New York Securities Fraud Lawyers Blog

Banner picture of a key atop a balance sheet

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

Successful, Strategic & Straight-Talking SECURITIES LAWYERS

START WITH A FREE CONSULTATIONReferrals Welcome

Representing investors, financial professionals, whistleblowers, witnesses
and commercial clients around THE US and the world since 1999

New York Securities Fraud Lawyers Blog

FINRA Bars Former Wells Fargo Broker Nicholas Hansen Harper

May 15, 2015 | Malecki Law Team

The Financial Industry Regulatory Authority (FINRA) has permanently barred Nicholas Hansen Harper. Harper worked in Wells Fargo’s Topeka, Kansas branch office from 1997 through 2013 according to his BrokerCheck Report.

Per the Letter of Acceptance Waiver and Consent filed with FINRA, Harper resigned from Wells Fargo on August 7, 2013, shortly after the firm’s compliance department began to review trading in the accounts of certain of his customers. The timing of Harper’s resignation can only serve to raise suspicions.

Presumably suspicious of Harper, in March of 2015, FINRA requested Harper provide testimony to FINRA investigators pursuant to Rule 8210. More than one month after the request was issues, FINRA staff spoke to Harper’s attorney, who purportedly indicated that Harper would not be appearing before FINRA to provide testimony at any time.

FINRA Looks To Come Down Harder On Brokers And Firms Making Unsuitable Recommendations to Customers

May 13, 2015 | Malecki Law Team

What should happen to a financial advisor (FA) if they provide unsuitable and inappropriate investment advice to their clients?

First, if the unsuitable advice given to a customer caused losses to that customer’s account, the customer has the option to sue the FA in FINRA arbitration. Investors can recover some or all of their losses due to the bad advice – usually against the firm that the FA worked for in a failure to supervise case. Arbitration is common for aggrieved investors, and this law firm has successfully represented numerous investors who have been the victims of unsuitable investment advice from an FA.

But what about punishing the broker, so he or she doesn’t do it again to someone else? Can they go to jail? If not, what does happens?

Malecki Law Announces Investigation of Former PrimeSolution Securities, Inc. Brokers Jeffrey Gainer, Jerry Cicolani, Jr. and Kelly Hood

May 11, 2015 | Malecki Law Team

This oil and gas investment was a bust, but not because of the current market conditions. According to Securities and Exchange Commission (SEC) court filings, brokers Jeffrey Gainer, Jerry Cicolani, Jr. and Kelly Hood were terminated from their employer PrimeSolutions Securities, Inc., a Cleveland, Ohio broker-dealer, as a result of marketing and recommending investments in KGTA Petroleum, Ltd. In its complaint filed in the United States District Court for the Northern District of Ohio, the SEC described KGTA Petroleum, Ltd. as a scam and Ponzi scheme. As reported recently by Crain’s Cleveland Business, the FBI announced on April 15, 2015 that Mr. Cicolani had been charged criminally as a result of selling unregistered KGTA Petroleum, Ltd. securities.

Brokers Gainer and Cicolani allegedly engaged in three separate fraudulent acts by recommending the KGTA investments without properly registering the securities, engaging in “selling away” activities by selling the KGTA investments not through their employer, PrimeSolutions Securities, Inc., and failing to disclose to their public investor customers the very large fees they earned as a result of the recommendations and placements. According to the SEC complaint, Brokers Gainer and Cicolani earned approximately $6 million in fees, or around 29% of all funds raised in the fraudulent KGTA investments.

The SEC detailed in its complaint that the investments KGTA Petroleum, Ltd. held by customers were often in the form of “promissory notes” or “agreements,” but really represented a typical Ponzi scheme, with interest and other payments made to old investors from the funds of new investors. The SEC complaint alleged that the scheme affected at least 57 customers.

JP Morgan Investigated By SEC and Other Authorities Over Sale of Proprietary Products

May 8, 2015 | Malecki Law Team

Is it okay for a broker-dealer to use bonuses and other incentives to encourage its financial advisors to steer customers into “in house” and proprietary funds that may not be right for them just to generate more fees for the firm? Or does this practice improperly (and illegally) incentivize the financial advisor to betray his customer’s trust for his and his firm’s benefit – thereby compromising the integrity of the relationship?

The SEC is asking just those types of questions about the practices of JP Morgan, according to recent reports. Per InvestmentNews, the SEC and other regulators have subpoenaed and otherwise inquired of JP Morgan about the firm’s sales practices. Specifically, the reports indicate that the focus seems to be on conflicts of interest related to the sales of mutual funds and other proprietary products to customers. The SEC is reportedly looking into whether JP Morgan breached duties to its customers and/or applicable laws by unfairly and/or illegally marketing its in house investment products.

The sale of in-house proprietary products can be a very lucrative business for large “wire houses” as they are known in the industry. Wire houses include such familiar names as JP Morgan, Merrill Lynch, Citigroup, Wells Fargo, etc. By performing all of the structuring, issuing, lending and selling for their proprietary funds internally, a wire house is able to capture all of the associated fees, commissions and charges. Therefore, it is important that regulators review the sales of such in house products, to make sure they are being sold fairly and legally to customers.

Malecki Law Announces Investigation of Former LPL Financial Broker Charles Fackrell

May 8, 2015 | Malecki Law Team

On the heels of an announcement from the Financial Industry Regulatory Authority (FINRA) that LPL Financial LLC has been fined approximately $12 million as a result of lax supervision, FINRA barred former LPL broker Charles Fackrell as a result of him refusing to comply with FINRA’s request for information. Mr. Fackrell was employed by LPL Financial in North Carolina from 2010 through 2014, according to a review of publicly available records.

According to a Letter of Acceptance, Waiver and Consent No. 20140437052 (AWC), the results of a FINRA investigation into Mr. Fackrell’s activities while employed at LPL Financial allegedly uncovered securities rule violations for selling private securities offerings.

In the AWC, Mr. Fackrell consented to the finding that he violated FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade). Rule 2010 requires that all FINRA members shall observe high standards of commercial honor and just and equitable principles of trade.

FINRA Alleges Substantial Fraud Claims Against Avenir Financial Group

May 6, 2015 | Malecki Law Team

Senior-aged investors continue to dominate securities related news coming out of the Financial Industry Regulatory Authority (FINRA). Though Avenir Financial Group, a New York-based broker-dealer, has only been a FINRA member for three years, the regulator has alleged substantial fraud claims against the firm, the firm’s Chief Executive Officer and Chief Compliance Officer Michael Clemens and several registered representatives.

In a New Release dated April 27, 2015, FINRA alleged that Avenir and registered representative Karim Ibrahim (a/k/a Chris Allen) defrauded a 92 year old customer of the firm by selling equity interests in the firm based on misleading and fraudulent terms. FINRA alleged that Mr. Ibrahim was aware that the firm was financially struggling, yet offered 5% of the company for $250,000, a valuation that was materially misleading because other investors had previously been offered lower prices and there was no basis for the change in the prices. FINRA alleged that Mr. Clemens aided and abetted the fraud by instructing Mr. Ibrahim regarding the proposed sale to the senior-aged customer.

In the related FINRA Complaint, FINRA detailed that Avenir “inexplicably” increased the equity share offerings. For example, the Complaint stated that a one percent share increased from an initial offer of $2,600 to a third offering costing $50,000. During this time, Avenir was allegedly suspended from operating a securities business when its net capital decreased below regulatory thresholds, and the firm faced an approximate $200,000 margin call that would have closed the firm had it not been for the investor who purchased the third offering.

LPL Financial Settles Supervisory Failure Charges with FINRA for $11.7 Million

May 6, 2015 | Malecki Law Team

LPL Financial agreed to pay more than $11 million to settle charges in connection with a Financial Industry Regulatory Authority (FINRA) investigation into the firm, as recently reported in the Wall Street Journal. According to the Letter of Acceptance Waiver and Consent filed with FINRA, LPL Financial was alleged to have supervisory failures, related to non-traditional products such as exchange traded funds (ETFs), variable annuities, and non-traded real estate investment trusts (REITs).

LPL allegedly failed to deliver over 14 million trade confirmations in addition to failing to properly monitor and report trades. Of the amount collected, $1.7 million is reportedly restitution for customers, while LPL Financial was fined an additional $10 million.

Vigilant supervision over the sale of non-traditional investments is especially important because public customers are typically unfamiliar with the products being sold to them. In addition, many non-traditional products have higher commissions (meaning a bigger incentive for a broker to sell such products) than their more traditional counterparts.

Broker Stuart Conley Accepts Censure and Fine for Failing to Obtain Prior Written Authorization For His Discretionary Trading

May 1, 2015 | Malecki Law Team

Formality is substance in the business of investing; casual account management is not allowed. Either you discuss every trade with your broker, or your broker obtains written discretionary power, with no exceptions!

The Financial Industry Regulatory Authority (FINRA) accepted on April 27, 2015 a Letter of Acceptance, Waiver and Consent No. 2013037694701 (AWC) from Stuart Conley, a former broker of UBS Financial Services Inc. and Further Lane Securities, L.P. for placing discretionary trades in 21 separate accounts. It was address by the AWC that Mr. Conley allegedly failed to obtain prior written consent from the account owners to make discretionary trades.

Failing to obtain prior written consent violated FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade) and Rule 2510 (Discretionary Accounts). Rule 2010 requires that all FINRA members shall observe high standards of commercial honor and just and equitable principles of trade. Rule 2510 prohibits brokers from exercising discretionary power in a customer’s account without first obtaining written authorization from that customer and the employing broker-dealer.

FINRA Files Complaint Against Lawrence LaBine

April 30, 2015 | Malecki Law Team

Unfortunately, the elderly and the inexperienced investors are oftentimes the ones who find themselves victimized by unscrupulous and predatory brokers. Foreign persons – from Europe, South America, and elsewhere – also appear to be increasingly victimized by such U.S.-based brokers as well.

On April 28, 2015 the Financial Industry Regulatory Authority Department of Enforcement filed a complaint against Mr. Lawrence LaBine. According to the Complaint, Mr. Labine is accused of having violated NASD Rules 2310 and 2110 and FINRA Rule 2010 in making unsuitable recommendations to customers, Section 17(a) of the Securities Act and FINRA Rule 2010 in making misrepresentations and omissions concerning Domin-8 and D8, and Section 10(b) of the Exchange Act, Rule 10b-5 thereunder and FINRA Rules 2020 and 2010 by making fraudulent misrepresentations and omissions concerning Domin-8 and D8.

The Complaint alleges that Mr. LaBine made the subject fraudulent misrepresentations and omissions to customers, as well as unsuitable investment recommendations to customers while registered with DeWaay Financial Network. Many of Mr. LaBine’s customers at DeWaay to whom he sold unsuitable investments were said to be elderly and/or inexperienced investors.

What is an 8210 Request and What Do I Do If I Get One?

April 29, 2015 | Malecki Law Team

Back in February, I wrote a piece on what to do when you get an SEC subpoena. SEC subpoenas are only part of the securities regulatory landscape. While the SEC can and will subpoena anyone – registered or unregistered – who is potentially the target of or may have helpful information related to an SEC investigation, FINRA registered representatives are additionally subject to FINRA inquiries via FINRA Rule 8210.

FINRA Rule 8210 allows FINRA investigators to essentially “subpoena” a person – i.e., require that they testify on the record and/or compel them to produce documents – without actually ever getting a subpoena. Instead, FINRA uses what is commonly (and not surprisingly) referred to as an “8210 Request.”

8210 Requests are similar to SEC subpoenas in their function, but differ slightly in practice. FINRA investigators will regularly tell parties that FINRA is not the government, but merely a private member organization. Why is that significant? Some may say that it’s significant because FINRA cannot actually “require” someone to come testify under a threat of contempt or jailtime; that your response is, in a way, “voluntary.”