Last year, a Connecticut based hedge fund, Turnberry Capital Management LP, filed a FINRA arbitration securities claim against SunTrust Banks, Inc. to recover $13 million it lost in 2007 by investing in mortgage backed securities. However, Turnberry Capital Management did not purchase the securities from SunTrust, who manufactured the defective securities, but purchased the securities…

Affinity fraud hit’s a new low. Jody Myung Dunn was accused by the Securities and Exchange Commission, or SEC, of selling $3.45 million in fraudulent investments in a phantom offshore company to the deaf community. Dunn is also deaf. Dunn Solicited Deaf Investors The deaf investors were allegedly solicited via the Internet to sink their…

When your stockbroker sells you a security, whether it be a bond or a stock, you are typically charged a “commission” which is fully disclosed and appears on your confirmation. So for example, you may wish to purchase 200 shares of Apple Computer (AAPL) or an exchange traded stock, and your broker, or brokerage firm…

Real Estate Investment Trusts or REITs are companies, which own and manage income-producing property (e.g.hotels, hospitals, & office buildings) or are involved in real estate financing. REITs are either publically traded, non-exchange traded, or privately traded. REITs provide investors with real estate exposure, but unlike other real estate investments, REITs are often entirely illiquid. REIT…

Everyone thinks that bonds, including U.S. Treasury Bonds are safe investments. Think again. If interest rates, which are at historical lows, rise, the market prices of bonds go down. Longer term bond prices go down real far down, and mutual funds that invest or trade bonds, will get hardest hit, and this has nothing to…

It is OK to steal as long as you do not steal too much to get a greedy lawyer involved. In the good old days, if you stole $100 from 2 million people, or $200 million, although no competent greedy lawyer would be willing to undertake your representation to recover your $100, the class action…

As Justice Louis D. Brandies once said not in a legal opinion, but in a book, “Sunshine is said to be the best disinfectant; Electric light the most efficient policeman,” Brandies, Other People’s Money (1914). The Responsibility of the SEC It is the responsibility of the United States Securities & Exchange Commission to oversee securities…

Morgan Stanley & Co. LLC has consented to be fined $1.75 million by the Financial Industry Regulatory Authority (FINRA) for its failure to supervise the sale of complex financial products known as non-traditional exchange-traded funds, as well as for making unsuitable recommendations of these funds. In addition to the fine, Morgan Stanley consented to a…

Until recently, Clifford Jagodzinski worked at Morgan Stanley Smith Barney as a Complex Risk Officer. Mr. Jagodzinski’s job duties included identifying potential compliance risk issues and enforcing securities law violations. According To The Lawsuit According to a lawsuit filed in federal court, as part of his officicail duties, Mr. Jagodzinski detected that a particular broker,…

The Financial Industry Regulatory Association (“FINRA”) maintains a database of customer complaints about individuals licensed by FINRA as registered representatives. The data can be accessed and used by both securities regulators and the investing public to find out about past complaints made by customers of the registered representatives. Customer Complaints Can Be Expunged But records…

Wells Fargo Advisors and its related firms have agreed to pay a fine of $2.1 million to settle a disciplinary action brought by the Financial Industry Regulatory Authority (FINRA) for the companies’ failure to supervise the sale of complex financial products known as non-traditional exchange-traded funds, as well as for making unsuitable recommendations of these…

Broker-dealers have long offered a range of structured securities to institutions and wealthy individuals. Certain structured securities products have been increasingly marketed to retail investors in recent year. According to a recent report by the United States Securities & Exchange Commission, on Issues Identified in Examinations of Certain Structured Securities Products Sold to Retail Investors,…

The Financial Industry Regulatory Authority (FINRA) has suspended Andrew J. Aragona, a former broker with Newbridge Securities Corp., from associating with any FINRA-registered firm in any capacity for one year for unsuitably recommending that an elderly customer switch variable annuity contracts. Per a default decision entered May 2, Aragona was also fined $15,000, and ordered…

Tough economic times call for investors to be wary, as financial professionals are tempted toward riskier behaviors, according to the Financial Industry Regulatory Industry’s (FINRA) 2012 report on regulatory and examination priorities, released Jan. 31. The report first lists a few investment characteristics that demand close attention, and then provides a detailed list of products…

A federal court in California dismissed a complaint filed by Charles Schwab Corp. that tried to block regulators from disciplining the brokerage firm for embedding a clause in its customer account agreements that precludes class-action lawsuits. FINRA Complaint Filed The Financial Industry Regulatory Authority (FINRA) alleged in a complaint filed in February with its Office…

The Financial Industry Regulatory Authority (FINRA) found that Sean M. Sheridan, during the course of his association with J.P. Turner & Co., Inc. fraudulently obtained $267,000 from at least eight customers, who also lost approximately $1,040,856 in connection with the short term trading of investment company shares. Until sometime in 2010, Sean F. Sheridan (“Sheridan”)…

LPL Financial LLC must pay $1.4 million to an elderly couple who claimed they were the victims of fraud in connection with real estate deals. The award was issued by an arbitration panel of the Financial Industry Regulatory Authority (FINRA) on Feb. 10. Heinrich and Araceli Hardt, both 76, bought into real estate deals known…

Citigroup Global Markets Inc. has agreed to be censured and to pay a fine of $3.5 million for posting inaccurate data on residential mortgage-backed securities on a website it maintains pursuant to federal regulations. Despite possessing information that the data posted on its website was inaccurate, Citigroup Global did not correct the data it was…

Lloyd Thomas Mincy Jr., a stockbroker registered with Centaurus Financial Inc., has been fined $20,000 and suspended for nine months for fraudulently misrepresenting the guaranteed rates of return for variable annuities he sold to four customers. From October 2004 through 2008, Mincy materially misrepresented the features of the variable annuities, both verbally and in writing….

Brookstone Securities Inc. of Lakeland, Fla., was fined $1 million after a hearing panel of the Financial Industry Regulatory Authority (FINRA) found the broker-dealer made fraudulent sales of collateralized mortgage obligations to elderly, unsophisticated investors. Brookstone Hearing Panel Decision Antony L. Turbeville, the firm’s owner and former CEO, and Christopher Kline, one of its brokers,…

SECURITIES ARBITRATION OUTLINE & READING MATERIALS 1. Arbitration — Overview “Equity is justice in that it goes beyond the written law. And it is equitable to prefer arbitration to the law court, for the arbitrator keeps equity in view, whereas the judge looks only to the law, and the reason why arbitrators were appointed was…

State courts must enforce arbitration agreements pursuant to the Federal Arbitration Act (FAA) regardless of public policy concerns or conflicting state laws, the U.S. Supreme Court has held in Marmet Health Care Center Inc. v. Brown, in a per curiam opinion entered Feb. 21. West Virginia’s Supreme Court of Appeals The ruling vacated a decision…

Investment adviser Brenda A. Eschbach has consented to an entry of judgment against her for misappropriating over $3 million in client funds, the Securities and Exchange Commission (SEC) announced on Feb. 15. The SEC Complaint Against Brenda A. Eschbach According to the complaint filed by the SEC in U.S. District Court for the Central District…

Independent/broker-dealer Basis Financial LLC, and its owner and CEO Armen Karapetyan have been charged with defrauding customers of about $1.8 million over a three year span through four private placement offerings involving financially shaky issuers. According to the FINRA Complaint According to a complaint filed by the Financial Industry Regulatory Authority’s (FINRA) Department of Enforcement…

As a colleague once said: “if you put them to sleep, you have to wake them up”. However, a New York state court confirmed an $880,000 arbitration award against Merrill Lynch, Pierce, Fenner & Smith Inc. despite allegations that one of the arbitrators repeatedly fell asleep during the hearings. No Basis to Vacate the Award…

Securities Arbitration Is Not An Ideal World On July 16, 2012, Stephen J. Choi, Professor of Law, New York University, Jill E. Fisch, Professor of Law, University of Pennsylvania, and A.C. Pritchard Professor of Law, University of Michigan, released their Draft Paper: THE INFLUENCE OF ARBITRATOR BACKGROUND AND REPRESENTATION ON ARBITRATION OUTCOMES. As stated in…

Recently, an issuer of Exchange Traded Notes (ETNs) ceased issuing new notes of a certain type. This caused the trading price of that ETN to spike by nearly 90 percent. When the issuer resumed issuing the notes of that type, their market price plunged by more than half in two days. To help investors avoid…

CCO Investment Services Corp. is a wholly owned subsidiary of Citizens Financial Group, Inc., which is owned by the Royal Bank of Scotland, and in substantial part, operates from kiosks located in traditional retail bank branch offices of Citizens Bank. Since 2006, CCO has been fined more than $4.9 million by a series of federal…

The Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) filed a disciplinary proceeding on March 28 alleging that former broker William Bruce Smith misappropriated $100,000 from a customer. Smith, who worked for FINRA-member Triad Advisors in Shrewsbury, Ma., at the time of the misappropriation, was registered as a general securities representative and principal…

The Securities and Exchange Commission announced fraud charges against James M. Donnan, III, and Gregory L, Crabtree for allegedly perpetrating a Ponzi scheme. Donnan resides in Athens, Georgia, and Crabtree resides in Proctorville, Ohio. The complaint also names two of Donnan’s children, Jeffrey Todd Donnan and Tammy L. Donnan, and his son-in-law, Gregory K. Johnson,…

In October 2010, Nicholas J. Guiliano, Esquire of the Guiliano Law Group, P.C. in Philadelphia and Jeffrey Sonn of Sonn & Erez in Ft. Lauderdale, Florida filed nine actions in arbitration before the Financial Industry Regulatory Authority against Royal Alliance, Inc. and several of its former agents, in connection with the sale of the unregistered…

Harold E. Wilson, a former broker with Ameritas Investment Corp., has been permanently barred from the financial industry for engaging in private securities transactions without disclosing this activity to his firm. In addition, Wilson was barred for failing to respond to repeated requests for information on these transactions from the Financial Industry Regulatory Authority (FINRA)….

As early as January 2009, financial publications began to warn investors of the risks associated with Inverse and Leveraged Exchange Traded Funds. According to Morninstar, these funds can be “expensive and extremely risky” and may not be appropriate for all investors. Indeed, in May 2009, FINRA’s Enforcement Department’s Strategic Programs Group conducted an inquiry regarding…

UBS Financial Services Inc. of Puerto Rico and two of its executives have agreed to settle charges of fraudulent conduct related to mutual funds by paying $26.6 million, to be placed into an account for harmed investors. The fraud consisted of misleading statements made to investors, concealment of a liquidity crisis, and the obscuring of…

The SEC’s Office of Investor Education and Advocacy is issued and Investor Bulletin to help educate investors about lost and stolen securities and the Commission’s Lost and Stolen Securities Program (LSSP), a database for securities certificates reported lost, stolen, missing, or counterfeit. About Lost and Stolen Securities When a security certificate is retired, such as…

Merrill Lynch Pierce Fenner & Smith has been censured and fined $1 million for its failure to arbitrate disputes with its employees over retention bonuses. The fine was part of a settlement with Merrill Lynch announced by the Financial Industry Regulatory Authority (FINRA) on Jan 25. A full-service broker-dealer with its principal offices located in…

Stockbrokers, or more accurately, their employer brokerage firms are required to report to The Financial Industry Regulatory Authority (FINRA), when their stockbrokers are the subject of customer complaints alleging sales practice violations, criminal actions, bankruptcies, or their conduct forms the basis of an arbitration or civil action by a public customer against the broker or…

LPL Financial LLC has been fined $100,000 for failing to supervise Jack Kleck, a broker who sold unsuitably risky investments to clients in their 80s, the Oregon Department of Consumer and Business Services announced on Nov. 22. Boston-based LPL is a broker-dealer licensed by the State of Oregon and responsible for the activities of Jack…

The Securities and Exchange Commission today charged four brokers who formerly worked on the cash desk at a New York-based broker-dealer with illegally overcharging customers $18.7 million by using hidden markups and markdowns and secretly keeping portions of profitable customer trades. Four Brokers’ Fraudulent Scheme The SEC alleges that the brokers purported to charge customers…

Nicholas J. Guiliano, Esquire of the Guiliano Law Group will be featured as a Speaker at the 21st Annual Meeting of the Public Investors Arbitration Bar Association this year in Austin, Texas at the Barton Creek Resort and Spa. Discovery Phase of an Arbitration Mr. Guiliano’s presentation will explore the discovery phase of an arbitration…

UBS Securities LLC was fined $12 million and censured by the Financial Industry Regulatory Authority, or FINRA, for widespread system deficiencies and a failure to supervise that led to tens of millions of improper short sales. The firm violated federal securities laws and FINRA rules at various times from January 2005 through March 2010, with…

A New Jersey investment advisor was sentenced to 14 years in prison recently after pleading guilty to one count of securities fraud and use of manipulative and deceptive devices plus one count of transacting in criminal property. According to Court Documents Sandra Venetis, 60, the founding principal and president of Systematic Financial Associates Inc., a…

Brokerage firm Merrill Lynch, Pierce, Fenner & Smith Inc. has agreed to pay $2.8 million to settle charges by the Financial Industry Regulatory Authority (FINRA) that the firm’s failure to supervise led to over-billing. From April 2003 to December 2011, Merrill Lynch charged a total of about $32 million in unwarranted fees to roughly 95,000…

Brokers and financial advisors of JP Morgan Chase have said they were encouraged by the investment bank to favor JP Morgan’s own products even when the product of competitors were less expensive or better-performing, according to a report in the New York Times. Some advisers told the newspaper they felt pressured to recommend proprietary products as…

In 2012, The Office of the Whistle-blower was established to administer the SEC’s whistle-blower program formed in accordance with Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Section 21F of the Securities Exchange Act of 1934. The Act provides that the SEC shall pay awards to eligible whistle-blowers who voluntarily…

The Securities and Exchange Commission today announced that a non-profit corporation that offers securities to fund mortgage and construction loans to young Amish families in Ohio will ensure that its investors receive more timely and accurate information under an agreement reached with the SEC. SEC Investigates Amish Helping Fund The SEC investigated the Amish Helping…

Since January 2011, David Lerner Associates, Inc. (David Lerner Associates) has recommended and sold over $300 million of a $2 billion real estate investment trust (REIT) — Apple REIT Ten — without performing adequate due diligence in violation of its suitability obligations. Earlier Apple REITs under the same management inappropriately valued the REITs’ shares at…

Charles B. Rowley III, a stockbroker with Boston-based Detwiler Fenton & Co., has been sanctioned by the Financial Industry Regulatory Authority, or FINRA, for engaging in churning and unsuitable trading in the accounts of two customers. Letter of Acceptance, Waiver and Consent Charles B. Rowley agreed to pay restitution of roughly $24,000 plus interest to…

The Financial Industry Regulatory Authority (FINRA) has expelled a Texas-based broker dealer from membership for selling $23 million in private placement offerings without having a reasonable basis to believe that the offerings were suitable for its customers. Letter of Acceptance, Waiver and Consent Cambridge Legacy Securities LLC consented to the expulsion as part of a…

The Securities and Exchange Commission today charged former professional baseball player Doug DeCinces and three others with insider trading ahead of a company buyout. The SEC alleges that DeCinces and his associates made more than $1.7 million in illegal profits when Abbott Park, Ill.-based Abbott Laboratories Inc. announced its plan to purchase Advanced Medical Optics…

Sometimes the moral decay that leads financial professionals to steal from their clients runs deeper than anyone could expect. Robert Bales’ Crimes For instance, the news is out that Robert Bales, the U.S. Army staff sergeant accused of massacring 16 Afghan civilians, was a former stockbroker on the losing end of a 2003 arbitration before…

Wells Fargo Investments LLC has been fined $2 million for failure to supervise the conduct of one of its brokers who sold unsuitable reverse convertible securities to elderly customers, the Financial Industry Regulatory Authority, or FINRA, announced on Dec. 15. The firm was also censured. The fine also covered Wells Fargo’s also failure to provide…

Hairdressor, Marcy Salandra went to her stockbroker’s office at Investors Capital Corporation in McMurray Pennsylvania to withdraw money to buy a house. However, instead of meeting her broker Patricia S. Miller, she was greeted by three FBI agents. Apparently, instead of the $681,944 that her statements showed her Investors Capital Corporation account was worth, the…

An analysis by The New York Times of the Securities and Exchange Commission (SEC) enforcement actions during the past 15 years has found that Wall Street firms have broken anti-fraud laws they had pledged not to breach in at least 51 cases. The New York Times Report These cases involved 19 different firms, according to…

The U.S. Supreme Court issued an opinion on Jan. 10 ruling in favor of a credit card company that sought to enforce a mandatory arbitration provision in its agreement with a class of consumers that sued the company for making misleading statements and charging excessive fees. The class of consumers who sued, called respondents in…

The United States Securities & Exchange Commission, as required by Section 917 of the Dodd-Frank Wall Street Reform and Consumer Protection Act issued a report today on Investor Literacy. Retain Investors Lack Knowledge to Prevent Fraud Not surprisingly, the study found that U.S. retail investors lack basic financial literacy and that investors have a weak…

The Financial Industry Regulatory Authority (FINRA) issued a regulatory notice this month that contained the results of a survey of retail broker-dealer firms regarding the use and oversight of senior designations in an effort to better understand their approach to a vulnerable segment of the population. One area of particular focus was the use of…

What practitioners have known for a long time: The Financial Industry Regulatory Authority’s Arbitration forum is unfair to investors. However, at least this time, there is empirical evidence to back up these claims of unfairness. Some History of Investor Unfairness By way of background, since 1987 and the Supreme Court’s holding in Shearson v. McMahon,…

Each year in Pennsylvania investors conservatively lose $3 billion as the result of securities fraud, Ponzi schemes and the sale of unregistered securities. Among the 50 states that are part of the North American Securities Administration Association, Pennsylvania is and always has been lowest on the list in terms of enforcement actions. Notwithstanding three lawyers,…

Scott B. Hostutler, formerly a broker with Edward Jones, was suspended for 10 days by the Financial Industry Regulatory Authority (FINRA) for trading in a customer’s account without authorization. Hostutler was fined $5,000 in addition to his suspension from association with any FINRA member in any capacity. The sanctions were set out in a Letter…

Thomas R. Fortino, a former broker with First Allied Securities Inc., was fined and suspended by the Financial Industry Regulatory Authority (FINRA) after he engaged in business outside his firm, often called selling away, and misled his firm about these activities. Fortino submitted a Letter of Acceptance, Waiver and Consent (AWC) that resolved the FINRA…

Jimmy Wayne Freeman, a broker with Texas-based PlanMember Securities Corp., was ordered by the Texas Securities Board to pay more than $500,000 in restitution to investors after he sold them securities issued by an outside firm without his firm’s permission and without holding the appropriate securities license. Freeman was also suspended for 12 months from…

The Financial Industry Regulatory Authority (FINRA) has sanctioned Christine L. Cantone and her firm for their failure to supervise a broker who sold fictitious investments to customers through which he misappropriated over $1.6 million. Cantone & Cantone Research Inc. Censored & Fined Pursuant to an FINRA order dated Feb. 22 that accepted an offer of…

Anthony L. Semadeni, a former stockbroker with World Group Securities, has been barred from the financial industry for two years and ordered to pay up to $60,000 in restitution plus interest to customers for borrowing money from them and never fully paying it back. Semadeni also lied to World Group about the loans he received…

Over five years, former broker James Scott McKee defrauded the customers of the brokerage firms where he worked out of nearly $1 million, using lies and omissions to induce them to invest in various real estate ventures in which he had a direct or indirect financial interest, according to a complaint filed by the Financial…

Evidently, it slipped the mind of one New York stockbroker that dead men can’t trade. Eric Anthony Foster, a stockbroker with Halcyon Cabot Partners Ltd., has been fined $10,000 by the Financial Industry Regulatory Authority (FINRA) and suspended for three months for unauthorized trading in the account of a deceased customer while he worked for…

The Financial Industry Regulatory Authority, or FINRA does not take kindly to stockbrokers who fail to disclose tax liens, perhaps because such behavior can signal un-trustworthiness, the last thing you want to see in a stockbroker. If you are a stockbroker who fails to timely disclose such liens per FINRA rules, you are likely to…

The Guiliano Law Group. P.C. has announced the filing of securities arbitration claims before the Financial Industry Regulatory Authority (FINRA) on behalf of investors suffering losses in Inverse and Leveraged Exchange Traded Funds or ETFs. Many investors were sold these securities based upon the notion that they could be a long term hedge. Most ETFs track…

Just when you thought that you heard it all. The New York Stock Exchange disciplined former Morgan Stanley stockbroker Charles Winitch of Scarsdale, New York, for unauthorized trading, churning or excessive activity, and breach of fiduciary duty with respect to the accounts of his customers. Mr. Winitch’s fraudulent conduct, however, relates to the accounts of…

John Edward Mullins and wife allegedly drained their client’s trust while she was in a nursing home. A former Morgan Stanley broker was barred today by the Financial Industry Regulatory Authority Inc. for allegedly misappropriating $11,156.47 from the charitable foundation of a 97-year-old nursing home resident who was his client for more than 20 years….

If your stockbroker sold you improper, excessively risky investments, or — failed to disclose the riskiness of what appeared as an otherwise conservative investment, and as a result you lost your shirt — then today’s story will be especially relevant. For my readers who are stockbrokers, I’ll tell you right now that I’m going to…

Last week I told you about what happened to Hal and his wife, both 67, retired, and long time readers. From more than a million dollars in their 401K account as of January, 2006, their investments have lost close to $750,000. Why? What Went Wrong? “In our final preparations for retirement, in early 2006 even…

Philadelphia, PA (MarketWire) November 6, 2008 –The Guiliano Law Group, P.C., a leading securities lawyer firm in Philadelphia, Pennsylvania announced today it is actively investigating and pursuing securities fraud claims against certain securities broker-dealers resulting from the risky or unsuitable recommendation of securities. Investment trusts, labor unions, pension funds, local municipalities, school boards and charitable…

LPL Financial was sued last week in Phoenix for its role in an affinity fraud case involving members of a local church and an ex-broker who allegedly stole $5 million from at least 40 victims. The lawsuit alleges that the broker, James Buchanan, was able to steal $382,376 from an elderly married couple because LPL…

PHILADELPHIA – PA Nicholas J. Guiliano of the Guiliano Law Group, P.C., in Philadelphia, Pennsylvania announced today he is actively investigating and pursuing fraud claims against certain securities broker-dealers resulting from the risky or unsuitable recommendation of the securities of certain financial institutions. Tens of Billions Lost in Securities Investment Trusts, Labor Unions, Pension Funds,…

The Securities and Exchange Commission today charged a former broker in South Florida, Gary J. Gross, who allegedly defrauded senior citizens and other customers through a variety of abusive sales practices, garnering him more than $700,000 in commissions and fees while causing more than $2.7 million in investor losses. SEC Chairman Christopher Cox announced the…

Despite intense pressure from regulators to tighten recruiting standards for brokers with marks on their records, these bad apples are still being hired by new firms, recent cases illustrate. The problem is compounded by an industry practice that condones silence from broker-dealers when a registered representative leaves under a cloud, attorneys and regulators said. It’s…

General Description of Auction Rate Securities Auction rate securities were first offered for sale in U.S. financial markets in the early 1980s. As of the end of 2005, there were approximately $263 billion of auction rate securities outstanding. Many different types of issuers have issued auction rate securities for example, closed-end funds, corporations, municipal authorities…

NYSE HEARING BOARD DECISION 07-143 September 7, 2007 Citigroup Global Markets Inc. Violated NYSE Rule 401(a) by failing to ensure delivery of prospectuses in connection with sales of registered securities in violation of Section 5(b)(2) of Securities Act of 1933 and to deliver trade confirmations to certain customers; violated NYSE Rule 1100(b) by failing to…

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