Investors Topics

Another brokerage firm, Alexander Capital L.P Has Been Charged for Failing to Properly Supervise Brokers for Fraudulent Activity Harming Investors

July 7, 2018 | Malecki Law Team

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.

Malecki Law Featured in Financial Planning Article for Insights on Alleged Hector May Ponzi Scheme, Eye Towards Educating Victims

June 29, 2018 | Malecki Law Team

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.

Are Private Placements a Tool for “Troubled Brokers”? That’s What a Wall Street Journal Study Suggests

June 28, 2018 | Malecki Law Team

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.

“Where’s My Order?” Apparently, Merrill Lynch Customers Had No Idea: Merrill Lynch Agrees to Pay $42 Million Settlement For Allegedly Re-Rerouting Customer Orders To Electronic Platforms And Creating False Reports

June 22, 2018 | Malecki Law Team

The SEC settlement indicates that Merrill Lynch sent millions of dollars in customer orders to other broker-dealers for execution while purposely concealing their activity as part of their so-called “masking.” practice. For five years, Merrill Lynch had routed some orders to broker-dealers referred to as “ELP”s, or “Electronic Liquidity Partners.” Merrill Lynch was routing their customer orders into smaller “child orders” for execution at ELPs and other external entities. Meanwhile, Merrill Lynch hid the involvement of ELPs and informed customers that all transactions occurred within the firm. The SEC alleged that Merrill Lynch created false reports; altered code to reconfigure FIX messaging systems; modified Transaction Cost Analysis reports and more to Merrill Lynch as the execution venue incorrectly. Did customers experience bad executions? Why create false reports?

Bank of America’s Merrill Lynch, Pierce, Fenner and Smith Incorporated has agreed to pay a $42 million-dollar settlement Securities and Exchange Commission for federal securities laws violations according to an Order Instituting Administrative and Cease-and-Desist Proceedings. According to the SEC’s order released Tuesday, Merrill Lynch admitted to fraudulently deceiving clients about the handling of their millions of orders to buy and trade stock. The Securities and Exchange Commission finds that Merrill Lynch “willfully violated” Sections 17(a)(2) and 17(a)(3) of the Securities Act. The case is an unfortunate reminder of the risks that even the most careful investors deal with when trusting financial institutions.

Merrill Lynch Pierce, Fenner and Smith Incorporated is a FINRA registered brokerage firm and investment advisor with 1559 total disclosures according to (CRD #7691) records on BrokerCheck. Although a Delaware corporation, Merrill Lynch’s principal offices are in Bryant Park, New York. Merrill Lynch’s business conduct includes mutual fund retail, investment advisory services; retailing corporate equity securities; selling variable life insurance or annuities, along with other securities and non-securities transactions.

Malecki Law Announces the Filing of an Expedited Group FINRA Arbitration Against Securities America, Inc. for NINE Defrauded Investors Claiming Failure to Supervise Alleged Ponzi Schemer Hector May

June 15, 2018 | Malecki Law Team

Malecki Law filed an expedited FINRA arbitration complaint today on behalf of nine investors from Upstate New York, Northern Virginia and Long Island, New York alleging that Securities America, Inc. failed to supervise its registered representative Hector May and failed to audit his remote Securities America office, which it is alleged in essence allowed his alleged Ponzi-type fraud to persist for many years. Through these alleged supervisory shortcomings, it is alleged that Securities America’s Inc. aided and abetted fraudulent practices conducted by its registered representative as well as in his disclosed, approved SEC-registered investment advisor, Executive Compensation Planners, Inc. “At some point, a license to sell securities can become a license to steal when there is inadequate supervision of these remote brokerage firm offices,” offered well-known securities attorney Jenice Malecki.

Executive Compensation Planners was supposed to solicit wrap fee programs through Securities America, according to its Form ADV filed with the SEC. Instead, as alleged in the FINRA pleading, Hector May had wires sent and checks written directly to Executive Compensation Planners; created fictitious statements; and pocketed client funds. Hector May reported managing $18 million in his Form ADV. Mr. May’s FINRA BrokerCheck report indicates that Hector May, who had been with Securities America since 1998, was terminated for misappropriation of clients’ assets just after the Department of Justice initiated a criminal investigation into his suspected felony, along with investigations by the U.S. Postal Inspectors and the United States Securities and Exchange Commission.

Prior to his alleged conduct coming to light, Hector May was widely known with an excellent reputation within his New York Community, often sponsoring charities – “clients now want to know if he was using their money to be charitable,” said Jenice L. Malecki, Esq., a securities lawyer in New York. Mr. May’s wife, daughter and other family members are alleged to have worked with him.

My Money Was Stolen Out of My Brokerage Account, What Can I Do? Malecki Law Files Claim Regarding Identity Theft Fraud in Brokerage Account

May 31, 2018 | Malecki Law Team

Can’t imagine having a retirement brokerage account drained in a case of preventable identity theft? Such an unimaginable misfortune is a devastating reality for an investor alleging in a FINRA arbitration complaint that he had the entirety of his account at Invesco stolen, without any help or recompense from the brokerage firm. An unidentified perpetrator used this unsuspecting investor’s private identifying information to access and steal money from a 401k retirement account. Malecki Law securities fraud attorneys recently filed a claim against Invesco Distributors Inc, on behalf of this investor alleging their failure to safeguard their client’s assets pursuant to FINRA Rules, SEC Regulations, and securities laws.

This foreseeable fraud initiated when, just around the busy Christmas holiday season, an unidentified individual accessed our client’s Invesco retirement 401k. The perpetrator changed the email address and phone number, which had previously been on file for ten years. Within days, the perpetrator stole funds totaling over $100,000 from the investor’s Invesco 401k brokerage account. The perpetrator also successfully took a loan against the 401k account and transferred money to a bank account not owned by our client. Furthermore, Invesco transferred $25,000 to the IRS as a penalty for borrowing against the 401(k) accounts. Amazingly, the investor learned of these unauthorized account transactions only from checking Invesco’s account portal.

Invesco Distributors, Inc. is an indirect wholly owned subsidiary of Invesco Ltd, according to their official website. Invesco Ltd. announced in a recent press release that their firm manages an estimated $972.8 billion in client assets. Based in Texas, Invesco Distributors Inc., is their U.S distributor of mutual funds, exchange-traded funds, institutional money market funds and other retail products. As a FINRA registered broker-dealer, Invesco Distributors Inc. is expected to comply with required industry practices, statutes, rules, and regulations. FINRA rules, SEC regulations and securities laws exist to encourage brokerage firms to protect their investor’s information.

Hector May’s Alleged Ponzi Scheme: Malecki Law Investigating, Lohud Interested

May 17, 2018 | Malecki Law Team

Hector May, a former highly regarded member of the community in Rockland and Orange counties, is under investigation by several governmental entities. Reportedly, allegations include that Hector May misappropriated investor funds. In a Lohud/The Journal News article, Jenice Malecki, Esq. discusses how her clients and other investors have lost millions from Hector May in what she believes to exemplify a Ponzi scheme. Given her significant experience representing Ponzi scheme victims, Ms. Malecki finds many parallels with Hector May’s actions.

A Ponzi scheme is a type of investment fraud that relies on a constant money flow of new deposits to produce false “returns” to existing investors. New deposits are never actually invested and instead directly allocated to the schemer’s personal funds. Our clients, along with other investors, lost their retirement assets when Hector May sold unsophisticated investors what appears to be fictitious “tax-free” corporate bonds, an impossible investment. Hector May continuously increased his personal wealth at the cost of clueless investors losing their hard-earned life-savings. Eventually, Ponzi victims stop receiving promised returns, collapsing the scheme. It is very likely that Hector May was exposed from not being able to return money to a large investor. Ponzi schemes typically endure for as long as new victims continue to “invest” into the produced returns; withdrawals collapse them.

Are My Investments Losing Money Because of the Market or Am I Just in the Wrong Investments?

April 6, 2018 | Malecki Law Team

You may ask yourself when the market swings whether your investment losses are temporary, permanent, due to the market swings or due to something else. When the market is good, a rising tide lifts all boats, as they say, but when the market is down, the truth may be revealed.

Whether you are a conservative, moderate or speculative investor, when the wind has been removed from the sails, you really see what your investments are made of, if anything.

If you are a conservative investor, your investments should not generally ride with market swings. The beauty of being conservative is wide diversification in fixed income and a bit of equities.

Malecki Law Investigating Possible Ponzi Scheme and/or Misappropriation of Funds by Financial Adviser Hector May

March 30, 2018 | Malecki Law Team

Malecki Law is currently investigating allegations against Securities America, Inc. and its terminated financial adviser, Hector Anthony May. Mr. May was employed almost twenty years with Securities America at its New City, New York office, and was terminated in March of 2018 in relation to an ongoing criminal investigation by the U.S. Department of Justice. The investigation relates to an alleged Ponzi scheme and/or misappropriation of funds involving many investors and potentially many millions of dollars in losses. If you have suffered investment losses with Securities America and/or had your retirement savings invested with Hector May through his own financial planning firm, Executive Compensation Planners, Malecki Law is interested in hearing from you.

In a Ponzi scheme involving Robert Van Zandt, Malecki Law successfully recovered over $7.4 million in investment losses through the firm’s representation of 120 victims from the Bronx, New York, who fell victim to Mr. Van Zandt’s $35 million Ponzi scheme. Malecki Law’s successful representation was featured in the media, including CBS New York’s Eye Witness News. Malecki Law has experienced attorneys who specialize in recovering investment losses for victims of financial fraud.

Help! I Just Lost My Entire Investment in the VIX

February 8, 2018 | Malecki Law Team

Wall Street is constantly crafting complex and volatile products that somehow end up in the investment accounts on Main Street. The latest turbulence in the stock markets has already been in part attributed to one of the latest Wall Street machinations: exchange-traded-products (ETPs) linked to volatile exchanges – specifically, products linked to the Chicago Board Options Exchange (CBOE) Volatile Index (VIX). Today alone, the Dow Jones Industrial Average closed more than 1000 points down from yesterday, and due to the volatility that is still ongoing, the devastating fallout is largely unrealized and has left investors scrambling.

Since its inception in 1993, the VIX was one of the earlier attempts to create an index that broadly measured volatility in the market. One such ETP linked to the VIX is Credit Suisse’s VelocityShares Daily Inverse VIX Short-Term ETN (ticker symbol XIV), which the issuer just announced it will be shutting down after losing most of its value earlier this week. Products that may be at similar risk include Proshares SVXY, VelocityShares ZIV, iPATH XXV, and REX VolMaxx VMIN. But the risks associated with these ETPs have been well known to professionals in the securities industry, and investors who were recommended these products should have received a complete and balanced disclosure of these risks at the time of purchase.

In October of 2017, the Financial Industry Regulatory Authority (FINRA) ordered Wells Fargo to pay $3.4 million in restitution to investors relating to unsuitable recommendations of volatility-linked ETPs. FINRA also published a warning to other firms in Regulatory Notice 17-32 regarding sales practice obligations, stating that “many volatility-linked ETPs are highly likely to lose value over time” and “may be unsuitable to retail investors, particularly those who plan to use them as traditional buy-and-hold investments.” This was not the first warning from the regulator.