Current Investigations

IMS Securities Ordered to Pay Retirement Investors $1M in UDF REIT Case

Published on: November 18, 2018 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority arbitration panel has awarded eight retirement investors $1,019,211 in a Texas real estate investment trust case involving three United Development Funding (UDF) REITs. United Development Funding is made up of private and publicly traded investment funds that use investor money to give loans to land developers and homebuilders.

According to the claimants, IMS Securities, a Houston-based brokerage firm that is no longer in operation, and its chief executive Jackie Divono Wadsworth recommended through a third party that investors purchase retirement accounts in the:

United Development Funding II

FINRA Bars Another Ex-Morgan Stanley Broker

Published on: October 31, 2018 | by Shepherd Smith Edwards & Kantas, LLP

For the third time this month, The Financial Industry Regulatory Authority has announced that it has barred yet another Morgan Stanley (MS) broker. The brokerage firm had fired financial adviser Bruce Plyer in late 2016 in the wake of allegations that he executed trades in a client’s account without authorization. Now, the self-regulatory organization is barring Plyer after he failed to appear and give testimony into FINRA’s probe into the matter.

Plyer has accepted and consented to FINRA’s findings, but he is not admitting to or denying any of them.

After being let go from Morgan Stanley, he was registered for a short time with International Assets Advisory until he left the industry early last year.

UBS to Pay $19.8M in Puerto Rico Bond Fraud Case

Published on: October 25, 2018 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority panel is ordering UBS Financial Services Inc. (UBS) to pay restitution of almost $19.8M in an arbitration case involving Puerto Rico bonds and closed-end funds that were sold to investors. This is the largest amount that UBS has paid to date to claimants in a Puerto Rico bond fraud case.

The arbitration ruling involved not only the sale of the Puerto Rico bonds but also how credit lines were used as part of the investing strategies involving the investor accounts. Of the $19.8M: $14.9M is for compensatory damages, $745K is interest, $3.9M is legal fees, and $215K is for other costs.

This is just one of several Puerto Rico bond and closed-end bond fraud awards that UBS and its affiliated financial firm, UBS Financial Services of Puerto Rico (UBS-PR), have been ordered to pay in the last few years. In December 2016, A FINRA arbitration panel ordered UBS to pay $18.6M to two UBS clients who had alleged breach of contract, breach of fiduciary duty, and other violations over their Puerto Rico securities losses.

HSBC and Nomura to Pay $765M and $480M, Respectively to Settle RMBS Fraud Claims

Published on: October 19, 2018 | by Shepherd Smith Edwards & Kantas, LLP

HSBC will pay a $765M penalty over claims involving its packaging, marketing, and sale of residential mortgage-backed securities prior to the 2008 economic crisis. According to the US Attorney Bob Troyer, from the beginning HSBC employed a due diligence process that it knew was ineffective, “chose” to place faulty mortgages in deals, and disregarded these problems even as it sold the RMBSs to investors. As a result, contends the US government, investors, including federally-insured financial institutions that bought the HSBC Residential Mortgage-Backed Securities that were backed by faulty loans, sustained “major losses.”

HSBC had touted using a proprietary model that would choose 20% of the riskiest loans for further examination and another 5% that would be randomly chosen. The government, however, claims that the financial firm’s trading desk exerted undue influence on which loans would be securitized and sometimes failed to employ a random sample. Outside vendors then studied the chosen loans.

The US alleges that even when a number of loans were marked as low grade, HSBC “waived” them through or regraded them, and concerns about loans that had defaulted right away were purportedly disregarded. The bank even allegedly continued to buy loans from an originator who was found to likely be providing loans that were fraudulent.

Another Ex-Morgan Stanley Broker is Barred by FINRA

Published on: October 16, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has barred another former Morgan Stanley (MS) broker. John Halsey Buck III consented to the industry bar after he did not provide the information and documents that the self-regulatory organization asked for related to its probe into his alleged involvement in unapproved private securities sales. Buck, who has over 50 years experience in the industry, was let go by the brokerage firm earlier this year.

Morgan Stanley reportedly fired him in the wake of disclosure-related issues, including those involving private investments that did not involve the broker-dealer. According to InvestmentNews, the allegations against Buck have to do with “selling away.” This is a practice that happens when a stockbroker, financial adviser, or a registered representative solicits the sale of or sells securities that his or her brokerage firm does not offer or hold. Broker-dealers usually have a list of approved products that its brokers are allowed to sell to firm clients.

Buck had been with the industry since 1965. Previous to working with Morgan Stanley, he was a registered broker with UBS Financial Services (UBS), Wachovia Securities, Prudential Securities Incorporated, Loeb Partners, and Hornblower, Weeks, Noyes & Trask.

FINRA Bars Former Morgan Stanley and Wells Fargo Brokers

Published on: October 11, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority announced this week that it is barring three former brokers. They are ex-Morgan Stanley broker (MS) Kevin Smith and former Wells Fargo (WFC) brokers Wilfred Rodriquez Jr. and Thomas A. Davis.

According to the self-regulatory authority’s order, the bar against Smith comes after he wouldn’t appear before FINRA to testify regarding allegations involving a structured products trade in a family member’s trust that he may have executed without checking with the client first.

Morgan Stanley fired Smith in 2016 in the wake of the broker fraud allegations.

Investors Suing UBS Puerto Rico Over Closed-End Fund Losses Are Denied Class Action Certification

Published on: September 19, 2018 | by Shepherd Smith Edwards & Kantas, LLP

U.S. District Judge Sidney H. Stein is refusing to grant class action certification to a group of investors suing UBS Puerto Rico over its sale of proprietary closed-end mutual funds. In particular, the class action complaint dealt with a series of 23 closed-end bond funds that UBS Puerto Rico developed and marketed exclusively to Puerto Rico residents.

These proprietary closed-end funds were comprised of at least 2/3 Puerto Rico debt (and often much higher), resulting in a geographic concentration that placed the owners of such funds at a great risk if anything negative happened on the island. Additionally, the UBS closed-end funds were highly leveraged, typically borrowing $1 for every $1 invested, meaning that any losses in the closed-end funds would be significantly increased.

Notwithstanding the above, the plaintiff investors say that UBS falsely depicted these closed-end mutual funds as safe and secure investments that would garner fund holders tax-free income when, in truth, the mutual funds were “ticking time bombs” that were actually very risky.

FINRA Bars Former JP Morgan, Stifel Nicolaus, and Benjamin & Jerold Brokers

Published on: September 11, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority (FINRA) has barred three former brokers who failed to take part in the self-regulatory authority’s probe into allegations of wrongdoing. Stephen T. Hurtak, formerly of Stifel Nicolaus & Co., was a broker for 39 years. According to FINRA, Hurtak refused to take part in the investigation into possibly unsuitable recommendations he may have made to several customers.

Unsuitable Recommendations

Brokers have a duty to make investment recommendations and strategies that are appropriate for a customer as it pertains to their investment goals, risk tolerance, and portfolios. When unsuitable recommendations lead to investment losses, this can be grounds for an investor fraud case.

Investigations Involving William A. Hightower of UBS Financial Services and Legacy Asset Securities Inc.

Published on: September 6, 2018 | by Shepherd Smith Edwards & Kantas, LLP

SHEPHERD SMITH EDWARDS & KANTAS LLP INVESTIGATING CLAIMS INVOLVING William A. HIGHTOWER, UBS FINANCIAL SERVICES INC. and Legacy Asset Securities, INC.

Baytown, Texas – September 6, 2018

Lawyers with the Securities Law Firm of SHEPHERD SMITH EDWARDS & KANTAS LLP, www.sseklaw.com, are investigating claims involving William A. Hightower, UBS Financial Services Inc. and Legacy Asset Securities, Inc. Hightower worked as a broker throughout Texas for almost two decades, with his most recent two positions at UBS and Legacy starting in 2007. It appears that, starting in 2009, Hightower engaged in a series of improper private securities transactions including sales of stock in Hightower Capital and “private annuities” between Hightower and his customers. In 2015, Hightower was barred from the financial services industry by FINRA for failing to cooperate with an investigation and is currently under criminal investigation for securities fraud.

Dallas, Texas-Based Wells Fargo Broker Expelled by FINRA

Published on: August 30, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority (FINRA) has barred J. Gordon Cloutier, Jr. (Cloutier), a former Wells-Fargo (WFC) broker based in the Dallas area of Frisco, Texas, after he allegedly tried to make an unauthorized trade and requested a loan from a client. Cloutier, who had worked at the firm for seven years, was fired in 2016. Previous to working with Wells Fargo, Cloutier was a Merrill Lynch broker, which is now a division of Bank of America (BAC), from 1996 to 2009. FINRA ultimately barred Cloutier after he failed to respond to numerous attempts by the self-regulatory organization to interview him for its probe. It is FINRA’s policy to open an investigation after a broker is let go from a firm. It was Cloutier’s lack of response that led to FINRA issuing the default bar from the industry.

At Shepherd Smith Edwards and Kantas LLP, our Texas broker fraud law firm represents investors in helping them to recoup their losses sustained due to broker misconduct, negligence, or carelessness. Over the years, we have successfully helped thousands of investors from our Houston offices. If you were an investors who worked with Cloutier, our Wells Fargo investor fraud attorneys want to hear from you.

Broker Fraud