Articles Tagged with broker malpractice

Windsor Street Capital (formerly known as Meyers Associates) and its anti-money laundering (AML) officer, John D. Telfer, have been charged with securities violations by SEC, according to a recent report.  Windsor allegedly failed to report at least $24.8 million in questionable penny stock sales.  The violations cited by the SEC relate to the unregistered sale of hundreds of millions with insufficient due diligence, per InvestmentNews.

The suspicious transactions allegedly date back to June 2013 and resulted in nearly $500,000 in commissions and fees for Windsor, according to the SEC.  InvestmentNews reports that Mr. Telfer has been charged with aiding and abetting by virtue of his alleged failure to properly monitor the transactions at issue.

The investment fraud attorneys at Malecki Law are interested in hearing from investors who have complaints regarding Raymond James Financial Services broker Joseph Amalfitano of Malvern, PA. According to his BrokerCheck report maintained by the Financial Industry Regulatory Authority (“FINRA”), Mr. Amalfitano moved to Raymond James after stints at Citigroup and Merrill Lynch.

Mr. Amalfitano was recently the subject of two customer complaints since 2008, per FINRA records.

According to his BrokerCheck, in 2012, Mr. Amalfitano was alleged to have “maintained an unsuitable concentration of Bank of America stock” in customers’ accounts. Overconcentration can be dangerous since it has the potential to create higher risk and volatility of an account when compared to a more balanced, diversified portfolio. FINRA records indicate this case was settled.

Malecki Law’s team of investment attorneys are interested in speaking with those who invested in AR Global REITs. Industry analysts and consultants believe that investors in a number of AR Global-sponsored real estate investment trusts (REITs) are in danger of having their distributions cut, per InvestmentNews.

Specifically, investors in American Realty Capital Global Trust II, American Realty Capital New York City REIT, American Finance Trust, American Realty Capital Hospitality Trust, American Realty Capital Retail Centers of America, Healthcare Trust, and Realty Finance Trust may be at risk, according to the report.

The problem is said to stem from the MFFO (modified funds from operations a/k/a cash flow) at seven of AR Global’s REITs. The MFFO of these seven funds reportedly failed to match or exceed their distributions. In simple terms, this would mean that the funds failed to take in as much as they were distributing. Such a situation has the potential to mean big trouble for investors including distribution cuts and rapid decline in asset value – i.e., less income and large losses to the principal.

Morgan Stanley broker Armando Fernandez has been suspended by the Financial Industry Regulatory Authority (FINRA) for 20 business days, according to publicly available FINRA records.  Per a Letter of Acceptance, Waiver and Consent filed with FINRA, Mr. Fernandez was accused of exercising discretion in a customer account without prior written acceptance of the account as discretionary from his member firm.  FINRA records indicate that Mr. Fernandez was also fined $7,500.

Generally, brokers are prohibited from placing trades in a customer account without speaking to the customer first, unless an account is a discretionary account.  When discretion is given by the customer to the broker, it is typically documented in a signed agreement.  When there is not such a signed agreement, and a broker executes transactions on a discretionary basis anyway, violations of FINRA Rules likely have taken place.

Customers who have been the victim of brokers improperly exercising discretion in their accounts (or violating other FINRA Rules) may be entitled to recover their losses in an action against the firm and/or broker responsible.

Trust Funds are an especially susceptible vehicle for fraud committed by FINRA registered stock brokers and financial advisors.  Two of the primary issues in such cases are “conflict of interest” and “breach of fiduciary duty.”

Trust funds can be created for a wide variety of reasons.  Frequently, though, they are used as a means to afford an orderly transfer of wealth to a younger generation.  They can offer a whole host of benefits that would make a trust fund the preferred choice over an outright gift.  For example, the recipient/beneficiary may be very young, and the trust could afford some level of control or stability to prevent the beneficiary from squandering the money.   Another reason may be certain tax advantages offered by the trust structure that would not be available in an outright give.

Regardless of the reason or reasons for its creation, a trust is going to need a trustee.  The trustee is the party responsible for overseeing the trust and managing its assets.  While trusts can hold different types of assets, they frequently contain securities, like as stocks and bonds. Therefore, such trusts would, by necessity, involve brokerage accounts.  In that case, clients will oftentimes look to their stockbroker/financial advisor to put on a “second hat” and serve as trustee.  The logic being “I already trust him/her with my money so why not let them be the trustee.”  However, this is where significant problems can be created.

New research shows that getting senior-aged investors to exhibit heightened emotions may cause those investors to more easily part with their hard-earned savings and retirement proceeds, according to a New Release published by the Financial Industry Regulatory Authority (FINRA).

The research was made possible with funding from the AARP Fraud Watch Network and the FINRA Investor Education Foundation.  In the study, Stanford University Psychologists found that inducing emotions in older adults increased their intention to buy falsely advertised items, according to the News Release.  As reported, the study was conducted on younger adults and older adults, with both groups were induced to exhibit excitement or anger before watching advertisements known to be misleading.  According to the Release, the young adults group tended to believe advertisements based on their believability, and not subjective emotional states, while older adults tended to believe the misleading advertisements based only on their emotional states.

One researcher was quoted as noting “Whether the con artist tries to get you caught up in the excitement of potential riches or angry at the thought of past and future losses, the research shows their central tactic is the same and just as effective… Cons are skilled at getting their victims in to a heightened emotional state where you suspend rational thinking and willingly hand over your hard earned money to a crook.”

In February 2016, academics Mark Egan, Gregor Matvos and Amit Seru at the University of Minnesota and University of Chicago business schools released a report titled “The Market for Financial Adviser Misconduct” on financial advisers in the United States. The report reveals how rampant securities fraud and broker misconduct is throughout the country. For the purpose of the study, these academics have analyzed the full set of disclosures of approximately 10% of employees in the finance and insurance sectors between 2005 and 2015, and taken in to account customer complaints, arbitrations, regulatory actions, terminations, bankruptcy filings and criminal proceedings. Based on this study, 7% of advisers were reported to have engaged in misconduct. The actual unreported cases may add to this number.

Here at Malecki Law, it is our mission to protect individuals who have been victimized by unscrupulous brokers. Here are some excerpts highlighting the important findings from this study:

  • According to the report, prior offenders are five times more likely to repeat their misconduct as compared to an average adviser. Approximately one-third of advisers with misconduct reports are repeat offenders. That is why we encourage all investors to investigate their broker on FINRA’s BrokerCheck

 The securities fraud attorneys at Malecki Law would like to hear from investors who have complaints against John T. Keyser of Dawson James Securities in Florida. In the past, Keyser has been the subject of a FINRA suspension and customer dispute, as well as an outstanding tax lien. Since 1986 he has been at 16 brokerage firms, including 3 that were expelled from the industry. His current firm has 7 regulatory and 1 arbitration disclosure. Two other firms he has worked with had a combined 30 regulatory & 9 arbitration disclosures on BrokerCheck.

According to FINRA’s BrokerCheck, there were customer dispute cases against him in 2010, 2006, and 2002. Further, as per FINRA’s BrokerCheck, in 2010 there were allegations made against him for churning, intentional and negligent misrepresentation, unsuitability, breach of fiduciary duty, and unauthorized trading, seeking damages for $650,000. As per BrokerCheck, the firm and Keyser denied the wrongdoings and refuted the allegations. FINRA’s BrokerCheck shows that in 2006 there was another customer dispute against him, alleging that a stop loss order had not been executed timely to cover his client’s position. The same FINRA site reveals that in 2002, there was an unauthorized trading complaint made against him, demanding damages of 80,000.

There are other disclosure events, regulatory investment and judgement liens, against his records on BrokerCheck, one of which resulted in NASD suspending his license for failure to pay an arbitration award, which was resolved upon award payment. It is noteworthy that on BrokerCheck several Florida firms Mr. Keyser has worked for in the past have been expelled by FINRA including Sterling Financial Investment Group and Barron Chase Securities.

The investment fraud attorneys at Malecki Law are interested in hearing from investors who have complaints regarding former stockbroker Robert H. Potter.  According to his BrokerCheck report maintained by the Financial Industry Regulatory Authority (“FINRA”), Mr. Potter has been permanently barred by FINRA.  He has also reportedly been the subject of no less than three customer complaints.

Mr. Potter has reportedly been barred by FINRA for his failure to cooperate with an investigation into allegations that Mr. Potter comingled customer funds with his own personal funds.  Per FINRA, Mr. Potter was discharged from Cambria Capital in August 2015, after the firm questioned the validity of certain transactions involving Mr. Potter and his customers.

In 1997, Mr. Potter was the subject of a customer complaint alleging unauthorized, excessive trading, per FINRA.  FINRA records indicate that the customer recovered more than $66,000 as a result of their complaint.

The securities fraud attorneys at Malecki Law are interested in hearing from investors who have complaints against stockbroker Jared Cohen.  Mr. Cohen is reportedly registered with Ameriprise Financial Services, Inc., based out of Armonk, NY.  He has also recently been registered with IDS Life Insurance Company, according to industry records.

According to BrokerCheck, as maintained by the Financial Industry Regulatory Authority (“FINRA”), Mr. Cohen has been the subject of two customer complaints in the past six years.  Mr. Cohen has been the subject of complaint alleging misrepresentations of investment risk and over-concentration in non-traded Real Estate Investment Trusts (“REITs”), as well as misrepresentations surrounding the sale of preferred stock recommendations, per FINRA records.

Of these customer disputes, FINRA records indicate that one customer initiated a FINRA arbitration and recovered $25,000 in a settlement with Ameriprise.