Alternative Investments

First Allied Securities Broker William Fox Accused of Making Unsuitable Alternative Investments Recommendations

Published on: April 29, 2020 | by Shepherd Smith Edwards & Kantas, LLP

Texas Stockbroker Purportedly Earned High Commissions From Illiquid Alternative Investments

If you are an investor who was sold alternative investments by First Allied Securities broker William Fox, you may have grounds for an investor claim. Fox, an Austin, TX-based registered representative, has been accused by at least one customer, who already filed a Financial Industry Reguinveslatory Authority (FINRA) claim, of not performing the proper due diligence before recommending that the claimant invest over $2M in retirement funds in illiquid, poor quality alternative investments.

This included nontraded real estate investment trusts (nontraded REITs), annuities, private placements, equipment leasing, and oil and gas investments. The sale of these investments to the claimant resulted in Fox earning $140K in commissions and an investment advisory fee.

Tata Arbitrage Fund and ICICI Prudential Among the Arbitrage Funds That Temporarily Shuttered Because of Coronavirus

Published on: April 16, 2020 | by Shepherd Smith Edwards & Kantas, LLP

Market Volatility Forces Arbitrage Funds to Temporarily Close

Reports of arbitrage funds temporarily shuttering in the wake of the impact of the novel coronavirus (COVID-19) on the markets has caused concern for investors.

At Shepherd Smith Edwards and Kantas (SSEK Law Firm), our investment fraud lawyers are offering free case assessments to help you determine whether you have grounds for an investor claim. We understand the difficulties that US citizens are facing in the wake of COVID-19 and want to assure that we are here to help during this time.

Unsuitable Broker Recommendations of Structured Notes, Including Callable Yield Notes and Autocallable Securities May Be Causing Investors’ Losses During COVID-19

Published on: April 15, 2020 | by Shepherd Smith Edwards & Kantas, LLP

Structured Notes See Steep Decline During Coronavirus Market Crisis

Just weeks into the finansial crisis wrought by the novel Coronavirus (COVID-19), many investors are struggling to deal with the volatile impact of this pandemic not just on the markets but also on their portfolios.

But what many of them don’t know is that some of these losses might not have been as severe if only their brokers had refrained from making investment recommendations that were unsuitable for them or, at the very least, had properly apprised them of the risks involved.

Shepherd Smith Edwards and Kantas Investigates Investor Losses Involving Midstream MLPs

Published on: March 16, 2020 | by Shepherd Smith Edwards & Kantas, LLP

The Drop In Oil Prices Could Lead To Losses For Midstream MLP Investors

With oil and energy stocks continuing to fall – Saudi Arabia’s threat to globally distribute millions of barrels of crude oil in order to win the oil price war over the United States and Russia has only exacerbated these declines. Investors may be wondering – what does this mean for Midstream Master Limited Partnerships (MLPs)?

At Shepherd Smith Edwards and Kantas (SSEK Law Firm), our MLP investment fraud lawyers work with investors that have sustained significant losses caused by fraud or negligence.

National Financial Services Gives GPB Investors Deadline to Move Investments To Another Platform

Published on: November 26, 2019 | by Shepherd Smith Edwards & Kantas, LLP

National Financial Services Customers Have 60 Days To Transfer GPB Investments

Five months after announcing that investors of GPB Capital Holdings private placements would no longer be carrying these alternative investments (AI) on its platform, National Financial Services (NFS) is sending letters to customers notifying them that they have 60 days after January 14, 2020, to transfer their GPB Holdings II securities.

The GPB Holdings II securities must be transferred to another custodian broker or their alternative investment (AI) positions will be registered directly in their name. This is one of the larger GPB private placement funds that, as of June, had reported a 25.4% drop in value. National Financial Services (NFS) is a Fidelity Investments clearing and custody unit.

Former Broker Pleads Guilty in Castleberry Financial Fraud

Published on: August 26, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Scott P. Strochak, an ex-broker, has pleaded guilty to criminal charges related to his involvement in the $3.8M Castleberry Financial Services Fraud. He is also now facing parallel civil fraud charges brought by the US Securities and Exchange Commission (SEC).

Prosecutors charged Strochak, who was the Director of Alternative Investments and a Senior EVP at Castleberry Financial Services Group, and two other firm executives earlier this year over the scam, which promised 8-12% yearly returns on bond-like investments while touting a robust business that was handling hundreds of millions of dollars in capital and had over 300 investors. The fraud raised almost $3.8M from at least 17 investors.

According to the SEC, Strochak, former Castleberry CEO Norman Strell, and ex-President T. Johnathan Turner made misrepresentations to prospective investors, including that its investments were insured and bonded by top insurers like Chubb Group and CNA Financial Group. They allegedly continued to make these representations even after some investors complained that they never received evidence of said insurance.

Purshe Kaplan to Pay $9.5M to Native American Tribe

Published on: July 3, 2019 | by Shepherd Smith Edwards & Kantas, LLP

An alternative investment fraud settlement has been reached between Purshe Kaplan Sterling Investments and the Saginaw Chippewa Indian Tribe of Michigan, in which the independent broker-dealer will pay $9.5M. The tribe had filed an arbitration claim contending that it didn’t know that it was paying the firm millions of dollars in commissions on $190M of alternative investments that were purchased through former Purshe Kaplan broker Gopi Krishna Vungarala between 2011 and 2015, including shares in business development companies and non-traded real estate investments trusts (REITs).

Vungarala was not only the Michigan tribe’s broker but also he served as its investment manager, tasked with overseeing its portfolio. He has been accused by the Financial Industry Regulatory Authority (FINRA), too, of to the tribe about the commissions.

The self-regulatory authority (SRO) recently sought to bar the Purshe Kaplan broker from the industry after the alleged fraud occurred—a motion that is on appeal. FINRA also ordered him to disgorge nearly $9.7M plus interest. The SRO said that Vungarala neglected to tell the tribe that it qualified to receive over $3.3M in volume discounts, which would have lowered how much he made in commissions from the sales.

Massachusetts Regulator Expands Proxy Vote Fraud Probe of Realty Capital Securities to Include Independent Broker-Dealers and Advisers that Sold Alternative Investments

Published on: November 17, 2015 | by Shepherd Smith Edwards & Kantas, LLP

The Massachusetts securities division is widening its probe into alleged proxy voting fraud at Realty Capital Securities to include independent broker-dealers and advisers that sold RCS alternative investments, including nontraded real estate investment trusts. According to Massachusetts Secretary of the Commonwealth William Galvin’s complaint against RCS, firm employees communicated with other brokerage firm agents and talked about how to procure proxy votes. Massachusetts securities division spokesperson Brian McNiff said that these employees would send these agents a broker-dealer authority letter without verifying if they “had authority to vote client shares.”

Galvin, in his complaint, accused RCS of fraudulently gathering proxy votes to support real estate deals backed by AR Capital. He said RCS agents pretended to be shareholders and cast bogus votes for AR Capital-sponsored brokers. AR Capital is owned by Nicholas Schorsch and William Kahane. Schorsch is a principal shareholder in RCAS Capital, also known as RCAP, which is RCS’s parent company.

The state regulator has been probing Schorsch-related companies for the past year. In 2014, Galvin began a probe into RCS after American Realty Capital Property, which Schorsch controlled at the time, disclosed that it had purposely not corrected a $23 million accounting mistake.

This week, and in the wake of the charges filed by Massachusetts against RCS Capital, Fidelity Clearing & Custody and Charles Schwab and Corp. (SCHW) made the decision to step selling AR Capital products. Alternative investment products by AR Capital are marketed to advisers via Realty Capital Securities. Also, Cetera Financial Group said it would stop the sales of AR Capital-branded alternative investments, including REITs. The retail brokerage network announced the cessation a day after Galvin charged RCS with fraud.

ITG, AlterNet Securities to Pay $20.3M to Settle SEC Charges that it Misused Confidential Dark Pool Data, Ran Secret Trading Desk

Published on: August 13, 2015 | by Shepherd Smith Edwards & Kantas, LLP

ITG Inc. and affiliate AlterNet Securities will pay $20.3M to resolve Securities and Exchange Commission charges accusing them of running a secret trading desk and misusing dark pool subscribers’ confidential trading information. As part of the settlement, ITG admitted to wrongdoing.

According to the regulator, even though it told the public it was an “agency-only” broker with interests that were not in conflict with the interests of customers, the firm ran Project Omega, an undisclosed proprietary trading desk, for over a year. The SEC’s probe found that even though ITG said that it protected dark pool subscribers’ trading information, for eight months, the trading desk accessed feeds of order and execution data and used the information to put into place its strategies for high-frequency algorithmic.

SEC’s Stein Wants Regulator to Take a Closer Look at Exchange-Traded Funds and Alternative Mutual Funds

Published on: June 22, 2015 | by Shepherd Smith Edwards & Kantas, LLP

Kara Stein, an SEC commissioner, is calling on the Securities and Exchange Commission to examine whether exchange-traded funds and alternative funds are managing to get around certain rules and placing investors at risk. Stein said that both types of funds, which use high-risk complex investment strategies or place their money in illiquid assets, frequently “operate in a gray area” when it comes to regulation.

During a speech at the Brookings Institution, the SEC Commissioner noted that alternative mutual funds, which act like hedge funds and are often called liquid alts, don’t have to abide by the Investment Company Act of 1940 rules regarding leverage and liquidity. Stein said that the promise of benefits like those that come with investing in hedge funds along with liquidity of more traditional mutual funds are part of why alternative mutual funds appeal to investors. However, alternative mutual funds don’t necessarily provide the protections that accompany their more traditional counterparts.

Now, Stein is suggesting that the SEC propose rules regarding liquidity and the use of derivatives in alternative mutual funds. She said that the industry and regulators should ensure that retail investors continue to receive protections.

Earlier this month, the SEC announced that it is open for feedback from the public to help determine how to best review the listing and trading of unusual, new, or complex exchange-traded products. Because investment strategies of ETPs have expanded in recent years, there has been a growth in the amount of new ETPs and kinds of complexities. Meantime, individual and institutional investors continue to seek out these types of products.