According to a recent Acceptance, Waiver & Consent (“AWC”) submitted by broker Brian Berger with the Financial Industry Regulatory Authority (FINRA), Mr. Berger has been banned from associating with a broker-dealer in the securities industry.  According to the AWC, in June 2015 FINRA “initiated an investigation into allegations that Mr. Berger had misappropriated funds from elderly customers with registered with Wells Fargo Advisors LLC and MetLife Securities, Inc.”  Mr. Berger was reported to be licensed by Wells Fargo Advisors, LLC from July 2010 through July 2014, and with MetLife Securities, Inc. from July 2014 to April 2015.  It is further reported that he was briefly licensed by a different broker-dealer named Newbridge Securities Corporation from April to June 2015.

As stated in the AWC, Mr. Berger did not to voluntarily participate in FINRA’s investigation, and as a result was barred from the securities industry.

Mr. Berger’s publicly available CRD Report describes several customer complaints that he has faced since 2011.  The CRD Report shows that a customer alleged that there were unauthorized payments made against the customer’s account for discover card accounts owned by the financial advisor.  Though reported that the customer alleged damages of approximately $175,000, the allegations were reported as settled for approximately $186,000.

Mr. Berger’s publicly available CRD Report also discloses that he was discharged from his employment with MetLife Securities, Inc. because he “did not follow company policy with respect to customer signatures on account documents.”

FINRA Rules and securities industry regulations make clear that brokers must be supervised to ensure against securities law violations.   Malecki Law has successfully brought many securities actions on behalf of investors who suffered losses as a result of unscrupulous actions taken in their securities accounts.  Broker-dealers are required by the securities laws and industry rules to supervise the recommendations of their brokers and performance of their customers’ accounts, and may be liable to investors for their failure to do so.  If you believe you have suffered losses as a result of questionable securities recommended to you, or questionable actions taken in your securities account, please contact us immediately for a confidential consultation.

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This Week at Malecki Law

 

It was an eventful week at Malecki Law with prominent stories in the press, speaking engagements at legal educational organizations, appointments to bar association committees, and introduction to securities fraud in different communities.

Malecki Law announced the filing of a $25 million FINRA claim against UBS Puerto Rico on behalf of seven former UBS brokers, following a mass departure of brokers from UBS Puerto Rico. In the Statement of Claim filed with FINRA, the registered former UBS representatives allege that UBS management misled its brokers and customers, and threatened and pressured the brokers to sell the the Puerto Rican closed-end fund products. This news generated a lot of interest amongst the financial media and has appeared in over 30 prominent financial websites and blogs including Market Watch, The Street, and Caribbean Business News. Subsequently, this news announcement has generated a great deal of interest in the legal and financial professionals’ community.

Securities Fraud is not a problem isolated only to large cities like New York City.   Hard working people in towns and cities nationwide find themselves the victims of investment fraud every day from rural Texas to downtown Chicago.  Therefore, Malecki Law introduced a Communities section on their www.aboutsecuritieslaw.com website to make individuals around the country aware of historic and actively suspicious financial schemes.

Ms. Jenice Malecki was a panelist this week at the Practising Law Institute’s Securities Arbitration 2015 seminar, where she spoke about Examination of the Broker in Product Cases.

Malecki Law Associate Robert M. Van De Veire was appointed as Co-Chair of the prestigious Securities & Exchange Committee at NYCLA, where he has been a member for the past five years.

A Letter of Acceptance, Waiver and Consent (AWC) was recently accepted by Financial Industry Regulatory Authority’s (FINRA’s) Department of Enforcement from Adrian S. Lauer.  Mr. Lauer was accused of failing to disclose outside business activities on his Form U4 and to his employer.  Specifically, Mr. Lauer was accused of violating FINRA Rules 2010 (Standards of Commercial Honor and Principles of Trade) and 3270 (Outside Business Activities of Registered Persons).

It was alleged that from April 2011 through March 2014, Mr. Lauer participated in a 401(k) advisory business and worked as a webmaster for a college alumni club while employed at Securities America, Inc.  The AWC detailed that Mr. Lauer failed to disclose his participation in the advisory business, but later sought approval from the firm.  It was alleged that although the firm denied the request regarding the advisory business, Mr. Lauer also continued to participate in this business.  The AWC further detailed that while Mr. Lauer sought approval of his college alumni club activities after he had already begun participating, the firm informed him of the steps he needed to take for the firm to grant his request but he never followed the steps, still choosing the participate in the outside business activity.

The AWC detailed that as a result of his violations, Mr. Lauer consented to a 60-day suspension and a $5,000 fine.

Malecki Law has successfully represented many investors who became embroiled in brokers’ outside business and outside securities activities that were performed away from their employing brokers.  If you believe you have suffered losses as a result of questionable actions that took place in your securities account, or as a result of questionable investments that may or may not have been placed through a broker-dealer, please contact us immediately for a confidential consultation.

According to a Letter of Acceptance Waiver and Consent filed with the Financial Industry Regulatory Authority (“FINRA”), Thomas Buck has been barred by FINRA from working with any FINRA member firms. Mr. Buck was a former top broker at Bank of America Merrill Lynch and was at the time a broker at RBC Wealth Management.

Mr. Buck was a registered broker at Merrill Lynch’s Carmel, Indiana office, which was part of the firm’s Indiana complex. While at Merrill Lynch, Mr. Buck, who reportedly oversaw $1.3 billion in assets, was accused of failing to discuss pricing alternatives with customers, among other allegations.  In addition, Mr. Buck was accused of unauthorized trading and using discretion in customer accounts improperly and in violation of FINRA Rules.

Buck was reportedly fired from Merrill Lynch in March.  Just four months alter, he was barred from working at any FINRA-associated broker-dealer.  According to FINRA, Mr. Buck used commission-based accounts even though fee-based accounts would have been less expensive for clients. In some cases, clients were allegedly charged significantly more in commissions by virtue of the fact that they were not placed in fee-based accounts.

The extent of Mr. Buck’s use of commission-based accounts can be viewed as shocking.  Nearly 80% of the revenues generated by Buck were from commission-based activity, according to the AWC.  Whereas, 70% of the revenue generated at the Indiana complex that housed Buck’s group was said to be from fee-based accounts.  Not only did he allegedly mislead clients about the two account options, but he also is said to have actively engaged in unauthorized trading.

Mr. Buck, who had 33 years of experience in the securities industry, has 12 customer disputes according to his FINRA BrokerCheck report. These disputes were all filed in 2015 and seem to stem from his actions at Merrill Lynch.

Malecki Law has previously represented many investors successfully in FINRA arbitration proceedings involving  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.

Per reports, William Galvin, the Secretary of the Commonwealth of Massachusetts, recently filed complaints against Securities America and its broker Barry Armstrong over allegedly misleading advertisements that targeted vulnerable seniors.

Securities America allegedly participated in and failed to supervise Mr. Armstrong, in conducting a misleading radio advertising campaign.  In what has been described as a “bait and switch” technique, Mr. Armstrong reportedly ran the Alzheimer’s disease ads as a pretext to obtain the contact information needed to sell another service.

Mr. Armstrong, who hosts his own radio show, was said to have run ads on various AM radio stations that instructed listeners to call him for free information on Alzheimer’s disease.  Once listeners called in, their contact information was allegedly used to advertise financial services. According to reports, these deceptive ads were submitted to Securities America for review and were all approved by the firm.

The complaints requested a permanent cease and desist order, censure, an undetermined fine, and a requirement that Securities America hire an independent compliance consultant.

These allegations highlight the growing concern in the financial industry regarding elderly investors. Given their vulnerability, both regulators and firms have taken steps to ensure that seniors are protected from potential frauds. For instance, FINRA recently created a securities helpline for seniors.

Securities America is a FINRA registered broker-dealer and believed to have more than 2,000 financial professionals.  According to records, Mr. Armstrong has been a registered broker since 1984 and has been employed at Securities America since 2007. He has five disclosures on his FINRA BrokerCheck report, including three customer disputes. He was previously discharged from a broker-dealer for allegedly violating company procedures and for failure to supervise..

Malecki Law has previously represented many investors successfully in FINRA arbitration proceedings involving  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.

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This week, the attorneys at Malecki Law sent letters to several United States Senate and House of Representatives members, urging them to support the Department of Labor’s (DOL) proposal to hold financial advisors to a higher standard and act in the best interest of retirement investors. These members of the Congress include the Honorable Charles E. Schumer, the Honorable Jerrold Nadler, and the Honorable Kirsten E. Gillibrand.

Millions of Americans have worked their whole life to build a retirement nest egg and count on their retirement savings to support them through their golden years. The DOL’s proposal addresses loopholes in the current rules that make it far too easy for some advisers to take advantage of these hard-working Americans and line their own pockets with retirement savings. Our system is so broken that brokers often can and do put their own interest in commissions above the interests of their clients, causing them to be in unsuitable products just so the broker could earn additional commissions.

When someone turns their life savings over to someone for advice, they believe their financial adviser is going to do what’s best for them.  We have never heard a client recount a story of a financial advisor that told them that they are not fiduciaries, in fact, we hear just the opposite.  We all see the advertisements on television that say the financial advisers are there to help us, but we need to know that financial advisers are obligated to put client interests first, as well as be able to receive that assurance in writing.

Managing the retirement savings often involves complex financial decisions, decisions that cannot and should not be made without proper, fiduciary guidance.  While people spend time away from their families, sacrificing to save for the future, their busy lives do not permit the average investor to become a knowledgeable expert in the stock market while tending to children and grandchildren, working, managing their homes and paying their bills every day.  Everyone knows this to be true.

We are reaching out to the Senate to close these loopholes and ensure a high standard that holds anyone who gives financial advice genuinely accountable for helping everyday Americans choose the best retirement investments for them, their families, and their future — not just the ones that make their brokers and bankers richer.

“My broker dealer wants me to meet with its lawyers.”  This is the start of a FINRA registered representative’s worst nightmare.

Your heart is pounding and your head starts to race.  “Why me?” “What do they want to know?”  “What could I have done?”  “Are they going to ask me about the XYZ account?”  “I’m sure that I did everything right and by the book, didn’t I?”

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If you did do something that may have been a violation of the law, FINRA Rules, or the firm’s manual, you will likely begin to think about the potential punishment (fine, suspension, termination) even before you hang up the phone or close the door to your office.  Once an investigation into your conduct starts, you are not able to leave with a “voluntary” termination, but at best would be “permitted to resign during a firm investigation.”

Ultimately, no matter where your mind goes at first, it will almost certainly arrive at the same question eventually: “Do I need a lawyer?” and “If I get a lawyer, can I bring them with me when I meet with the firm’s lawyers?”

The answer to these questions is almost always a “Yes.”  Retaining counsel is generally a good idea in these situations for a number of reasons.

A broker-dealer’s lawyers getting involved is usually a sign that there is a problem.  You may be a part of the problem, a scapegoat for larger supervisory issues, or you may be an innocent by-stander or witness.  Though it can be difficult to know for certain, retaining an experience securities attorney and having an open and candid conversation with them can go a long way toward helping you determine which position you are most likely in.  Having a good idea of which position you are in (target or witness) will help you determine which approach to take before meeting with the firm’s lawyers.

While honesty is always the best policy, it is critical to know if your firm’s lawyers are “friend or foe.”  The cardinal rule for speaking to your firm’s attorneys is to ALWAYS REMEMBER YOUR FIRM’S LAWYERS REPRESENT THE FIRM, NOT YOU.  Therefore, it is possible that your firm’s interests are not aligned with yours, meaning your firm and/or your supervisors may be looking to throw you under the proverbial bus, thereby avoiding blame themselves.

If you did do something against the rules, you need to remember that there is a very real possibility that your firm may turn over some or all of the findings of their internal investigation to either the SEC, FINRA, or both.  So, if you may have committed a violation, you need to treat your conversation with the firm lawyers much in the same way as if you had received an SEC subpoena or a FINRA 8210 request.   This is going to be the first step in your defense.

Ultimately, you need to look out for yourself.  If you did nothing, you should make sure you are not the scapegoat for something you did not do.   Or, if you did commit a violation, you need to ensure that you are well represented throughout the whole process and present a cogent defense, as well as manage your exit from the firm in the best way possible.

 

If your firm has requested that you speak to in-house and/or outside counsel, you should contact the securities lawyers at Malecki Law for a free consultation at (212)943-1233.  The attorneys at Malecki Law have extensive experience representing clients in formal regulatory and internal investigations, and are here to help.

On July 1, 2015, the Financial Industry Regulatory Authority (FINRA) accepted settlement offers from brokers Jonah Engler, Hector Perez, Jonathan Michael Sheklow and Joshua William Turney for their roles in selling fraudulent investments to 59 customers.  According to FINRA’s Orders Accepting Offers of Settlement, these individuals sold $3 million worth of Senior Secured Zero Coupon Notes issued by a company called Metals, Milling and Mining LLC.  Mr. Engler himself has settled 11 customer complaints over the years, according to the FINRA CRD system.  The Orders state that each of the brokers has been barred from associating with any FINRA member in the future.

As reported in the Orders, the Notes were sold upon misrepresentations that they would return 100% within one year by extracting valuable minerals left over from mining operations.  The Orders detailed that all investors, except for three, lost all of the money they invested, with those three investors being repaid with money from new investors, a classic sign of a Ponzi scheme.

The Order stated that the company that issued the notes was partially owned or controlled by a Managing Partner of the brokerage firm that the above brokers worked for.  When a brokerage firm owns a company that issues securities, this may create a conflict of interest between the broker-dealer and the customer, because the securities may be recommended in order for the brokerage firm to make money, and not because it is suitable or in the best interest of the customer.

The Orders further detailed that the investments were misrepresented to be collateralized by barrels of “ore concentrate” when, in fact, there was no collateral, and the concentrate the company did have was nearly worthless.  In the Orders, it was described that the brokers failed to confirm whether the collateral existed and recklessly misrepresented the investments would be adequately secured.  Additionally, the brokers failed to investigate and understand the science of the investments, the Orders detailed.

Malecki Law has successfully brought many securities actions on behalf of investors who were sold fraudulent investments.  Broker-dealers are required by the securities laws and industry rules to supervise the recommendations of their brokers, and may be liable to investors for their failure to do so.  If you believe you have suffered losses as a result of questionable securities recommended to you, or questionable taken in your securities account, please contact us immediately for a confidential consultation.

Another oil and gas venture domino falls.  The Securities and Exchange Commissions (SEC) released a press release on July 6, 2015 announcing charges brought against Luca International, a California based oil and gas company, and Bingqing Yang, the company’s CEO.  The SEC charged Luca and Ms. Yang with running an alleged $68 million Ponzi scheme and affinity fraud against the Chinese-American community in California and elsewhere.

The SEC alleged that Ms. Yang knew the company was failing, but misrepresented the projected returns of the company as 20-30% annually.  Ms. Yang allegedly also commingled funds and diverted $2.4 million through a separate offshore entity to purchase a home and pay for personal expenses.

Ms. Yang allegedly relied on two tactics: affinity fraud and Chinese citizens who sought to immigrate to the United States through the EB-5 visa program, which grant green cards for making certain investments in U.S. companies.  Other Luca employees were also reported to be implicated in the fraud.  Additionally, the SEC’s press release noted that in a separate administrative action, Wisteria Global and one Hiroshi Fujigami settled charges that they acted as brokers for the Luca entities and were to disgorge ill-gotten gains of more than $1.1 million.

Affinity fraud occurs when a fraudulent product is marketed towards a specific group that are defined by a common interest, such as through religion or the community.  The Luca International investors were largely Chinese-American investors from the California area.  The investors were allegedly lured by advertisements made in Chinese language television, radio and newspapers.

We at Malecki Law have represented several groups who were drastically affected by affinity fraud.  It is essential that broker-dealers properly vet private placements in investments such as oil and gas ventures before permitted the investments to be marketed and recommended to investors.  Brokers and broker-dealers may be liable to their customers for failing to properly perform this due diligence.

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 Wall Street Journal reported on July 2, 2015 that many investors may suffer losses as a result of the attempts by Puerto Rico Electric Power Authority (PREPA) to restructure its debt with its creditors in order to avoid a default and other Puerto Rico economic woes.

While clearly many investors are and will continue to be harmed in this market, the pain is likely to be harder felt by two sets of victims of UBS’s closed-end bond funds that are tied to debt issued by PREPA, other utilities and Puerto Rico’s general obligation bonds.

We recently wrote regarding how the brokers who recommend products such as UBS’s closed-end funds may have also been given faulty information from the firm.  Then, Reuters ran an article describing a taped meeting at UBS where leadership threatened the UBS Puerto Rico brokers to sell the closed-end funds at all costs despite growing concerns about the products.  In one of the first arbitration awards to be announced in which UBS was ordered to pay $1 million to an investor related to the UBS closed-end bond funds, a Financial Industry Regulatory Authority (FINRA) arbitrator stated that a recommendation of the bond fund was unsuitable because it was “grossly overconcentrated… any proper UBS branch office or other review should have detected such obvious unsuitability.”

Alleging supervision and other firm failures, Malecki filed a case on behalf of two former UBS Puerto Rico brokers, Jorge Bravo and Teresa Bravo, and anticipates filing other cases on behalf of additional brokers.  The Bravos alleged in their Statement of Claim against UBS that they were both misled and induced by the firm into selling the closed-end bond funds to their clients and were harmed because Teresa Bravo purchased $100,000 of the bond funds herself.

We have been informed that additional brokers may be terminated in the future as a result of the continued fallout over the UBS closed-end bond funds.  These brokers should contact an attorney to discuss their legal options upon their termination, because UBS may be liable for damages to them, as a result of the well-publicized catastrophe that has resulted from the products the brokers were misled and induced to sell, and their clients bough, both upon false pretenses.