Broker Fraud

Stanford Ponzi Fraud Victims Awarded $1.4M

Published on: May 16, 2019 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority (FINRA) panel has ordered Pershing, LLC to pay $1.4m to six investors who lost money in R. Allen Stanford’s $7.2B Ponzi scam. Pershing is a Bank of New York Mellon Corp. (BK) division. It acted as Stanford Group Co.’s clearing broker for several years.

Pershing is accused of enabling the Stanford Ponzi Fraud, including through its transfer of hundreds of millions of dollars from US investors’ securities accounts, as it continued to make money from the sales of at least $500M in fake, unregistered certificates of deposit (CDs).

Pershing also allegedly disregarded the unusual ways in which Stanford ran his operations, including the use of offshore transfers and the high compensation awarded to brokers. The unregistered CDs were issued out of Stanford International Bank, a Stanford Financial Group unit based in Antigua, and then sold by Stanford’s brokerage firm in the US.

Fund Manager LJM Partners Sues Over Volatility Losses

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

LJM Partners is suing a number of unnamed parties after losing hundreds of millions of dollars during a major incident of stock market volatility early last year now known as “Vol-magedon.” The Chicago-based fund manager and commodity trading advisor (CTA) claims that these losses are what forced it to go out of business.

LJM had backed complex derivatives, which plunged in value after the largest ever one-day jump in the VIX volatility index in February 2018. The fund manager later gave back what was left of clients’ funds and shuttered its operations.

While LJM held $812M in assets at the start of that month, by the end of February, that figure had dwindled to $14M. One of its affiliates, which operated the LJM Preservation and Growth Fund—a mutual fund for retail investors—lost half its value due to the VIX volatility index jump. The fund then went on to lose the rest of its value as it unwound its holdings.

AXA Financial Ordered to Pay $3.2M to Farming Family

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

An egg-farming family based in New York has been awarded $3.2M in its Financial Industry Regulatory Authority (FINRA) arbitration claim against AXA Financial. The claimants are an older couple, Sandra and James Fitzpatrick, who own Fitzpatrick Poultry Farm. They contend that Franceso Puccio, an ex-AXA Financial broker, placed their money into variable annuities (VA), which were unsuitable for them. Puccio has already been convicted for senior investor fraud involving another elderly client that was also with the firm.

The couple are claiming that they lost millions of dollars because of the way AXA and Puccio handled their funds. They contend that their money had been invested in mutual funds until Puccio moved their funds, as well as four life insurance policies, into VAs.

Puccio worked in the securities industry for 16 years. He was barred by FINRA in 2015 after he failed to turn over information and documents that the regulator had requested related to an investigation into whether he had converted monies from a non-customer. Puccio’s BrokerCheck record notes several customer disputes, with allegations including unsuitable investments sold to claimants, negligence, breach of fiduciary duty, misrepresentations, and omissions.

Claim Filed Against Arkadios Over GPB Capital Private Placements

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

An investor in GPB Capital has filed a Financial Industry Regulatory Authority (FINRA) Claim against Arkadios Capital and one of its brokers over losses she sustained to her IRA after she followed the financial adviser’s recommendation to invest in GPB Capital Holdings.

Now she is claiming retirement fund losses in the hundreds of thousands of dollars. Our investor fraud law firm, Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) is representing the investor, who hails from the greater Atlanta area, and we have filed a FINRA arbitration claim on her behalf.

GPB Capital Holdings is an alternative asset management firm whose private placement funds are primarily invested in auto dealerships and waste management. The firm is under scrutiny by FINRA, the US Securities and Exchange Commission (SEC), Massachusetts Secretary of the Commonwealth William Galvin, and the FBI over its private placements that were sold by dozens of brokerage firms and their brokers.

Buckman, Buckman & Reid To Pay Customers $205K

Published on: May 2, 2019 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority (FINRA) announced that Buckman, Buckman & Reid, a New Jersey-based brokerage firm, will pay about $205K in restitution to seven clients to settle claims that it did not reasonably supervise two ex-registered representatives accused of recommending “excessive and unsuitable trades.” The self-regulatory authority (SRO) has already barred both former brokers from the industry.

Also dealing with sanctions are Buckman Senior VP and owner Harry John Buckman, Jr., who supervised the two former brokers. Mr. Buckman was suspended for three months, ordered to pay a $20K fine, and must fulfill continuing education hours related to fulfilling supervisory duties.

FINRA said that the brokerage firm and Buckman neglected to identify when one of the ex-representatives was taking part in short-term Unit Investment Trust (UIT) trading on a frequent basis, as well as engaging in “other long-term investments” that charged customers substantial, upfront expenses. As a result, between ’13 to ’14 Buckman customers that were harmed ended up paying about $201K in commissions while sustaining approximately $163K in losses. Meantime, although there were red flags indicating “potentially excessive trading” by this former broker, the firm is accused of not reviewing these warnings.

Ex-Aegis Capital Broker is Barred Over Churning Allegations

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

The Financial Industry Regulatory (FINRA) announced that it is barring former Aegis Capital broker James Schwartz for allegedly churning four clients’ accounts. The self-regulatory authority (SRO) contends that Schwartz, who is no longer employed in the securities industry, made 256 trades in these accounts without first getting the customers’ permission to execute the transactions. Along with other trades he made in these accounts—535 trades in total—the customers ended up collectively losing over $660K.

FINRA’s BrokerCheck record on its case against Schwartz said that he engaged in about $10M worth of unauthorized trades. Some trades were also allegedly excessive.

The SRO said that Schwartz earned commissions and gross sales credits of $277,705 from these fraudulent transactions, more than $194,000 of which was paid to the former Aegis Capital broker.

LPL Financial To Pay $450K Fine to Texas Investors

Published on: April 21, 2019 | by Shepherd Smith Edwards & Kantas, LLP

According to the Texas State Securities Board, target=”_blank” rel=”noopener noreferrer”>LPL Financial (LPLA) will pay a $450K fine and buy back unregistered securities. The Consent Order noted that the settlement is part of the wider $26M one reached between the brokerage firm and state securities regulators in 2018.

In its deal with Texas, LPL agreed to buy back unregistered securities that it sold to investors in the state going as far back as Oct 1, 2006. LPL will pay “3% interest per year on the value of the securities either in damages if they were sold or by repurchasing the investments.” Similar terms were part of the wider agreement offered to all US states and territories regarding how to compensate investors who were sold unregistered stocks and fixed-income securities.

In January, Maryland Attorney General Brian Frosh announced his state’s settlement with LPL, which involved buying back these same types of securities, along with 3% simple interest annually, from investors. Aside from its restitution and rescission offers to Maryland investors, the brokerage firm agreed to pay a $499K civil penalty.

Investor Alert! Beware of Losses from the UBS Yield Enhancement Strategy

Published on: April 1, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Investors in supposed “Yield Enhancement” strategies are learning that the purported safe investment program has significant risk. The Yield Enhancement Strategy (YES) that UBS Financial Services, Inc. (UBS) and other brokerage firms used was marketed as a “safe and efficient” way to enhance the return on a conservative portfolio.

The YES program was represented as an investment program that involved using options strategies that produced small returns but with small risks. UBS is one of a number of brokerage firms that touted the YES approach to customers as a way to make money via the “strategic” buying and selling of SPX index options spreads. The returns were purportedly “incremental” to “underlying asset returns” while giving clients a chance to possibly make money from low yield assets.

Seeking Alpha reports that the brokerage firm told clients that their UBS Yield Enhancement Strategy involved allowing a “mandate” or margin to be placed against their respective portfolios and that this would then be used, via an “iron condor” options trading strategy, to generate returns. It was these particular investors that have sustained the greatest losses when excessive volatility in December—the most that the market has encountered in 30 years—caused the YES strategy to fall.

Ex-UBS Puerto Rico Broker is Sentenced to Prison

Published on: March 29, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Jose G. Ramirez-Arone Jr., who formerly worked as a broker for UBS Financial Services of Puerto Rico (UBS-PR), has been sentenced to a year and a day in prison for defrauding investors. Ramirez-Arone, also called Jose Ramirez and known by many on the island of Puerto Rico as “The Whopper,” pleaded guilty to bank fraud last year.

Ramirez admitted that he made more than $1.2 million in improper commissions by persuading clients to inappropriately invest in UBS Puerto Rico Bond Funds. More specifically, Ramirez admitted to participating in a scheme where he advised his clients to borrow money against their investments from a credit line at UBS Bank and then to use that borrowed money to buy more UBS Puerto Rico Bond Funds. This use of “non-purpose” loans to buy securities was strictly prohibited.

Unfortunately, in addition to being a prohibited transaction, this type of investing – where leverage is used to buy an already leveraged investment product – is unsuitable for most investors. The vast majority, if not all, of these investors were ill-equipped and unable to handle the risks involved, which they are now claiming were misrepresented or not fully disclosed to them. When Puerto Rico bonds and closed-end bond funds plunged in value in 2013, many UBS clients ended up having to sell their investments because they lacked the assets to satisfy maintenance calls on their accounts, resulting in massive losses for some.

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: