Articles Tagged with FINRA Arbitration

Last week, Malecki Law filed an amended FINRA arbitration complaint against Securities America on behalf of victims claiming that the broker-dealer’s inadequate supervision over its registered representative, Hector May, permitted his alleged Ponzi Scheme to happen. Securities America failed to act as Hector May sold fictitious “tax-free” corporate bonds from his New City Securities America office with his Securities America approved Registered Investment Advisory business, Executive Compensation Planners. The amended complaint adds two pension plans as additional plaintiffs joining the original nine victims specified in the June 18th filing. Our announcement of the filing to the press piqued the interest of the media including a reporter who interviewed attorney Jenice Malecki for an article in Lohud, as well as an article in Financial Planning magazine.

Hector May was formerly a Securities America registered representative, who reportedly managed more than $18 million in assets according to his Form ADV. Before the alleged Ponzi scheme surfaced, Hector May was an influential community member who donated to charities and political candidates. Claimants alleged that Hector May simply used his community status to issue, solicit and sell these non-existent securities products. Now, Hector May is being investigated by multiple government agencies for alleged fraud resulting in millions of dollars bilked from unsuspecting investors. Of course, Hector May refuses to provide answers regarding the whereabouts of the invested funds or any further details about the transaction activities in dispute.

The amended complaint now alleges that Hector May also stole money from two New York company’s pension plans while running his Securities America branch office.  The newly added pension plans’ beneficiaries were allegedly sold fictitious “tax-free” corporate bonds. Hector May allegedly told company beneficiaries not to worry since their invested money would be in “safe places” under his RIA with Securities America. Hector May’s reassuring comment could not be further from the truth, hidden by his falsely produced employee benefit plan and annual reports. Consequently, company employees have been defrauded out of millions of dollars that had been intended to be their income upon retirement.

Malecki Law was featured in the news for filing a FINRA arbitration claim on behalf of investors alleging that Securities America failed to perform proper supervisory duties as their formerly registered broker, Hector May allegedly operated a Ponzi Scheme. In the Financial Planning article, investor fraud attorney Jenice Malecki provides additional information and commentary on her representation of nine clients against Securities America. Financial Planning provides breaking and daily news coverage as well as analysis to help independent financial advisors better their business, practice and client services. Readership often includes independent broker-dealers, financial planners and other industry professionals seeking insights into the highly regulated securities industry. Malecki Law spoke with Financial Planning to spread the message so that other innocent victims who lost their hard-earned savings may seek justice.

Investor fraud attorney, Jenice Malecki released more details regarding the specific allegations relating to Hector May’s allegedly fraudulent practices against investing clients to Financial Planning in hopes of raising awareness. Allegedly, victims of the New City broker’s Ponzi scheme were under the impression that Hector May invested their money into “tax-free” bond products from firms like General Electric. The clients later learned alleged Ponzi Schemer’s “tax-free” bond products were non-existent and apparently just words on false account statements.  When asked for a comment, Hector May’s attorney declined to provide a comment regarding a case started by a law firm placing ads in the newspaper for clients.

The clients are filing the claim only against Securities America since Hector May already had assets frozen and could not pay the award, Jenice Malecki commented.  FINRA rules place broker-dealers at fault for investment losses resulting from their failure to properly supervise and detect a Ponzi Scheme committed by their registered representative. Securities America had an obligation to monitor Hector May’s activities, including the fraud that transpired. Clients are claiming that Securities America missed many “red flags” that would have clued off a Ponzi Scheme.

BondsIn the recent years, we witnessed a sharp decline in Puerto Rican municipal bond prices and related assets, resulting in an upsurge in FINRA claims, arbitrations and awards. This has revealed new insights into the bond market and we anticipate a wave of FINRA Arbitration cases linked to bonds and fixed income asset classes.

After the recession in 2008, there has been a massive movement away from equities towards the seemingly less-risky and volatile asset class of bonds, creating a spike in demand for U.S. treasuries, corporate and municipal bonds. More than $1 trillion has flowed into the U.S. bond market since 2008.

Bonds are sensitive to interest rates and it’s pricing inversely proportional to interest rates. Fed has explicitly stated their intent to hike interest rates going forward, therefore, a fall in bond prices can be reasonably anticipated. Rising interest rates will result in losses for bond investors, most immediate effect being paper losses, and the inability to sell those bonds without incurring actual losses for a long time. Majority of the impact will be felt by longer term bond investors with 10 years or more to maturity and by non-treasury bond holders that tend to fall faster as rates rise.

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This month, Malecki Law attorneys were awarded full net out-of-pocket damages of $142,168.00 by a Financial Industry Regulatory Authority (FINRA) Arbitration Panel. There has been a series of media reports on this, initially appearing in the  InvestmentNews and followed by the Financial Times site Financial AdvisorIQ, and other websites. The claim was brought against Garden State Securities Inc. by Malecki Law on behalf of an elderly investor Anthony Romano on alleged charges of over-trading, over-concentration, and unsuitable investments.

This was another noteworthy investor case win for Malecki Law, who regularly brings claims against unscrupulous broker-dealers and holds them accountable for mismanaging investor’s accounts.

Elderly investors such as Mr. Romano find themselves especially at risk because once they lose their life’s savings to poor decisions made by brokers and securities firms, they do not have sufficient time to recoup their losses. The FINRA Arbitration panel also assessed that all forum fees in the amount of $14,400 will be paid by the respondent Garden State Securities, Inc.

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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