Unfortunately, the elderly and the inexperienced investors are oftentimes the ones who find themselves victimized by unscrupulous and predatory brokers. Foreign persons – from Europe, South America, and elsewhere – also appear to be increasingly victimized by such U.S.-based brokers as well.
On April 28, 2015 the Financial Industry Regulatory Authority Department of Enforcement filed a complaint against Mr. Lawrence LaBine. According to the Complaint, Mr. Labine is accused of having violated NASD Rules 2310 and 2110 and FINRA Rule 2010 in making unsuitable recommendations to customers, Section 17(a) of the Securities Act and FINRA Rule 2010 in making misrepresentations and omissions concerning Domin-8 and D8, and Section 10(b) of the Exchange Act, Rule 10b-5 thereunder and FINRA Rules 2020 and 2010 by making fraudulent misrepresentations and omissions concerning Domin-8 and D8.
The Complaint alleges that Mr. LaBine made the subject fraudulent misrepresentations and omissions to customers, as well as unsuitable investment recommendations to customers while registered with DeWaay Financial Network. Many of Mr. LaBine’s customers at DeWaay to whom he sold unsuitable investments were said to be elderly and/or inexperienced investors.
Per the Complaint, Mr. LaBine sold senior debentures issued by a company called Domin-8, which purportedly developed real estate management related software. At the time he sold the debentures to his customers, FINRA alleges that Mr. LaBine withheld from his customers information about the perilous financial condition of Domin-8. Reportedly, Domin-8 filed for bankruptcy shortly after the sales in question.
Speculative debentures, such as those allegedly sold by Mr. LaBine, can be especially unsuitable for elderly investors. Frequently, these investments are difficult to value and experience high price volatility – meaning that prices can go up and down very quickly. This all adds up to increased risk of loss that is usually not appropriate for retirement or near-retirement aged investors.
In addition to the Domin-8d debentures, FINRA alleges that Mr. LaBine recommended other investments that were unsuitable for his clients, including non-traded Real Estate Investment Trusts. Non-traded investments such as REITs carry with them an extra risk above and beyond a traditional publically traded investment. While most people believe that investment risk is limited just to a drop in the price of the investment, non-traded investments also have liquidity risk.
Liquidity risk is important to note because given that there is no publicly traded market, investors who need to sell their investment (a REIT, for example) may not be able to. In this situation, an investor who really needs to get their money out of the investment may be forced to offer to sell it at a very steep discount in order to entice another investor to buy it. In some cases, there may not even be a buyer, meaning the investor’s money is completely locked up. This can be scary for someone who may desperately need the money for unforeseen medical or other expenses.
Malecki Law has handled numerous cases stemming from unsuitable investment recommendations. 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.