New York Securities Fraud Lawyers Blog

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EMPLOYEE RECOVERY $2M FOR A WHISTLEBLOWING TRADER

INVESTOR RECOVERY $7.2+M FOR PONZI SCHEME VICTIMS

INVESTOR RECOVERY $3.9M FOR TAX SHELTER FRAUD VICTIMS

BROKER PONZI SCHEME $7.4 MILLION

FAILURE TO SUPERVISE $4+ MILLION

BROKERAGE THEFT $3.8 MILLION

PONZI AT MAJOR FIRM $4+ MILLION

FAILED PRODUCT 28 EXPUNGEMENTS

WHISTLEBLOWER AWARD MAX 30% BOUNTY

NO ACTION INSIDER TRADING CASE

NO ACTION EMBEZZLEMENT CASE

NO ACTION MARKET MANIPULATION

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New York Securities Fraud Lawyers Blog

FINRA Bars Chicago Broker George E. Johnson Over Allegations of Fraud and Stock Manipulation

February 24, 2016 | Malecki Law Team

The Financial Industry Regulatory Authority (FINRA) has announced that it barred broker George E. Johnson from the securities industry for allegedly engaging in manipulation of stock trading, and for committing fraud. FINRA also imposed a 6-month suspension against a second broker, Joseph Mahalick, and a 2 year suspension against a supervisor, Christopher Wayne. All three individuals are reported to have worked at the time for the brokerage firm Meyers Associates, L.P. out of the firm’s Chicago, Illinois office. Mr. Johnson has been working for and was registered by Newport Coast Securities, Inc. from April 2013.

FINRA’s Order stated that during May 2012, Mr. Johnson manipulated the market for the common stock of IceWEB, Inc. (OTCBB: IWEB) by soliciting customers to buy the stock while also soliciting other customers to sell at increasingly higher and artificially inflated prices and frequently effecting matched orders among his own customers. Before and during this time, FINRA’s Order set forth that Mr. Johnson distributed to his clients misleading research and sales materials concerning IWEB, and failed to disclose material information.

The Order alleged that Mr. Johnson first became involved with IWEB when his employer acted as a placement agent for the company, and that he continued to recommend the stock to his clients through private placements and in the open market, despite the company having years of financial issues. At the time, IWEB stock was valued at around .12/share, and the Order alleged that Mr. Johnson solicited purchases and sales in the stock to artificially increase the share price to .17/share, allegedly for the purpose of earning placement agent business from IWEB to earn substantial placement fees.

Broker Transition Part 2 – Are Your Clients Really Yours? Navigating the Protocol

February 19, 2016 | Malecki Law Team

From Deutsche Bank to Credit Suisse and Barclays, brokers are in transition for a variety of reasons – some voluntary and some obligatory. Either way, for a FINRA registered representative, leaving their broker-dealer can be a nerve-wracking time. Regardless of the reason for leaving, the ultimate goal is always the same: get to your new firm and bring with you as many clients as you can without getting sued by your old broker-dealer in a FINRA Arbitration.

But, easier said than done. In addition to the logistical challenges, there are also some legal hurdles that must be cleared first.

The first major question that should be asked is: “Does the Protocol for Broker Recruiting apply?” If either your old firm or new firm are not signatories to it, then your answer should be “No.” If both your old firm and your new firm are signatories to it, then the answer to that question should be “Yes” – but some restrictions may apply.

SEC Announces Significant Settlement With Massachusetts-Based PTC, Inc. Regarding Foreign Corrupt Practices Act Allegations

February 18, 2016 | Malecki Law Team

The Securities and Exchange Commission (SEC) announced on February 16, 2016 a settlement with Massachusetts-based PTC, Inc. involving alleged violations of the Foreign Corrupt Practices Act (FCPA). In total, PTC was reported to agree to pay approximately $28 million, including nearly $12 million in disgorgement and more than $14 million in a non-prosecution agreement with the United States Department of Justice in a parallel action.

According to the SEC Order, PTC’s China-based subsidiaries made payments to China officials in an effort to win business, including:

Provided improper travel, gifts, and entertainment totaling nearly $1.5 million to Chinese government officials who were employed by state-owned entities that were PTC customers.

Highland Funds Energy Master Limited Partnerships Post Significant Losses

February 16, 2016 | Malecki Law Team

The New York securities and investment fraud attorneys at Malecki Law are interested in hearing from investors in Highland Funds’ series Energy Master Limited Partnerships (MLPs).

Highland Funds’ four Energy MLPs have declined by approximately 23% in the year to date, per Morningstar. These funds include:

Highland Energy MLP C (HEFCX)

FINRA’s 2016 Priorities: FINRA is Searching for Sales Practice Issues

February 11, 2016 | Malecki Law Team

Brokers beware; FINRA is watching your firm, and you. Becoming embroiled in a regulatory inquiry or investigation can become a major and costly headache and impediment to registered representatives’ business.

In January 2016, the Financial Industry Regulatory Authority (FINRA) released its annual list of priorities, showing what sorts of sweeps they may perform, and investigations they may bring, in the coming year. brokers working in the securities industry should be aware of the priorities that are relevant to them, including those having to do with sales practice.

FINRA’s 2016 Priorities make clear that they intend a top-down review of the following areas, which may lead to firm-wide or broker specific investigations, including:

INVESTIGATION ALERT: Malecki Law Announces Investigation Into Investor Losses in Oil Linked Structured Notes

February 9, 2016 | Malecki Law Team

The investment fraud attorneys at Malecki Law announce the firm’s investigation into potential securities law claims against broker-dealers relating to the improper sale of natural gas and oil linked structured notes and similar products to investors.

Malecki Law is interested in hearing from investors who purchased structured notes issued by well-known financial institutions, including Bank of America Merrill Lynch (NYSE: BAC), Citigroup (NYSE: C), Credit Suisse (NYSE: CS), Goldman Sachs (NYSE: GS), JP Morgan Chase (NYSE: JPM), Morgan Stanley (NYSE: MS), UBS (NYSE: UBS), and Barclays (NYSE: BCS).

These investment products, often bearing such names as “Phoenix,” “Plus,” “Enhanced Return,” “Principal Protected,” “Bullish,” “Leveraged Upside” or “Accelerated Return,” were reportedly marketed to investors as a way to make significant returns and income from the rising price of oil. In addition to promises of increased gains, investments like these are frequently also sold to investors with assurances that their potential losses would be limited and their initial investment would be protected.

Investor Recovery Options for United Development Funding Investors

February 5, 2016 | Malecki Law Team

United Development Funding (“UDF”) has come under fire in recent months – being accused of operating like a “Ponzi scheme.” It has allegedly disclosed that since April 2014, it has been under SEC investigation.

UDF operates several publicly-traded and non-traded Real Estate Investment Trusts (REITs) along with other real estate related companies, according to reports. UDF reportedly operates in a manner that is different from traditional REITs – in that its assets are not real estate holdings, but rather development loans that it originates.

The UDF fund family is reportedly comprised of four public companies – United Mortgage Trust (non-traded), UDF III (non-traded), UDF IV (publicly traded symbol: UDF), and UDF V (non-traded).

SEC Announces 2016 Priorities that Involve Securities Industry Participants

February 5, 2016 | Malecki Law Team

The sad truth is that the Government loves the easy kill. It is often easier for regulators to extract settlements and punishments against smaller market participants, including brokers, traders and analysts, than the giant wire houses, because large companies can match the resources of the Government.

The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), among other regulators, regularly engage in investigations to explore, deter and punish market conduct that violates the securities laws and industry rules. While it can be hard to know what those investigations will be, the regulators like the SEC disclose regulatory priorities on an annual basis. These examination priorities are areas where the SEC will be dedicating resources throughout 2016.

Of the 2016 Priorities announced by the SEC, the following may lead to broad investigations:

Broker Transition: The Upfront Bonus/Forgivable Note

February 5, 2016 | Malecki Law Team

Thinking about leaving your broker-dealer? Looking to make the transition to a new firm?

It has been reported recently that brokers from Credit Suisse, Deutsche Bank and potentially Merrill Lynch are being heavily recruited to leave and join new broker-dealers. For those leaving Credit Suisse, Deutsche Bank, and Merrill (as it is for any FINRA registered representative) the choice to move to a new broker-dealer is not one that is made lightly. Whether a protocol move or a non-protocol move, many of the same issues remain at the forefront and need to be dealt with judiciously. One of these issues is the transition bonus/promissory note.

If you are fortunate enough to have a substantial book of business and significant gross production, you may have been offered an upfront transition bonus by a new broker-dealer. Frequently, these bonuses are awarded to reps in the form of Forgivable Promissory Notes. The basic structure of these “Notes” is as follows: The “bonus” is structured on paper as a loan. Over a set time period – usually five to seven years – the balance of the loan, including interest, is paid off or “forgiven” by the broker dealer.

A Summary of FINRA’S Regulatory Priorities in 2016

February 5, 2016 | Malecki Law Team

Recently, FINRA issued the 11th Regulatory and Examination Priorities Letter that addresses issues in the financial industry, if left unaddressed could adversely effect market integrity and investors. In 2016 their key points of emphasis have been identified as (1) culture, conflicts of interest and ethics; (2) supervision, risk management and controls; and (3) liquidity. The Letter also highlights specific policies and procedures the FINRA will use to ensure that member firms are compliant with the priorities identified.

According to Richard G. Ketchum, CEO and Chairman, FINRA, “ Firm culture, ethics and conflicts of interest remain a top priority for FINRA. A firm’s culture contributes to, and is also a product of, a firm’s supervision and its approaches to identifying and managing conflicts of interest and the ethical treatment of customers. Given the significant role culture plays in how a firm conducts its business, this year the letter addresses how we will formalize our assessment of firm culture to better understand how culture affects a firm’s compliance and risk management practices.”

Culture, Conflicts of interest and Ethics