer returns by tracking an index like the S&P 500 or Dow Jones.  Unlike mutual funds, ETFs trade on an exchange like stocks and typically have lower fees and higher liquidity.

Nontraditional or Leveraged ETFs are complex products and differ from traditional ETFs in that they endeavor to return multiples of a given index’s return – typically double or triple the return – or the inverse of a given index’s return, or both.  For example, a double leveraged “bear” S&P 500 ETF would be designed to return twice the opposite of the S&P 500’s performance.  So if the S&P 500 went down 1, the ETF would (in theory) go up 2, and vice versa.

Because nontraditional ETFs use derivatives such as swaps and futures contracts to achieve their desired performance, they can be especially risky.  The features of nontraditional ETFs more often than not make them useful only to speculative day-traders and completely unsuitable as “buy and hold” investments for average “mom and pop” investors.

Given that nontraditional ETFs can be so dangerous for the average investor, proper supervision by the selling broker-dealer, like BDFS, is critical to ensure that “mom and pop” are not the ones buying them as long term investments in their accounts.  When firms fail at conducting the proper due diligence and supervision, their customers can suffer crushing losses in their accounts as a result.

Examples of nontraditional ETFs that are usually not appropriate for average investors yet improperly sold to them anyway are:

Direxion Daily Nat Gas Rltd Bull 3X                            GASL

Direxion Daily Jr Gld Mnrs Bull 3X                             JNUG

Direxion Daily Brazil Bull 3X                                         BRZU

Direxion Daily Gold Miners Bull 3X                             NUGT

Direxion Daily Russia Bull 3X                                        RUSL

Direxion Daily Latin America Bull 3X                          LBJ

ProShares Ultra MSCI Brazil Capped                          UBR

Direxion Daily Energy Bull 3X                                      ERX

ProShares Ultra Oil & Gas                                              DIG

ProShares Ultra MSCI Mexico Capped IMI               UMX

Direxion Daily FTSE Europe Bull 3X                          EURL

Direxion Daily South Korea Bull 3X                            KORU

ProShares Ultra FTSE Europe                                      UPV

Direxion Daily Dev Mkts Bull 3X                                  DZK

Direxion Daily Emrg Mkts Bull 3X                               EDC

ProShares Ultra MSCI EAFE                                         EFO

ProShares Ultra MSCI Emerging Markets                 EET

If you or a family member invested in nontraditional ETFs such as those listed above or others, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

It is the right of any and all investors who believe they may have suffered losses as a result of recommendations of their financial advisor to contact our offices to explore their legal rights and options.  The attorneys at Malecki Law have extensive experience representing investors.

 

 

A former University of Washington faculty member pled guilty in connection with a Ponzi scheme that lasted at least six years.  It has been reported by the Washington State Sky Valley Chronicle on May 20, 2015 that Satyen Chatterjee, who owned and operated a financial advisory business called Strategic Capital Management, Inc. for more than twenty years.  The news article reported that the Washington State Department of Financial Operations ordered the business to cease operating illegally in 2013.  The guilty plea was also announced by the Federal Bureau of Investigations in a press release dated May 18, 2015.

According to the article, Mr. Chatterjee used his faculty post at the University of Washington to promote his advisory business.  The article went on the detail that Mr. Chatterjee convinced investors to transfer funds on the belief they were purchasing fixed rate securities, when in reality he transferred the money to personal bank accounts to fund his lifestyle or lost the money day trading.  Also detailed in the article was another scheme whereby Mr. Chatterjee solicited investments in a nutrient supplement company, but used that money to pay off investors who thought they invested in the fixed rate securities.

According to the FBI press release, Mr. Chatterjee admitted to the scheme to defraud investors during a period of 2007 to 2013.  The FBI press release estimates that at least six investors were defrauded out of more than $600,000.

The FBI press release also detailed that Mr. Chatterjee fabricated account statements for at least one investor, and blamed some of the investor losses on investment associates who defaulted on agreements they had with Mr. Chatterjee, as well as blaming them for certain of the losses.

Malecki Law has previously investigated and successfully handled securities arbitrations concerning Ponzi schemes and fraudulent investments perpetrated by financial advisors.  If you believe you have suffered losses as a result of questionable actions taken in your securities account, please contact us immediately for a confidential consultation.

Victims of securities fraud and negligence are entitled to receive damages to compensate them for their losses, as well as other remedies that may be available depending on the specific case.  Frequently investors who have lost money in their investment accounts do not realize that they may be the victims of securities fraud and/or negligence on the part of their financial advisor (i.e., investment advisor and/or stockbroker).

Therefore, today we are going to answer the question:

“Can I sue my financial advisor, investment advisor or stockbroker?“

The short answer to that question is:

“Yes, you may be able to sue your investment advisor, financial advisor or stockbroker, if you have suffered losses in your account as a result of their fraud or negligence.”

When do investors sue their financial advisor?  In simple terms, people sue their financial advisor when they feel that they have been cheated or misled.

Financial advisors are under a number of duties and obligations by virtue of having a license to sell securities.  The firms that they work for are also under specific duties and obligations with respect to what they permit the financial advisors that work for them to do and how they are supervised.  These duties stem from the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), as well as both state and federal laws.

So, if you to suffer losses in your investment account because your financial advisor, their firm, or both breached one or more of those duties to you, then you could have the right sue them to recover money.  It is important to file a lawsuit as quickly as you can, but always consult a lawyer, even if it seems like it happened a long time ago.

Did my financial advisor break the law?

A financial advisor and their firm have the obligation to provide their customers (you) with full and accurate information about investments they recommend.  If a firm or financial advisor provides you with misleading or false information that induced you to buy or sell and investment or did not tell you something important – then you may have a claim for fraud.

Churning is another example.  Churning occurs when a financial advisors buys and sells investments over and over in a very short period of time (oftentimes day-trading) in a customer’s account.  When this happens, the customer usually loses a lot of money in the account, while the financial advisor “earns” a lot of commissions from the account.  A customer who has had their account churned can sue their financial advisor and their firm to recover their losses and refund the commissions the customer paid.

Frequently when churning an account, the financial advisor is also engaged in what is known as “unauthorized trading.”  Unauthorized trading is just what it sounds like – trading in a customer account without the customer’s permission.  Unless a customer gives their financial advisor what is known as “discretion” (i.e., permission) to trade their account at will, a financial advisor is supposed to get the customer’s permission for every trade they make.  If not, then the financial advisor and their firm can be liable to the customer for losses sustained in the unauthorized trades.

Another duty that all financial advisors have to their customers is to make only suitable (i.e., appropriate) recommendations to their customers.  Therefore, financial advisors cannot legally make unsuitable or inappropriate recommendations to their customers.  For example, if a financial advisor has a customer who is conservative and not willing to risk losing a lot of money in their account and they recommend to that customer an investment that is very speculative (i.e., risky with high upside but high downside, too), that financial advisor and their firm can be on the hook to that customer if and when the investment loses money.

Finally, financial advisors (just like everybody else) are not permitted to forge documents or steal their customer’s money.  Unfortunately, financial advisors across the country regularly do both.  These financial advisors and their firms can be held liable to reimburse their customers for all money stolen and losses in the accounts effected.

Financial advisors who do “go bad” seem to do so during periods of personal crisis in their own lives – usually when they are going through a rough divorce, facing personal bankruptcy, or battling addiction to drugs/alcohol.  While those going through life’s major struggles deserve sympathy and a helping hand, that is no excuse to abuse the trust of their customers as so frequently happens.

Investors who believe they may be the victim of fraud or negligence on the part of their financial advisor should contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212)943-1233.  The attorneys at Malecki Law have extensive experience representing investors, and are here to help.

Not far from the home of the original “Ponzi scheme” in Boston, the SEC filed a complaint in the United States District Court for the District of Rhode Island on May 7, 2015 alleging that financial advisor and former broker Patrick Churchville operated a Ponzi scheme that defrauded investors out of $11 million.  The SEC complaint alleged that the fraud was run out of a company called Clearpath Wealth Management, LLC.

According to the SEC complaint, Mr. Churchville operated a Ponzi scheme by using investments from new investors to pay the distribution claims of old investors.  The SEC also alleged that Mr. Churchville diverted approximately $2.5 million of investor funds to purchase his home overlooking Narragansett Bay.  Local News Station WPRI reported on its website that the home is now up for sale for $3.5 million.

The SEC alleged that the fraud began in around December of 2010.  According to his publicly available Financial Industry Regulatory Authority (FINRA) CRD report, Mr. Churchville was registered by Spire Securities, LLC from August 2009 through February 2011, during the time that the SEC alleged fraudulent conduct occurred.  Broker-dealers generally have an obligation to supervise the offices where their registered employees such as Mr. Churchville work.  It is unclear from the SEC’s complaint or FINRA CRD what, if any, disclosure was made to Mr. Churchville’s investors by the firm.

Malecki Law has previously investigated and successfully handled securities arbitrations concerning private securities transactions and other fraudulent conduct by brokers who are employed by FINRA member broker-dealers.  If you believe you have suffered losses as a result of questionable actions taken in your securities account, please contact us immediately for a confidential consultation.

The Financial Industry Regulatory Authority (FINRA) has permanently barred Nicholas Hansen Harper.  Harper worked in Wells Fargo’s Topeka, Kansas branch office from 1997 through 2013 according to his BrokerCheck Report.

Per the Letter of Acceptance Waiver and Consent filed with FINRA, Harper resigned from Wells Fargo on August 7, 2013, shortly after the firm’s compliance department began to review trading in the accounts of certain of his customers.  The timing of Harper’s resignation can only serve to raise suspicions.

Presumably suspicious of Harper, in March of 2015, FINRA requested Harper provide testimony to FINRA investigators pursuant to Rule 8210.   More than one month after the request was issues, FINRA staff spoke to Harper’s attorney, who purportedly indicated that Harper would not be appearing before FINRA to provide testimony at any time.

In response to his violation of FINRA Rule 8210, Harper has agreed to a bar from association with any FINRA member in any capacity.

FINRA investigations are serious matters and for that reason Rule 8210 provides FINRA with a “big stick” to force compliance from registered representatives.

For Harper, this has already become something future employers and clients, alike, in any business can see.  This can affect future employment possibilities, future licensing and the ability to get financing for personal and/or business endeavors.  For a registered person receiving an 8210 request, proper handling of these matters by experienced counsel is essential.

FINRA is one of the few regulators that specifically oversee the securities industry.  Because of that, FINRA’s enforcement division is a crucial part of preventing investment fraud and punishing those who have committed violations.

In addition to the state and federal laws that are on the books, the securities industry is also governed by industry rules promulgated by the Securities and Exchange Commission and FINRA.   These rules, including Rule 8210, are important and must be complied with.

Failure to comply with FINRA and SEC rules can expose a person to civil liability and loss of professional licenses, as in the case of Nicholas Harper.  If a licensed stockbroker or financial advisor has broken the rules with respect to a customer account, that customer could be entitled to recover their losses.

Malecki Law has handled numerous cases stemming from inappropriate trading by brokers in customer accounts.  If you or a family member invested with Nicholas Harper or Wells Fargo and have lost money, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

What should happen to a financial advisor (FA) if they provide unsuitable and inappropriate investment advice to their clients?

First, if the unsuitable advice given to a customer caused losses to that customer’s account, the customer has the option to sue the FA in FINRA arbitration.  Investors can recover some or all of their losses due to the bad advice – usually against the firm that the FA worked for in a failure to supervise case.  Arbitration is common for aggrieved investors, and this law firm has successfully represented numerous investors who have been the victims of unsuitable investment advice from an FA.

But what about punishing the broker, so he or she doesn’t do it again to someone else?  Can they go to jail? If not, what does happens?

In some more extreme cases, the FA may have committed a crime and may be prosecuted. However, these cases are in the significant minority.  More often, the FA is pursued by a financial industry regulator – usually the Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA), but in some cases it could be a state regulator.

These regulators have the power to suspend an FA’s license to sell securities, fine the FA or both.  The regulators also have the ability to punish the firms that employed the FA for failing to supervise the FA properly.

Just yesterday, InvestmentNews reported that FINRA would be toughening its sanctions against firms and FAs for suitability violations.  According to the article, FINRA will be “tightening the screws on its disciplinary responses” against FAs including increasing its suggested suspensions from one year to two years and the potential for barring FAs and firms that commit fraud.  This announcement comes on the heels of a Department of Labor proposal to impose a fiduciary duty upon FAs when dealing with investment accounts – meaning the FA would have to act in his or her client’s best interest.

Ultimately, steps taken in favor of investor protection whether by the DOL, FINRA or otherwise are steps taken in the right direction.

It is the right of any and all investors who believe they may have suffered losses as a result of unsuitable recommendations of their financial advisor to contact our offices to explore their legal rights and options.  Contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

 

 

This oil and gas investment was a bust, but not because of the current market conditions.  According to Securities and Exchange Commission (SEC) court filings, brokers Jeffrey Gainer, Jerry Cicolani, Jr. and Kelly Hood were terminated from their employer PrimeSolutions Securities, Inc., a Cleveland, Ohio broker-dealer, as a result of marketing and recommending investments in KGTA Petroleum, Ltd.  In its complaint filed in the United States District Court for the Northern District of Ohio, the SEC described KGTA Petroleum, Ltd. as a scam and Ponzi scheme.  As reported recently by Crain’s Cleveland Business, the FBI announced on April 15, 2015 that Mr. Cicolani had been charged criminally as a result of selling unregistered KGTA Petroleum, Ltd. securities.

Brokers Gainer and Cicolani allegedly engaged in three separate fraudulent acts by recommending the KGTA investments without properly registering the securities, engaging in “selling away” activities by selling the KGTA investments not through their employer, PrimeSolutions Securities, Inc., and failing to disclose to their public investor customers the very large fees they earned as a result of the recommendations and placements.  According to the SEC complaint, Brokers Gainer and Cicolani earned approximately $6 million in fees, or around 29% of all funds raised in the fraudulent KGTA investments.

The SEC detailed in its complaint that the investments KGTA Petroleum, Ltd. held by customers were often in the form of “promissory notes” or “agreements,” but really represented a typical Ponzi scheme, with interest and other payments made to old investors from the funds of new investors.  The SEC complaint alleged that the scheme affected at least 57 customers.

Selling private securities offerings without the required registration, disclosures and approval of a FINRA member broker-dealer are a very serious violation of the securities laws and rules.  Any investors who invested in these investments may have claims against the brokers and perhaps the broker-dealer PrimeSolutions Securities, Inc., who had affirmative supervision obligations over the branch office at which the brokers worked.  PrimeSolutions Securities, Inc. is obligated to investigate any “red flags” and perform regular audits to root out potentially fraudulent conduct.

According to his publicly available Financial Industry Regulatory Authority (FINRA) CRD report, Mr. Cicolani was the subject of approximately 70 customer complaints at his previous broker-dealer Merrill Lynch, Pierce, Fenner & Smith, Inc.  This number of complaints alone would require PrimeSolutions Securities, Inc. to subject Mr. Cicolani to “heightened supervision,” requiring closer scrutiny of his activities and accounts.  Ms. Hood was allegedly Mr. Cicolani’s girlfriend and was also terminated from PrimeSolutions Securities, Inc. as a result of the KGTA investments.

Malecki Law has previously investigated and successfully handled securities arbitrations concerning private securities transactions and other fraudulent conduct by brokers who are employed by FINRA member broker-dealers.  If you believe you have suffered losses as a result of questionable actions taken in your securities account, please contact us immediately for a confidential consultation.