Broker-Dealers

Family Files $18M Investor Fraud Lawsuit Against Securities America Alleging Broker Fraud

Published on: March 27, 2019 | by Shepherd Smith Edwards & Kantas, LLP

The Jamieson family has filed a broker-dealer fraud lawsuit against Securities America. They are seeking $18M in damages related to the actions of one of the firm’s former brokers, Hector A. May, who late last year pleaded guilty to operating an $11M Ponzi scheme that went on for years. May now faces 25 years in prison. Securities America fired him last year in the wake of the fraud allegations against him.

Last month, the Jamieson family sued May and Securities America. They claim that they lost $18M from working with May, who had been their adviser since 2001. The family contends that the former Securities America broker and his daughter Vania May Bell stole millions of dollars from them. In addition to working as a Securities America broker, May also was president and CCO of Executive Compensation Planners Inc. (ECP), which is no longer in operation. Bell served as ECP’s controller.

The plaintiffs contend that May and Bell advised them in a manner that made it possible for the two of them to keep defrauding the family. The Jamiesons are accusing Securities America of not performing its duties by:

NorthStar Healthcare REIT Investors Suffer Losses as Income Distributions Are Suspended

Published on: March 22, 2019 | by Shepherd Smith Edwards & Kantas, LLP

If you are an investor in NorthStar Healthcare Income, you very likely received a letter last month notifying you that monthly distributions from this investment have been suspended. According to NorthStar’s board, the publicly registered nontraded real estate investment trust’s (nontraded REIT) portfolio has been undergoing “operational and performance challenges” that as of the end of June 2017 has resulted in a “lower estimated value/share” of the NorthStar Healthcare’s common stock. The nontraded REIT has since determined that in order to protect both capital and its financial state, suspension of these distribution payments is necessary.

The NorthStar Healthcare Inc. nontraded REIT was set up to originate, acquire, and oversee healthcare industry-related investments, including debt, equity, and securities investments involving healthcare real estate. Sources note that between 2013 and 2018, it raised about $2B and set up a portfolio involving more than 650 properties.

However, NorthStar Healthcare Income began reducing distribution rates in December 2017. By October of last year, it had notified investors that it would only buy back shares from an investor if qualifying disability or death were factors. In December 2018, the nontraded REIT reduced its net asset value from $8.50/share to $7.10/share. Now, with the distribution suspension, some investors are standing to lose not just their monthly distributions, but also they could see a substantial decline in value on their principal that they originally invested.

Wedbush Securities To Pay $250K Over Inadequate Supervision of Ex-Broker Accused of Fraud

Published on: March 15, 2019 | by Shepherd Smith Edwards & Kantas, LLP

According to the US Securities and Exchange Commission (SEC), Wedbush Securities has settled allegations accusing the brokerage firm of failing to supervise one of its former registered representatives, Timary Delorme, who is accused of engaging in a pump-and-dump fraud that harmed retail investors. As part of the settlement, Wedbush consented to a censure and will pay a $250K penalty.

The SEC filed this civil securities case against Wedbush a year ago, accusing the broker-dealer of not properly investigating red flags indicating that Delorme might have been defrauding investors. The former Wedbush broker is accused of, from 2008 to 2014, receiving payments, which were issued to her husband, in exchange for recommending to investors that they make certain trades that were then used in the pump-and-dump fraud.

The regulator said that Wedbush even disregarded an email from a customer reporting the fraud, as well as a number of Financial Industry Regulatory Authority (FINRA) arbitrations claims and inquiries over Delorme’s trading activities involving penny stocks. Instead, contends the Commission, Wedbush performed two inadequate probes into the allegations against its former broker but didn’t take proper action.

United Planners Fined $100K By Massachusetts for Inadequate Supervision of a Broker

Published on: February 20, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Massachusetts Secretary of the Commonwealth William Galvin’s office has fined United Planners Financial Services of America $100K for failing to properly supervise broker Thomas T. Riquier. The broker was charged last year for violating the state’s securities laws over his alleged involvement in a real estate scam that defrauded investors and others of at least $1M over 26 years.

According to the state regulator’s consent order, at one point Riquier, who is president of The Retirement Financial Center, oversaw 1,771 accounts for about 400 clients and generated more than $1.2M for United Planners, including over $500K in advisory fees. The state regulator charged Riquier, who is no longer a registered broker or investment adviser, last year with violating the Massachusetts Uniform Securities Act.

Investors of a limited partnership known as the Rowley Land Appreciation Fund Limited Partnership (The Rowley Fund) contend that Riquier told them that the property he was purchasing on their behalf would be sold for profit. Instead, he allegedly used their money to buy property that already belonged to him. Investors have yet to see any return on this property. Last year, The Salem News reported that according to investigators, Riquier made about $730K from his investor fraud.

Finra Bars Another Ex-Morgan Stanley Representative, Fines Firm $10M for AML Detection Deficiencies, and Orders It To Pay Two Investors $4.2M For Broker Fraud

Published on: January 10, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Daniel Todd Levine, a former Morgan Stanley (MS) broker, has been barred by the Financial Industry Regulatory Authority after he failed to cooperate in a probe into allegations that he may have taken part in outside business activities that he did not disclose to the broker-dealer while he worked for the firm. Levine was a Morgan Stanley broker based in Denver, Colorado between 2013 and July 2018 when he stepped down. His next employer was First Financial Equity Corp., but that brokerage firm fired him a few weeks later after he did not notify them about the FINRA investigation.

According to Levine’s BrokerCheck record, he previously worked with Prudential Securities, Merrill Lynch, and UBS (UBS). He was employed in the securities industry for over 20 years.

A number of other former Morgan Stanley brokers have recently made news headlines over allegations of broker fraud. Last month, FINRA announced that it had filed a lawsuit against Ami Forte, who is accused of making unauthorized trades in the account of now deceased Home Shopping Network co-founder Roy M. Speer. In November, former Morgan Stanley financial adviser James Polese was sentenced to five years behind bars after pleading guilty to defrauding customers of over $1M.

Houston, TX-Based Brokerage Firm Next Financial is Acquired by Atria

Published on: January 9, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Next Financial Group Inc. will be purchased by Atria Solutions. The Houston-based independent broker-dealer is the fourth brokerage firm that Atria, which is located in Dallas, has acquired since 2017. The other brokerage firms are Cadaret Grant & Co., Cusco Financial Services, and Sorrento Pacific Financial.

Next Financial currently has almost 540 advisers and representatives and nearly $13B in assets under management. According to InvestmentNews, Under the Next Financial deal, Atria will acquire the broker-dealer and its related companies. Following the acquisition, Atria will work with almost 2,000 advisers with about $65B in assets under administration.

Next Financial’s BrokerCheck record shows 19 disclosure events that have been settled, usually without the firm admitting to or denying the findings, for various causes, including:

When Margin Calls Lead to Investor Fraud Losses

Published on: December 22, 2018 | by Shepherd Smith Edwards & Kantas, LLP

If you are an investor that has lost money because of an unsuitable margin call in your investment account, you may have grounds for filing a Financial Industry Regulatory Authority (FINRA) arbitration claim to try and recover your losses. Unfortunately, a lot of investors may not understand what they are getting into when they open a margin account.

What is A Margin Account?

Margin accounts are not suitable for every investor, especially those that can’t handle too much risk. A customer that sets up with a margin account with a broker is indicating that he or she may want to borrow money later on down the road. With a margin account, you are essentially providing the securities and money in your margin account as collateral for this possible loan. Should you decide to borrow the money to buy securities, a broker is then allowed to sell your assets if necessary to fulfill the margin loan.

International Assets Advisory “Proudly” Hires Brokers With “Checkered” Pasts

Published on: December 10, 2018 | by Shepherd Smith Edwards & Kantas, LLP

A Florida-based wealth management firm is once again in the headlines over its hiring of brokers with “checkered” pasts. According to a recent Business Insider article, International Assets Advisory (IAA), which oversees approximately $2.5B in customer funds, “proudly hires” brokers that other investment firms wouldn’t even consider, including some with previous offenses on their record.

According to IAA president Ed Cofranceso, the firm’s hiring strategy lets him access a bigger talent pool while allowing some of those whom he employs to get a “second chance.” Cofranceso called his approach “American” and “Christian” and noted the adage about how every story has two sides. For example, the Business Insider article notes, one of the brokers that IAA hired had been fined and fired because his previous firm made him sell “bad products” to investors.

One headhunter interviewed for the news article notes that while the majority of employers will instantly nix any prospective applicants who respond “yes” to even one of nearly six dozen questions on the Financial Industry Regulatory Authority’s (FINRA) U4 registration form, IAA won’t disqualify these individuals right off the bat. Questions asked include whether applicants have been charged for misdemeanors or felonies and if they’ve ever had any “run-ins” with regulators. According to IAA General Counsel Myra Nicholson, candidates with such disclosures whom IAA eventually hires usually have to go through an “on-the-job” audit and may also be subject to more monitoring and certain restrictions.

Financial Firm News: Includes Lincoln Investment Planning, Grenda Group, and Massachusetts Financial Services Company

Published on: September 7, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Lincoln Investment Planning to Pay Clients For Not Giving Discounts on Mutual Fund Shares

FINRA is ordering broker-dealer Lincoln Investment Planning to pay $1.37M to clients to whom it did not give the discounts they were entitled to when they purchased mutual fund A shares between 1/2011 and 6/2018.

The self-regulatory organization contends that the firm placed certain charitable organizations and retirement plan customers at a disadvantage by charging them a front-end sales charge even when they qualified to not pay the fees.

Broker Fraud Allegations Lead to Finra Bars for Northwestern, Fortune Financial, and Morgan Stanley Representatives

Published on: March 24, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has barred three brokers in separate, unrelated cases for alleged misconduct. They are ex-Morgan Stanley (MS) representative Thomas Alain Meier, ex-Fortune Financial broker Michael Giokas, and ex-Northwestern Mutual broker Michael Cochran.

Former Morgan Stanley broker Thomas Alan Meier is accused of making unauthorized trades in customer accounts. In the self-regulatory organization’s letter of acceptance, waiver, and consent, FINRA stated that from 7/2012 through 3/2016, Meier “effected” over 1000 transactions that were not authorized in six customers’ accounts. His allegedly unauthorized transactions involved discretion without written permission or the accounts garnering discretionary acceptance and impacted four clients.

Between 4/2016 and 10/2017, Morgan Stanley submitted 21 amended Forms U5 for Meier. The forms showed that 14 customer complaints were filed against Meier, including two arbitration cases. AdvisorHub reports that because of Meier’s alleged misconduct, customers sustained $818K in losses and over $2M in unrealized losses. To date, the brokerage firm has paid customers about $2.5M in settlements and resolved 13 of the claims.