Malecki Law filed an expedited FINRA arbitration complaint today on behalf of nine investors from Upstate New York, Northern Virginia and Long Island, New York alleging that Securities America, Inc. failed to supervise its registered representative Hector May and failed to audit his remote Securities America office, which it is alleged in essence allowed his alleged Ponzi-type fraud to persist for many years. Through these alleged supervisory shortcomings, it is alleged that Securities America’s Inc. aided and abetted fraudulent practices conducted by its registered representative as well as in his disclosed, approved SEC-registered investment advisor, Executive Compensation Planners, Inc. “At some point, a license to sell securities can become a license to steal when there is inadequate supervision of these remote brokerage firm offices,” offered well-known securities attorney Jenice Malecki.

Executive Compensation Planners was supposed to solicit wrap fee programs through Securities America, according to its Form ADV filed with the SEC.  Instead, as alleged in the FINRA pleading, Hector May had wires sent and checks written directly to Executive Compensation Planners; created fictitious statements; and pocketed client funds. Hector May reported managing $18 million in his Form ADV. Mr. May’s FINRA BrokerCheck report indicates that Hector May, who had been with Securities America since 1998, was terminated for misappropriation of clients’ assets just after the Department of Justice initiated a criminal investigation into his suspected felony, along with investigations by the U.S. Postal Inspectors and the United States Securities and Exchange Commission.

Prior to his alleged conduct coming to light, Hector May was widely known with an excellent reputation within his New York Community, often sponsoring charities – “clients now want to know if he was using their money to be charitable,” said Jenice L. Malecki, Esq., a securities lawyer in New York.  Mr. May’s wife, daughter and other family members are alleged to have worked with him.

Brokers can end up with unwarranted customer complaints, arbitrations, terminations, and other adverse disclosures on their CRD for reasons beyond their control. While plenty of investors have a legitimate “beef” against their investment professional, some people vet illegitimate or unwarranted frustrations by filing complaints to a broker’s employer or FINRA and it can stay with a broker and hurt his career forever. Sometimes, the brokerage firm, the market or other external forces are actually at fault for the customers’ losses, not the broker. Some customer complaints could be emotional or financially driven rather than rational. Similarly, firms sometimes have “ulterior motives” in terminating and reporting a termination of an investment professional, which could be false and lead to a FINRA 8210 inquiry, investigation or disciplinary hearing, as well as hurt future employment potential forever.

The CRD, short for Central Registration Depository, is the online registration and licensing system FINRA uses as their database for broker records. Potential customers, regulators, and employers have access to most of the CRD’s information through FINRA’s publicly available online resource, BrokerCheck. Customer disclosures permanently show on the CRD irrespective of a broker’s actual culpability for the alleged misconduct. It can negatively change a broker’s career forever.

Frivolous marks on a Form U5 can damage the stellar reputation any well-intentioned brokers craft after years of successful securities industry experience. Fortunately, in the appropriate circumstances, brokers can have marks removed from the CRD in FINRA arbitration or court proceedings. The experienced expungement attorneys at Malecki Law can help brokers pursue removal of negative customers disclosures FINRA arbitration proceedings. It is more difficult, expensive, and time-consuming for investment professionals to pursue expungement requests in courts with FINRA as an adverse party, but an investment professional can file in court as well.

Can’t imagine having a retirement brokerage account drained in a case of preventable identity theft? Such an unimaginable misfortune is a devastating reality for an investor alleging in a FINRA arbitration complaint that he had the entirety of his account at Invesco stolen, without any help or recompense from the brokerage firm.  An unidentified perpetrator used this unsuspecting investor’s private identifying information to access and steal money from a 401k retirement account. Malecki Law securities fraud attorneys recently filed a claim against Invesco Distributors Inc, on behalf of this investor alleging their failure to safeguard their client’s assets pursuant to FINRA Rules, SEC Regulations, and securities laws.

This foreseeable fraud initiated when, just around the busy Christmas holiday season, an unidentified individual accessed our client’s Invesco retirement 401k. The perpetrator changed the email address and phone number, which had previously been on file for ten years. Within days, the perpetrator stole funds totaling over $100,000 from the investor’s Invesco 401k brokerage account. The perpetrator also successfully took a loan against the 401k account and transferred money to a bank account not owned by our client. Furthermore, Invesco transferred $25,000 to the IRS as a penalty for borrowing against the 401(k) accounts. Amazingly, the investor learned of these unauthorized account transactions only from checking Invesco’s account portal.

Invesco Distributors, Inc. is an indirect wholly owned subsidiary of Invesco Ltd, according to their official website. Invesco Ltd. announced in a recent press release that their firm manages an estimated $972.8 billion in client assets. Based in Texas, Invesco Distributors Inc., is their U.S distributor of mutual funds, exchange-traded funds, institutional money market funds and other retail products. As a FINRA registered broker-dealer, Invesco Distributors Inc. is expected to comply with required industry practices, statutes, rules, and regulations. FINRA rules, SEC regulations and securities laws exist to encourage brokerage firms to protect their investor’s information.

Hector May, a former highly regarded member of the community in Rockland and Orange counties, is under investigation by several governmental entities. Reportedly, allegations include that Hector May misappropriated investor funds. In a Lohud/The Journal News article, Jenice Malecki, Esq. discusses how her clients and other investors have lost millions from Hector May in what she believes to exemplify a Ponzi scheme. Given her significant experience representing Ponzi scheme victims, Ms. Malecki finds many parallels with Hector May’s actions.

A Ponzi scheme is a type of investment fraud that relies on a constant money flow of new deposits to produce false “returns” to existing investors. New deposits are never actually invested and instead directly allocated to the schemer’s personal funds. Our clients, along with other investors, lost their retirement assets when Hector May sold unsophisticated investors what appears to be fictitious “tax-free” corporate bonds, an impossible investment.  Hector May continuously increased his personal wealth at the cost of clueless investors losing their hard-earned life-savings. Eventually, Ponzi victims stop receiving promised returns, collapsing the scheme. It is very likely that Hector May was exposed from not being able to return money to a large investor. Ponzi schemes typically endure for as long as new victims continue to “invest” into the produced returns; withdrawals collapse them.

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You may ask yourself when the market swings whether your investment losses are temporary, permanent, due to the market swings or due to something else.  When the market is good, a rising tide lifts all boats, as they say, but when the market is down, the truth may be revealed.

Whether you are a conservative, moderate or speculative investor, when the wind has been removed from the sails, you really see what your investments are made of, if anything.

If you are a conservative investor, your investments should not generally ride with market swings.  The beauty of being conservative is wide diversification in fixed income and a bit of equities.

Malecki Law is currently investigating allegations against Securities America, Inc. and its terminated financial adviser, Hector Anthony May.  Mr. May was employed almost twenty years with Securities America at its New City, New York office, and was terminated in March of 2018 in relation to an ongoing criminal investigation by the U.S. Department of Justice.  The investigation relates to an alleged Ponzi scheme and/or misappropriation of funds involving many investors and potentially many millions of dollars in losses.  If you have suffered investment losses with Securities America and/or had your retirement savings invested with Hector May through his own financial planning firm, Executive Compensation Planners, Malecki Law is interested in hearing from you.

In a Ponzi scheme involving Robert Van Zandt, Malecki Law successfully recovered over $7.4 million in investment losses through the firm’s representation of 120 victims from the Bronx, New York, who fell victim to Mr. Van Zandt’s $35 million Ponzi scheme.  Malecki Law’s successful representation was featured in the media, including CBS New York’s Eye Witness News.  Malecki Law has experienced attorneys who specialize in recovering investment losses for victims of financial fraud.

Wall Street is constantly crafting complex and volatile products that somehow end up in the investment accounts on Main Street.  The latest turbulence in the stock markets has already been in part attributed to one of the latest Wall Street machinations:  exchange-traded-products (ETPs) linked to volatile exchanges – specifically, products linked to the Chicago Board Options Exchange (CBOE) Volatile Index (VIX).  Today alone, the Dow Jones Industrial Average closed more than 1000 points down from yesterday, and due to the volatility that is still ongoing, the devastating fallout is largely unrealized and has left investors scrambling.

Since its inception in 1993, the VIX was one of the earlier attempts to create an index that broadly measured volatility in the market.  One such ETP linked to the VIX is Credit Suisse’s VelocityShares Daily Inverse VIX Short-Term ETN (ticker symbol XIV), which the issuer just announced it will be shutting down after losing most of its value earlier this week.  Products that may be at similar risk include Proshares SVXY, VelocityShares ZIV, iPATH XXV, and REX VolMaxx VMIN.  But the risks associated with these ETPs have been well known to professionals in the securities industry, and investors who were recommended these products should have received a complete and balanced disclosure of these risks at the time of purchase.

In October of 2017, the Financial Industry Regulatory Authority (FINRA) ordered Wells Fargo to pay $3.4 million in restitution to investors relating to unsuitable recommendations of volatility-linked ETPs.  FINRA also published a warning to other firms in Regulatory Notice 17-32 regarding sales practice obligations, stating that “many volatility-linked ETPs are highly likely to lose value over time” and “may be unsuitable to retail investors, particularly those who plan to use them as traditional buy-and-hold investments.”  This was not the first warning from the regulator.

When you are placed on administrative leave, it can seem like the world is collapsing around you.  It might be, but how you respond and hiring counsel could change the outcome.  Before making any rash decisions, it is important to understand just what has happened, what is likely to happen next, and what you should do about it.

What is “Administrative Leave”?

Administrative Leave is a form of suspension from the workplace, often pending the outcome of some form of investigation.  In the securities world, this can be the case if there is an investigation into a suspected compliance infraction, a customer complaint, a regulatory or self-regulatory investigation or inquiry, an arrest, charge, indictment, or complaint made against a broker or its firm (a FINRA “Member” firm).  Each firm may have its own policies and procedures for how to determine whether administrative leave is necessary, what specifically constitutes administrative leave, or at what point it is imposed.

Yesterday, a Financial Industry Regulatory Authority (FINRA) arbitration panel in Boca Raton, Florida awarded Malecki Law attorneys $397,823.00 for principal investment losses against Morgan Stanley & Co., LLC.  Malecki Law brought the case on behalf of an elderly and retired couple with conservative investment objectives on claims that Morgan Stanley failed to supervise their accounts and unsuitably over-concentrated their portfolio in risky oil and gas master limited partnerships (MLPs).  In addition to the compensatory damages, the panel also ordered Morgan Stanley to pay the claimants in this case 9% in interest, $15,000.00 in costs, attorneys’ fees, $11,812.50 in forum fees, and a $20,000.00 penalty for the firm’s late production of relevant documents at and just prior to hearing.

Malecki Law regularly brings claims on behalf of investors against unscrupulous conduct by brokers and brokerage firms, and holds them accountable for mismanaging investor retirement accounts.  Elderly investors such as these find themselves especially at risk from poor investment recommendations made by brokers and securities firms because senior citizens are typically out of the workforce and have much less time and ability to recoup their losses than younger investors.  This is pertinent to yesterday’s win because, in setting the damages figure, the arbitration panel rightfully did not deduct investment income (i.e., dividends), which the claimants earned while they had their accounts open with Morgan Stanley.

This is also a notable win for Malecki Law because the case involved the purchase of MLPs, which is a “hot investment” on Wall Street these days.  MLPs offer high yields, but are generally recognized as risky and volatile investments, typically within the oil and energy sector, and are not suitable for most retirement accounts or conservative investors looking to preserve their capital.  In May of last year, the Securities and Exchange Commission (SEC) issued an investor alert on MLPs to warn investors of the significant risks in these products, including unexpected tax consequences, fluctuations in distributions, and concentration exposure in the energy sector with acute sensitivity to shifts in the prices of oil and gas.

It seems like every day there is a new “hot stock” being pushed by financial pundits and brokerage houses alike.  Seadrill Limited (ticker symbol, SDRL) was once one of these hot stocks, but it has since fallen from grace, with wide reports that it will be declaring chapter 11 bankruptcy by early next week.  SDRL’s stock was known for its generous quarterly dividend, and, to the detriment of retiree investment portfolios, benefited from excessive promotions it received from those within the brokerage and investment industry.

SDRL is an offshore deep-water drilling contractor in the oil and gas sector.  It was founded in 2005 by John Fredriksen, a Norwegian-born billionaire, who was well-known for his triumphs in the oil and shipping industry during the 1980s.  The company grew quickly by way of aggressive management and acquisitions, and its stock price in September of 2013 surged to its high of over $47 per share.  However, SDRL has since spectacularly nosedived, falling by more than 99% in value to its current trading price of $0.23 per share.

As early as February 2012, Mad Money’s Jim Cramer was bullish on SDRL.  But so were big name brokerage firms like Morgan Stanley, which issued a research report in November 2013 that confidently touted SDRL as an overweight value stock.  In a subsequent research report from March 2014, Wells Fargo Securities named Seadrill’s subsidiary, Seadrill Partners, LLC (ticker symbol, SDLP), its “top Marine MLP Pick” and predicted “solid distribution growth” through 2015.  Notably, SDLP’s investment performance took a similar trajectory to its parent SDRL, at one-point trading over $34 per share in August of 2014, but now sitting barely above $3 per share today.