Articles Tagged with FINRA

Barred FINRA-registered broker Steve Pagartanis, of Suffolk County, N.Y, is facing charges by the SEC and the Suffolk County District Attorney’s Office for allegedly running a multi-million-dollar Ponzi Scheme that bilked long-term investors, many of them seniors, for 18 years. In May 2018, the SEC filed a civil complaint against Steven Pagartanis alleging that he solicited and sold securities using falsified statements; defrauding at minimum nine investors out of $8 million. Mr. Pagartanis allegedly told investors that he would invest their funds in a publicly-traded or private land development company. Steven Pagartanis was arrested on July 25, 2018, with charges related to securities fraud as well as mail and wire conspiracies in connection with this alleged Ponzi scheme. Before being barred from acting as a broker by FINRA, Steve Pagartanis (CRD#1958879) was most recently a registered broker with Lombard Securities Incorporated. Our securities fraud attorneys are currently investigating into Steve Pagartanis’s alleged Ponzi Scheme on behalf of investors who lost their irreplaceable life savings.

Victims claimed to have trusted Mr. Pagartanis after having done business with him for years and entrusted hundreds of thousands of dollars, including retirement and elder care earmarked money.  Mr. Pagartanis reportedly claimed that the money would purchase investments in Genesis Land Development. His victims claim that Mr. Pagartanis promised that their investments in the real estate development company would produce 4.5% in guaranteed interest with annual dividends. On the contrary, Mr. Pagartanis allegedly never invested the money and deposited it into his personal bank accounts, as also alleged in the SEC complaint. Now, victims of Mr. Pagartanis’s alleged Ponzi Scheme are left distraught, with no other choice but to hold the appropriate parties responsible – in particularly his brokerage firm Cadaret Grant & Co.

Our investor fraud attorneys see many parallels between Steve Pagartanis’s alleged fraudulent actions and typical Ponzi Scheme activity. A Ponzi Scheme is a kind of investment fraud in which a perpetrator pays “false returns” to existing investors using new deposits. Ponzi Scheme perpetrators will use some of the money to fund their lavish lifestyles. As is often the case in Ponzi Schemes, Steve Pagartanis relied on built up trust gained over the years from his mostly elderly clients. Eventually, Steve Pagartanis allegedly failed to make an expected payment to a client, which most probably unveiled the fraud. Ponzi schemes are almost always finally revealed when the fraudulent perpetrator could no longer make a payment, according to securities fraud attorneys.

The SEC charged New York-based FINRA regulated brokerage firm Alexander Capital L.P. (CRD # 40077)as well as two of its managers for failing to supervise three registered brokers, William C.  Gennity, Rocco Roveccio, and Laurence M. Torres last Friday. The alleged supervisory failures are concerning charges against the brokers for unsuitable recommendations, churning accounts, and executing unauthorized trades in September 2017. While the brokers profited from commissions, investors lost their hard-earned savings over violations of the antifraud provisions of the federal securities laws. According to the SEC, Alexander Capital L.P lacked reasonable supervisory policies and procedures that could have helped detect fraudulent practices by three brokers. In a separate order, the SEC also charged Alexander Capital managers, Philip A. Noto II and Barry T. Eisenberg for missing red flags and failing to adequately supervise to detect the alleged broker committed fraud. Consequently, investors lost substantial money over fraud that could have been prevented with reasonable policies and procedures to detect broker wrongdoings.

The parties agreed to settle the charges without admitting or denying the SEC’s findings. Alexander Capital has agreed to pay $193,775 of allegedly ill-gotten gains, $23,437 in interest, and a $193,775 penalty, which will be placed in a fund to be returned to harmed retail customers.  Philip A. Noto II agreed to a permanent supervisory bar and a $20,000 penalty.  Barry T. Eisenberg agreed to a five-year supervisory bar and a $15,000 penalty. Alexander Capital has agreed to hire an independent consultant to review its policies and procedures, according to the press release. Will Alexander Capital enforce the many reminders that the SEC released for brokerage firms to supervise account activities and protect consumers adequately? It remains to be seen, as old habits die hard.

The Securities and Exchange Commission’s recent charges against a New York-broker dealer Alexander Capital illustrates the agency’s crackdown on broker supervisory failures within the financial services industry. Our FINRA arbitration attorneys applaud the SEC’s commitment to holding securities firms accountable, but still think more needs to be done. After all, SEC has no tolerance for unscrupulous brokers, according to Andrew M. Calamari, Director of the SEC’s New York Regional Office and Co-Chair of the Enforcement Division’s Broker-Dealer Taskforce. Nevertheless, FINRA arbitration attorneys continue to file numerous claims involving churning, unauthorized trading, and other types of securities fraud, which the SEC has never detected.

If you want to find trouble on Wall Street, follow the money.  A “troubled broker” is a broker more concerned for his or her commissions than the quality of the investments he or she recommends.  Finding investors for private placements can be very lucrative for a broker, but very risky for a client.  As complaints about a broker mount on his CRD, so does the lifespan of a broker and as their career prospects dwindle, they become more desperate. While not all private placements are bad investments, they must be approached with extreme caution and are not appropriate for all investors.  If you get presented with a private placement, the very prospectus states: you should consult an attorney before signing.  It’s a mandatory disclosure that regulators believe you should get and you should not ignore it.  You should always consult a good New York securities lawyer before you give large amounts of your money to a non-public company in its infancy.  Understanding the investment, the company and doing due diligence is the only way to protect your interests.   If you don’t want to spend time or money to do that, don’t invest.  The “next big thing” your broker might be selling you on may be your “next big problem.”  There’s no free lunch.

These concerns about the multi-billion-dollar private capital markets are sound, based on a Wall Street Journal report finding that firms selling private placements have a much higher proportion of “troubled brokers”. The study compared the percentages of brokers with customer complaints, regulatory investigations and other disclosures at firms selling private placements with industry norms.  Among the worried securities industry members include former FINRA enforcement chief, Robert Bennet who allegedly proclaimed private placements as a “perennial concern for regulators.”. Private placement is the offer and sale of unregistered securities to a limited number of investors for a company’s capital generation. Our securities fraud attorneys always knew that a higher prominence of “troubled brokers” is at firms selling private placements, now our belief has been confirmed.

According to the WSJ study, of the firms selling private placements, half had at least one troubled broker out of every ten brokers.  Conversely, of the included firms that didn’t sell private placements, over 75% had less than that amount. Additionally, the analysis shows that half of the firms expelled by FINRA since 1993 sold private placements, despite comprising a lesser amount of the total industry. The private capital market has continued to rise with a reported $750 billion in sales. Given this, any insights about private placements should be known by investors, securities fraud attorneys, brokers and other affected financial industry members.

man-and-woman-holding-money-300x300Broker Deborah D. Kelley is allegedly one of the key figures in the $184 billion New York pension fund “pay-for-play” bribery scandal. She was reportedly arrested in December 2016 in San Francisco on charges of securities fraud, conspiracy to commit securities fraud, and conspiracy to obstruct justice in an SEC investigation. This week she was barred by the Financial Industry Regulatory Authority (FINRA).

The salacious allegations in this scandal involves the NY retirement pension fund and Navnoor Kang, its former director of fixed income and portfolio strategy, not only made newspaper headlines but was reported in prominent magazines such as Vanity Fair. Allegedly, Mr. Kang received more than $100,000 in bribes, including prostitutes, bottle service, drugs, vacations and weekend trips, expensive watches, VIP tickets to concerts from Ms. Kelly and another broker Gregg Schonhorn, in exchange for promoting the interest of Deborah Kelley’s broker-dealer. It is reported that Navnoor Kang deposited $2 billion with Ms. Kelly’s broker-dealers. Wall Street Journal reportedly quoted U.S. attorney Preet Bharara calling this a “classic case of quid pro quo corruption.”

As per FINRA records, she was registered with Sterne, Agee & Leach Inc.in 2014 and subsequently with Stifel, Nicolaus & Co. Inc. after Stifel bought the former broker-dealer. She was reported fired by Stifel for bribing the pension fund manager with entertainment and gifts to further business opportunities and misrepresentation of these expenses, as noted in the FINRA proceedings that led to her disbarment.

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There is an interesting point in this week’s Wall Street Journal titled “Brokerage Files Don’t Give The Full Pictures,” which talks about the how brokerage firms and individual brokers are held to different standards, when it comes to their BrokerCheck records. BrokerCheck, the online search tool from FINRA for brokers and brokerages, reports arbitration decisions that are not in a securities firm’s favor but not the negotiated legal settlements, whereas every settlement in a broker’s record is clearly delineated. So why does this gap exist in reporting and how does it continue to happen?

FINRA is not a government body, but it is overseen by the Securities and Exchange Commission (SEC). Within 30 days of reaching a settlement, brokerage firms are obligated to report agreements to FINRA, if the amount meets a certain threshold. However, BrokerCheck records pull information from an SEC document named “Form BD” that doesn’t ask brokerage firms about negotiated settlements. The agreement that gets reported to FINRA in the event of a settlement is not currently a part of SEC approved list of documents. This loophole in communication and reporting allows brokerage firms to maintain clean BrokerCheck records, without disclosing settlements to investors. As far as brokers are concerned, the BrokerCheck information comes from a different FINRA form that does require brokerages to disclose if they paid settlements on behalf of any employees over $15,000. It should be noted that many or most settlement payouts for brokers are actually paid for by brokerage firms and these firms are listed as co-defendants or only defendants in the FINRA arbitration proceedings.

Many individuals in the securities industry feel that data about brokerage firms should be more transparent so that they can be ranked based on this information. There are others who are “shocked” by this gaping hole in the BrokerCheck that does not paint the “full picture”, as per the WSJ story. Those in favor of the current scenario, argue that brokerage firms settle for many reasons without admitting to wrongdoing, so reporting settlements would create an unfair perception about the brokerage firm in an investors’ mind.

istock88023523small-crop-600x338-300x169According to the Consumer Financial Protection Bureau, 17 percent of Americans 65 and older, have already been the victims of financial exploitation.

A new study by the AARP Fraud Watch Network reveals that Americans who lose money to fraud typically exhibit a higher degree of confidence investing in unregulated investments and tend to trade more aggressively than other investors. The fraud watch network interviewed 200 victims of investment fraud and conducted 800 interviews with regular investors for this study that was commissioned a year earlier.

There has been a change in the way investors save for retirement. People are now more used to taking charge of their retirement since traditional pension plans have declined and technology has made it easier for average investors to enroll in trading and retirement accounts. The AARP study quotes Shadel, their lead researcher as saying “decline in traditional pensions has prompted millions of relatively inexperienced Americans to take on the job of investing their own money.” Technology has also made it easier for scammers to reach investors.

office_suit_corportate_237605_l-300x224The securities fraud attorneys at Malecki Law are interested in hearing from investors who have complaints against stockbroker Matthew Maczko.  Mr. Maczko was employed and registered with Wells Fargo Advisors, LLC, a national broker-dealer out of the firm’s Oakbrook, Illinois, from February 2008 to September 2016, according to his publicly available BrokerCheck, as maintained by the Financial Industry Regulatory Authority (FINRA).  He was previously registered with UBS Financial Services, Inc. from November 1998 to March 2008, according to BrokerCheck records.

In 2017, Mr. Maczko was permanently barred from association with any FINRA member broker-dealer by FINRA, after submitting a Letter of Acceptance, Waiver and Consent No. 2016050430201.  According to the AWC, Mr. Maczko violated NASD Rule 2310 and Rule 2111, both pertaining to suitability of investment recommendations, because from 2009 to 2016, Mr. Maczko “effected excessive transactions in four brokerage accounts of [a] customer … who is now 93 years old,” and “during this period, Maczko effected over 2800 transactions in these accounts that generated approximately $581,650 in commissions, $84,270 in other fees, and approximately $397,000 in trading losses.”  As the AWC went on, “[t]his level of trading was unsuitable.”

FINRA Suitability Rules require that recommendations made by the broker to the customer be suitable.  This means that the broker must consider the investor’s age, investment experience, age, tax status, other investments, as well as other factors when making a recommendation to buy or sell securities.

subpoena-2-300x134You just received a Subpoena from the Securities and Exchange Commission (SEC).  What will you have to produce?  We regularly represent securities industry professionals and investors who have gotten these Subpoenas, and the reaction is usually the same: people are nervous and concerned.  How will this affect your business, and how what will it take the comply?

Getting an SEC Subpoena is a serious matter, and it is imperative that you carefully comply in a timely manner.  Subpoenas will typically require you to produce documents or testify, or both.  Your goal should always to limit your involvement with the federal authorities, and this begins with your production of documents in response to the Subpoena.

The first step is to remember that just because you received a Subpoena does not mean you automatically did something wrong.  You may not be the SEC’s target, but may be someone the Commission believes has information related to another person or business.  The SEC is not obligated to tell you whether they view you as a target or a witness, and you should not assume you are a target.

businessman-with-the-notebook-1-1362246-mThe securities fraud attorneys at Malecki Law are interested in hearing from investors who have complaints against stockbroker Solomon David Krispeal.  Since January 2016, Mr. Krispeal has been employed and registered with PHX Financial, Inc., a Hauppauge, New York broker-dealer, according to his publicly available BrokerCheck, as maintained by the Financial Industry Regulatory Authority (FINRA).  He was previously registered with Legend Securities, Inc. from March 2013 to February 2016, Aegis Capital Corp. from April 2012 to March 2013 and with John Thomas Financial from January 2008 to April 2012, according to BrokerCheck records.

In 2017, Mr. Krispeal was fined and suspended from association with any FINRA member broker-dealer for 30 days by FINRA, after submitting a Letter of Acceptance, Waiver and Consent No. 2014042764601.  According to the AWC, Mr. Krispeal violated FINRA Rule 1122 (Filing of Misleading Information as to Membership or Registration) and Rule 2010 (Standards of Commercial Honor and Principles of Trade) because he did not disclose an arbitration he was named as a respondent in, and when he did make the disclosure, he “inaccurately disclosed that the matter was ‘withdrawn,’ rather than ‘settled.’”  FINRA Rule 1122 require that brokers and brokerage firms accurately disclose information regarding membership and registration to FINRA and correct any filings when required.

In addition to this regulatory matter, Mr. Krispeal has been made the subject of seven customer complaints, including two matter that have resulted in a settlement or an award, according to BrokerCheck records.  In one case (FINRA Case No. 13-00830) where which Mr. Krispeal was listed as a respondent and the customer made allegations of unauthorized trading, unsuitability and churning, the customer was awarded $75,000 (nearly all of the stated damages of $95,000), according to FINRA Dispute Resolution records.  Mr. Krispeal’s BrokerCheck Report also disclosed that the second case resulting in settlement concerned a customer’s allegations of unauthorized trading and alleged forgery.

According to publicly available BrokerCheck records, James Carolan Speno (CRD#431NYSE912), a New York based securities broker, formerly associated with Morgan Stanley, was recently barred by FINRA. Attorneys at Malecki Law are interested in hearing from investors who have complaints against James Speno.

Mr. Speno has spent over 45 years as a securities advisor. His most recent registration was with Morgan Stanley in New York. Prior to that he was registered with Oppenheimer & Co.; RBC Capital Markets Corporation; Salomon Smith Barney Inc.; Lehman Brothers Corp.; Merrill Lynch, Pierce, Fenner & Smith Inc., Sussex Securities Incorporated; Lehman Brothers Incorporated.

Mr. Speno is currently not registered with any firm.