Just this past month, H. Beck, Inc. of Bethesda, Maryland submitted a Letter of Acceptance Waiver and Consent (“AWC”) to settle alleged FINRA Rule violations concerning the failures in the firm’s supervisory system and written supervisory procedures.  H. Beck is said to have more than 800 registered representatives based out of over 460 registered branch offices.

Specifically, it was alleged in the AWC that the firm failed to maintain a supervisory system reasonably designed to ensure that customers received certain sales charge discounts.  H.Beck was also alleged to have insufficient supervisory procedures governing the use of consolidated reports with customers, leading to inaccurate information being sent to customers.

According to the AWC, H. Beck failed to “identify and apply sales charge discounts to customers with eligible purchases of UITs.”  A UIT, or uniform investment trust, is a type of investment company that offers undivided interests in a portfolio of securities.  These interests are frequently called “units.”

The sponsors of UITs typically offer investors a number of ways to reduce sales charges.  As a result of H. Beck’s alleged failure to properly apply sales charge discounts, their customers are said to have paid excessive sales charges of nearly $200,000.

H. Beck was also accused of having improperly supervised the use of consolidated reports with customers. As a result, FINRA alleged that H. Beck registered representatives sent consolidated reports to their customers about their assets held both at the firm and away from it, with information that were incorrect.

Based upon the foregoing, FINRA alleged that H. Beck violated NASD Rules 3010, 2110, 2210, and FINRA Rule 2010.

Malecki Law has handled a number of cases against H. Beck, Inc.  If you or a family member lost money as a result of the conduct of a broker at H. Beck, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

Was this a case of a broker who did “too much” for his clients, Aaron Parthemer’s attorney claimed in an InvestmentNews news article dated April 23, 2015?  One thing is sure: the Financial Industry Regulatory Authority (FINRA) has barred Aaron Parthemer from associating with any FINRA member broker-dealer in any capacity for violating industry rules by participating in private securities transactions, outside business activities, and for making loans to his clients, according to FINRA Letter of Acceptance, Waiver and Consent No. 2011030405801 (AWC).  Each of these items alone could be sufficient for termination of a broker from their employing broker-dealer.  The conduct detailed in the AWC spanned a time when Mr. Parthemer was employed and licensed to recommend the purchase and sale of securities by Morgan Stanley Smith Barney LLC from June 2009 through October 2011, and from October 2011 through March 2013 with Wells Fargo Advisors, LLC.

According to the InvestmentNews article, Mr. Parthemer was a Miami “socialite” who was a financial advisor to a number of NFL and NBA players and had his picture taken with such celebrities as Chris Brown and Nicki Minaj.  According to the AWC, Mr. Parthemer was barred for a number of securities industry violations, including involvement in outside business activities in violation of FINRA Rules 3270 and 2010 and NASD Rule 3030.  The AWC detailed that Mr. Parthemer worked as a President and Chief Executive Officer of a Miami nightclub (identified by the InvestmentNews article as “Club Play”) and also marketed an international tequila brand.  Brokers are permitted to operate outside business activities if they are disclosed and approved by their employing broker-dealer.  Disclosure and approval is required in order to ensure that inappropriate securities transactions do not occur outside the supervision of the broker-dealer.

Mr. Parthemer was also barred for providing approximately $400,000 in loans to certain securities customers, in violation of FINRA Rule 3240.  Rule 3240 makes it clear that loans to or from clients are only permitted in certain limited circumstances where disclosure is made to the employing broker-dealer and such loan is approved.  Supervision by broker-dealers is necessary, again to ensure that there are no violations of securities laws or industry rules occurring.  The AWC noted that the loans made by Mr. Parthemer were never disclosed to Wells Fargo.

In addition, Mr. Parthemer was barred for participating in private securities transactions by recommending that certain of his clients invest in an internet startup company, in violation of FINRA Rule 3040.  Like the activities listed above, a broker must disclose a private securities transaction to his/her employing broker-dealer, who must then approve or deny the transaction.  If the transaction is approved, the broker-dealer must place the transaction on its books and records and supervise the transaction as if it were any other security offered by the firm.  The AWC noted that Mr. Parthemer never disclosed his private securities transactions to either Morgan Stanley or Wells Fargo.

Malecki Law has previously investigated and successfully handled securities arbitrations concerning issues related to outside business activities, loans to customers and private securities transactions with public investors that should have been supervised by the employing 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.

EDI Financial, Inc. in Irving, Texas has been censured and fined $100,000 by the Financial Industry Regulatory Authority, according to a recent report issued by FINRA.  According to the report, EDI Financial entered into a Letter of Acceptance Waiver and Consent (“AWC”) with FINRA consenting to the fine and censure along with the entry of findings that it failed to “adopt and implement supervisory systems and procedures necessary to achieve compliance with the firm’s suitability obligations.”  According to FINRA, the failures of the firm’s supervisory system related to the solicitation and sale of private placements, specifically customer suitability.

Firms and their registered representatives have an obligation to ensure that all investments recommended to their customers are suitable (in other words, appropriate) for the customer.  Firms have an obligation to consider things such as the customer’s risk tolerance, age, income, and investment objective, among others.

Notwithstanding this obligation, it was alleged that “despite the risk and illiquidity of private placements” EDI failed to have appropriate supervisory procedures in place with respect to the proportion of a customer’s assets that could be put in the private placement.  This is known in the industry as “concentration.”

Allocating too much of a customer’s assets in one security, type of security, industry, etc. is known as “over-concentration” and can be very dangerous and risky for the customer.  That is why in most cases over-concentration is deemed unsuitable and a violation of FINRA rules.

Inappropriate sales of private placements and over-concentration can result in significant and devastating losses to investors.  Many of these investors can recover all or some of their losses under the law.

Malecki Law has handled numerous cases relating to losses as a result of over-concentration and private placements.  If you or a family member lost money as a result of a broker’s recommendation, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

The Securities and Exchange Commission (SECannounced on April 16, 2015 that it filed a complaint in the United States District Court for the Southern District of New York alleging that Michael J. Oppenheim defrauded former clients out of $20 million dollars.  Mr. Oppenheim was previously employed and licensed to recommend the purchase and sale of securities by JP Morgan Securities LLC, according to his publicly available FINRA CRD Report.

According to the SEC’s announcement and complaint, Mr. Oppenheim used his position as a financial advisor to convince two former clients to withdraw approximately $12 million from their accounts and give the money to him upon false promises that the money would be invested in “safe and secure municipal bonds for their accounts.”  However, the SEC complaint alleges that Mr. Oppenheim instead invested the ill-gotten money into either his own brokerage account or that of his wife, and subsequently lost the bulk of the funds in a risky options trading strategy.

The SEC complaint goes on to allege that after losing the investors’ money, he created fake account statements to make it look as though the money was not lost.  He also allegedly transferred money between other investors’ accounts to replenish money he stole earlier.  In total, the SEC complaint alleges that approximately $20 million was taken from Mr. Oppenheim’s clients’ accounts from March 2011 through October 2014, which, if true, would have been while he was licensed by JP Morgan Securities LLC to recommend securities transactions to public investors.

Broker-dealers such as JP Morgan Securities LLC has the affirmative obligation to approve each employed broker’s brokerage accounts, and therefore supervise such accounts.  Broker-dealers have this supervision obligation for many reasons, which include stopping fraud: if a broker steals money from a public investor, he or she may very well put this money into a brokerage account, so substantial and repeated large cash deposits may constitute a “red flag” that could indicate a securities violation.  It does not appear that the SEC has brought any charges against JP Morgan Securities LLC. According to a New York Times article on the subject dated April 16, 2015, the bank alerted federal authorities regarding the alleged theft.

Malecki Law has previously investigated and successfully handled securities arbitration proceedings concerning issues related to broker theft from customer accounts that should have been supervised by their employing 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 (FINRAannounced on March 30, 2015 that it fined H. Beck, Inc., LaSalle St. Securities, LLC, and J.P. Turner & Company, LLC for failing to supervise consolidated reports.  These consolidated reports were provided to public customers, according to the announcement.

According to FINRA, “[a] consolidated report is a single document that combines information regarding most or all of a customer’s financial holdings, regardless of where those assets are held,” and does not replace monthly reports received from the firm.

In the announcement, FINRA cited to FINRA Regulatory Notice 10-19.  A regulatory Notice is used by FINRA to remind its members of obligations required by FINRA Rules and securities laws.  In Regulatory Notice 10-19, FINRA made clear that:

If not rigorously supervised, this activity can raise a number of regulatory concerns, including the potential for communicating inaccurate, confusing or misleading information to customers, lapses in supervisory controls, and the use of these reports for fraudulent or unethical purposes.

Regulatory Notice 10-19, and FINRA’s announcement, make these concerns clear, and also put FINRA member broker-dealer firms on notice of their obligations to perform adequate supervision over these consolidated reports.  In Regulatory Notice 10-19, FINRA states that to the extent brokers are permitted to create consolidated reports, “firms are required to supervise this activity.”

In FINRA’s March 30 announcement, it fined the three firms for inadequate supervision over consolidated reports.  H. Beck, Inc., for example, has approximately 465 offices around the country and approximately 800 brokers.  For a period, H. Beck, Inc. had no system in place to supervise the creation and dissemination of consolidated reports, despite the fact that close to 50 brokers sent them to certain of their respective customers, according to AWC No. 2012031552601.  According to the AWC, certain of these consolidated reports contained inaccuracies.

Likewise, J.P. Turner, a firm of approximately 185 branch offices and 420 brokers, also was fined by FINRA for permitting close to 50 brokers to create and distribute to their customers consolidated reports, while the firm had no supervisory procedures in place addressing the use of consolidated reports, according to AWC No. 2013036404301.

We at Malecki Law have seen how consolidated reports, combined with lax broker-dealer firm oversight, can be used to perpetuate frauds against public investors.  Very often, brokers have the ability to create or modify the consolidated reports to include “investments” that may not be on the broker-dealer’s books and records.  If the firm does not properly supervise the creation and dissemination of these consolidated reports, then brokers may be permitted to give the questionable “investments” an appearance of legitimacy because they appear on a firm document.

Malecki Law has previously investigated and successfully handled securities arbitrations concerning issues related to consolidated reports.  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.

A Letter of Acceptance Waiver and Consent was recently accepted by FINRA’s Department of Enforcement from Andre Paul Young.  Mr. Young was accused of borrowing more than $200,000 from customers in violation of FINRA rules while a registered representative of MetLife Securities, Inc.  Specifically, Mr. Young was accused of violating NASD Rule 2370, FINRA Rule 3240 and FINRA Rule 2010.

It was alleged that from June 2010 through June 2012, Mr. Young borrowed roughly $208,000 from two MetLife Securities customers for personal expenses, including those associated with the settlement of certain estate matters.  Per the AWC, the customers issued five checks from their MetLife Securities brokerage account payable to a bank account number for an account owned by Mr. Young.

Per FINRA, this conduct was in violation of MetLife Securities policies and FINRA Rules.  FINRA Rule 3240 (and formerly NASD Rule 2370) expressly prohibits brokers from borrowing funds from customers.  In addition to those violations, Mr. Young allegedly failed to timely and completely respond to requests for documents and information in violation of FINRA Rule 8210.

Ultimately, Mr. Young consented to “a suspension from associating with any FINRA member in any capacity for a period of one year.”

Per his CRD, Mr. Young was also registered with Source Capital Group, Bancnorth Investment Group, Wachovia Securities and Prudential Securities.

Malecki Law has handled numerous cases stemming from loans to brokers from their customers for investment purposes or other, that were ultimately never repaid.  If you or a family member loaned money to your broker and fear that money may be lost, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.


Malecki Law announces the filing of a $10 million FINRA arbitration claim against UBS Financial Services, Inc. and UBS Financial Services Incorporated of Puerto Rico (collectively “UBS”) on behalf of former UBS Puerto Rico registered representatives, Jorge Bravo and Teresa Bravo (the “Bravos”).

In the Statement of Claim filed with FINRA, the Bravos allege that through its management (including Miguel Ferrer, Robert Mulholland and Carlos Verner Ubinas Taylor) UBS misled both its brokers and its customers about the UBS Puerto Rican closed-end funds.  In their pleading, the Bravos accuse UBS of threatening, deceiving and coercing its brokers, including them.

Specifically, the Bravos allege that they were lured away from their prior firm by UBS under the false pretense that UBS could and would help them better serve their clients.  UBS was allegedly engaged in a fraudulent course of conduct in material conflict with both its customers and its brokers, unbeknownst to the Bravos.  Over the three years they were registered with UBS, the Bravos allege that they were repeatedly and fraudulently mistreated and misled by UBS for UBS’s own benefit, until being unceremoniously forced out by the firm.

In their filing with FINRA, the Bravos allege that UBS chose to deceive its customers to protect itself, its business and its revenue stream stemming from the Puerto Rican closed-end funds.  Allegedly motivated by its own self-preservation, UBS management is claimed to have engaged in a concerted effort to artificially preserve the viability of the market for the Puerto Rican closed-end funds.  To do so, UBS allegedly made material misstatements and omissions to both brokers and customers about the closed-end funds, UBS’s internal analysis of the closed-end funds and its assessment of the market for the closed-end funds, which they controlled.   UBS had reportedly settled charges with the SEC in 2012 for its misconduct in the Puerto Rican closed-end fund market in and around the years 2008-2009.   To settle those charges, UBS reportedly paid $26.6 million.

According to the Statement of Claim, both before and after the settlement with the SEC, UBS created a high pressure environment to induce brokers, including the Bravos, to find more assets and sell the Puerto Rican closed-end fund products, or else face termination.  The Statement of Claim cites to a recent article published by Reuters about a newly uncovered recording of Miguel Ferrer driving reluctant brokers to sell the Puerto Rican closed-end funds.  The Bravos allege that such high pressure tactics towards brokers and threats against their jobs were common at UBS during their time there.

The Bravos do not only allege that they were misled and induced into selling the Puerto Rican closed-end funds to their clients.  According to the Statement of Claim, Ms. Bravo was duped into purchasing $100,000 worth of the Puerto Rican closed-end funds for her own personal brokerage account at UBS, resulting in losses.

Ultimately, the Bravos allege that as a result of UBS’s willful and tortious misconduct, their business has been devastated, and their abilities to earn in the future have been irreparably compromised.  Therefore, the Bravos allege that UBS is liable to them for causes of action arising out of fraud, fraudulent misrepresentation, breach of the duty to inform an agent, negligence, negligent misrepresentation, tortious interference with business relationships and economic advantage, breach of contract, and violations of Puerto Rico Law 80.

The Bravos have requested a FINRA arbitration panel award them no less than $10,000,000 in compensatory damages. Their Statement of Claim also asks the arbitration panel to award the Bravos punitive damages, above and beyond their compensatory damages, to punish UBS for its conduct.

Notable are the striking similarities in the above alleged scenario and those allegations previously made against UBS by the SEC in the wake of the recent auction rate securities (ARS) collapse, for which UBS reportedly entered into a $22.7 billion settlement with the SEC.  In both cases, allegations were made that UBS placed its own interests above those of its customers – and in the case of the Bravos – its brokers, too.


The Financial Industry Regulatory Authority (FINRAannounced on March 26, 2015 that it fined Oppenheimer & Co., Inc. for failing to supervise Mark Hotton, a former broker who allegedly stole money from his clients accounts and excessively traded their accounts.  FINRA had already barred Mr. Hotton from the securities industry in 2013.

According to FINRA’s announcement, Oppenheimer & Co., Inc. failed to supervise Mr. Hotton in many respects, including during his hire and during his employment, as well as failed to supervise the accounts he was trading.  Oppenheimer & Co., Inc. failed to supervise Mr. Hotton during his hire by failing to consider 12 prior reportable events that occurred in Mr. Hotton’s past, including criminal events and seven customer complaints, according to FINRA.

FINRA also announced that Oppenheimer & Co., Inc. failed to supervise Mr. Hotton during his employment by failing to subject him to heightened supervision despite learning that his business partners had allegedly sued him for fraud resulting in several million dollars’ damages.  Oppenheimer & Co., Inc. may have been required to subject Mr. Hotton to heightened supervision, a more expensive and time-consuming manner of supervision, because of the number of past customer complaints against him while employed at other firms or while at Oppenheimer & Co., Inc.  To may matters worse, FINRA noted that Oppenheimer & Co., Inc. further failed to supervise Mr. Hotton by failing to investigate “red flags” in correspondences and wire requests that could have signaled potential violations of securities laws and industry rules.  FINRA alleged that Mr. Hotton was wiring funds out of customers’ accounts to accounts he owned or controlled.

FINRA also announced that Mr. Hotton excessively traded certain of his clients’ accounts.  Excessive trading may occur when purchases and sales of securities are made at such a rapid rate that the purpose is only to increase the broker’s commissions earned from buying and selling.  Excessive trading may be evidenced from such high “turnover rates” as well as high “cost to equity ratios,” a ratio calculated from comparing the costs in the account to the equity.    Customers usually lose large percentages of money when their accounts are excessively traded, and broker-dealers are often best placed to detect and stop such trading, though they rarely do.

Finally, FINRA announced that Oppenheimer & Co., Inc. has failed to make timely disseminations to FINRA regarding their brokers, which meant that the investing public and other broker-dealers did not get necessary information in a timely manner.

Malecki Law has previously investigated and successfully handled securities arbitrations against Oppenheimer & Co., Inc. and certain of the firm’s brokers in the past.  If you believe you have suffered losses as a result of questionable actions taken in your account, please contact us immediately for a confidential consultation.

The Financial Industry Regulatory Authority recently censured Merrill Lynch Pierce Fenner & Smith and fined the firm $100,000, sanctions to which the firm consented.  These sanctions relate to Merrill Lynch’s alleged violation of several industry rules, including FINRA Rules 4370 and 2010.  FINRA alleged that Merrill Lynch “failed to send required regulatory disclosures and notices in connection with the opening of approximately 12,989 [f]irm accounts” from early 2010 to early 2011.

This does not appear to be Merrill Lynch’s first such brush with the regulators over related violations.  In 2012, Merrill Lynch was fined $2.8 million by FINRA amid allegations the firm overcharged customers more than $32 million due to an inadequate supervisory system in place at the firm.  FINRA also specifically alleged that the Merrill Lynch failed to send necessary business continuity plans to more than 16,000 customers and failed to send required margin risk disclosure statements to nearly 7,000 customers over several years.

Margin can be a risky proposition for investors because it involves borrowing money from the firm for the purpose of “leveraging” positions in the account.   While margin can boost profits in the portfolio, it can also magnify losses.  For this reason, margin is typically unsuitable for most investors, especially those is with limited investment experience and those who cannot afford to incur significant losses.

Not just limited to margin borrowing, disclosure is also very important in the financial services industry, generally.  There are numerous rules and regulations that cover the disclosures firms are required to send their customers. The main goal of many of these regulations is investor protection.  While these required disclosures should not be confused with a cure-all for fraud, when they are not sent to customers, the window for fraud opens even wider.

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. If you or a family member invested in exchange traded funds, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

Malecki Law takes a proactive and informed approach to the financial news of today: actively engaging in fact-finding analysis on prospective cases from around the world. Our thorough knowledge of securities law’s history and fine points makes us ideal consultants for investors who have suffered losses due to misadvice from their broker or other financial counsel.

Reuters reported on February 6, 2015 that UBS in Puerto Rico held a meeting during which executives of the firm, including Miguel Ferrer, then the Chairman of UBS Financial Services Inc. of Puerto Rico, threatened financial advisors to sell UBS originated Puerto Rico closed-end bond funds despite the brokers’ and their customers’ growing concerns about “low liquidity, excessive leverage, oversupply and instability.”  According to the Reuters article, Mr. Ferrer found “unacceptable” the view of UBS financial advisors who were wary of recommending UBS funds that were loaded with debt of the Puerto Rican government.

According to the Reuters article, in a recording made by an attendee of the meeting, Mr. Ferrer reprimanded the brokers to focus on the positive aspects of the products available or “get a new job,” continuing that it was “bullshit” for brokers to claim that there were no products to sell.  Portions of the recorded meeting are available online in the Reuters article.

At the time of the recording, according to Reuters, many of UBS’s funds were highly concentrated in Puerto Rico’s debt at a time when there were concerns about the size of that debt and the weakness of the overall economy.  This recording may be beneficial to both claimants and brokers who each have hundreds of millions of dollars in damages because their claims generally alleged that there was a lack of disclosure regarding the attendant risks of bond funds underwritten by UBS.

Investor claims surrounding the PR bond funds have skyrocketed in the past two years.  Now, in light of the published details about the meeting by Reuters, it appears the financial advisors who recommended the bond funds to their clients may have also been misled and pressured by UBS.  As we have written previously, where proprietary products result in substantial losses to investors, they also damage the registered representatives who must rely on the firm’s marketing and research to sell the products.  According to the Reuters article, UBS also pressured its financial advisors with termination if they did not continue to sell the Puerto Rico bond funds.  Because of this, those financial advisors may have claims against UBS PR for losses to their business, the muddying of their professional records and any damages suffered as a result of the investor claims that are reported on the FINRA CRD reports.

Malecki Law has also previously written about duties owed by employing firms to their registered representatives.

Financial advisors and registered representatives have obtained favorable judgments against their employing firms in the recent past.  In the early- and mid-2000s, there was a plethora of litigation surrounding the Morgan Keegan bond funds, which were found to have been misleading to both customers as well as the financial advisors who suffered employment and reputational damage as a result of recommendations made based on firm advice and directives.

Financial advisors who worked for and sold Morgan Keegan bond funds that failed in 2008 were often successful in obtaining expungement of the customer disputes from their CRD record, because arbitration panels found that they were not involved in the complained of investment-related sales practice violations and did not know of their employing firm’s failure to perform adequate due diligence on the products they originated and offered for sale to the investing public.