The Guiliano Law Group has filed an FINRA Arbitration action against G.F. Investment Services LLC based upon the conduct of Richard Walker Lunn Martin, or Richard W. Martin, the chief of gloom and doom, and speculative moron that invested the accounts of virtually all his customers in highly risky inverse and/or leveraged ETF securities.
Martin was formerly registered with G.F. Investment Services LLC., and hosted a radio show on the Progressive Radio Network entitled “Wake Up Call.” The Progressive Radio Network is supposedly “the world’s leading commercial free progressive news and radio network.” “The Wake-Up Call is designed for people with little or no prior knowledge of finance and encourages listeners to submit their questions and concerns to the show.”
On April 24, 2017, Martin was permanently barred by FINRA for the violation of FINRA Rules, including Rules 2111 and 2010, and 2210 for making “exaggerated false claims” for by not having a reasonable basis to recommend short-selling and the long-term holding of Inverse and Leveraged to “virtually all of his customers.” Department of Enforcement v. Richard Walker Lunn Martin, Disciplinary Proceeding No. 2013035817701 (April 24, 2017)
Martin was a registered representative of G.F. Investment Services, operating from an undisclosed branch location in Penang, Malayasia.
Martin has been the subject of at least fifteen (15) disclosed customer initiated, investment related arbitrations alleging fraud in connection with the sale of Inverse and Leveraged Exchange Traded Funds, or “ETFs.”
On April 24, 2017, Martin was permanently barred by FINRA for the violation of FINRA Rules, including Rules 2111 and 2010, and 2210 for making “exaggerated false claims” for by not having a reasonable basis to recommend short-selling and the long-term holding of Inverse and Leveraged to “virtually all of his customers.” Department of Enforcement v. Richard Walker Lunn Martin, Disciplinary Proceeding No. 2013035817701 (April 24, 2017),
Martin, who holds himself out as a former high level institutional investment and commodities trader in London and Paris for the largest world banks and financial institutions, believed that there was an ongoing United States monetary crisis and that the debt burden of the United States would cause an imminent depression in the world economy and a catastrophic collapse and reset in the financial markets.”
As set forth in the FINRA Enforcement Action, Martin’s investment strategy, at least initially, was primarily based upon recommending and shorting positions in stocks. Thereafter, Martin liquidated his customers’ short positions into cash, and in turn, purchased leveraged/inverse Non-traditional ETF, and sent communications to his customers and “to the public that failed to provide a sound basis for evaluating the facts, were misleading, and contained exaggerated and unwarranted language, promissory statements, and projections of future performance.”
Since January 2009, it has been widely acknowledged by broker-dealers and by state and federal securities regulators that inverse and leveraged ETFs are highly risky securities, and that in connection with the recommendation and sale of inverse or leveraged ETFs, many brokers did not, and do not, fully understand the risks and characteristics of these securities.
“Non-traditional ETFs may not be suitable for retail investors” and “inverse and leveraged ETFs typically are not suitable for retail investors who plan to hold them for more than one trading session, particularly in volatile markets.” See, D. Franceski, & Z. Knepper, Practical Compliance & Risk Management For The Securities Industry, Non-Traditional Exchange Traded Funds at 8 citing Regulatory Notice 09-31)(February 2010); See also, “Are complex ETFs suitable investments?,” InvestmentNews, February 10, 2011.
In January 2009, financial publications began to warn investors of these risks. For example, according to Morninstar,® the UltraShort S&P 500 ProShares SDS is an “expensive and extremely risky fund.” Morninstar® also warns investors that using this fund as a hedge the funds leverage vastly increases risk and volatility, and accordingly these funds may not be appropriate for all investors.
Subsequently, in May 2009, FINRA’s Enforcement Department’s Strategic Programs Group conducted an inquiry regarding the sale of inverse, leveraged, and inverse-leveraged Exchange Traded Funds, and thereafter in June 2009, FINRA issued Notice to Members 99-31, reminding firms of:
their sales practice obligations in connection with leveraged and inverse ETFs. In particular, recommendations to customers must be suitable and based on a full understanding of the terms and features of the product recommended; sales materials related to leveraged and inverse ETFs must be fair and accurate; and firms must have adequate supervisory procedures in place to ensure that these obligations are met.
FINRA Regulatory Notice 09-31(June 2009)(emphasis added).
In this Notice to Members, FINRA also warned members that: “Firms must train registered persons about the terms, features and risks of all ETFs that they sell, as well as the factors that would make such products either suitable or unsuitable for certain investors.” Id. at 4 (emphasis added). Similarly, on August 18, 2009, the SEC staff and FINRA issued an Investors Alert, with respect to Leveraged and Inverse ETFs: Specialized Products with Extra Risks for Buy-and-Hold Investors, and warned that:
before purchasing an inverse or leveraged ETF, investors should also consider seeking the advice of an investment professional. Be sure to work with someone who understands your investment objectives and tolerance for risk. Your investment professional should understand these complex products, be able to explain whether or how they fit with your objectives, and be willing to monitor your investment.
FINRA Investor Alert, August 19, 2009.
As set forth in the Enforcement Action against Martin, “[d]espite his reliance on Non-traditional ETFs, Martin exhibited a lack of knowledge regarding several fundamental aspects of these ETFs. For example, while Martin claimed to understand the “tacking errors” with these funds, he did not understand how they affected ETFs. Similarly, Martin did not understand the concept of a “decay factor” that occurs as a result of a Non-traditional ETF rebalancing its assets on a daily basis. In addition, Martin claimed to rely on Non-traditional ETFs as a hedge against a drop in the stock market despite the fact that Nontraditional ETFs are not intended as a long-term hedge against market forces generally.” Department of Enforcement v. Richard Walker Lunn Martin, Disciplinary Proceeding No. 2013035817701 (April 24, 2017).
Upon information and belief, Martin was supposedly under the supervision of Daniel J. Hushek in G.F. Investment Services’ Sarasota office. Hushek is a part-time owner of a Jimmy John’s Sandwich franchise, and was terminated by G.F. Investment Services in January 2017, following his On-The-Record testimony before FINRA regarding the activities and supervision of Martin.
G.F. Investment Services in addition to its failure to supervise Martin, is responsible for Martin’s actions and ongoing course of fraudulent conduct, under the common law doctrine of respondeat superior. G.F. Investment Services is also responsible for Martin’s conduct pursuant to Section 20(a) of the Exchange Act of 1934, 15 U.S.C. § 78t.
If you are one of Martin’s 44 customers who collectively lost more than $8 million, you should consult with qualified counsel to determine your legal rights.
Guiliano Law Group
Our practice is limited to the representation of investors. We accept representation on a contingent fee basis, meaning there is no cost to you unless we make a recovery for you. There is never any charge for a consultation or an evaluation of your claim. For more information, contact us at (877) SEC-ATTY.
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