Current Investigations

Shepherd Smith Edwards & Kantas LLP Investigating Claims Involving Donna Tucker and UBS Financial Services

Published on: August 29, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Roanoke, VA – August 1, 2014

Lawyers with the Securities Law Firm of SHEPHERD SMITH EDWARDS & KANTAS LLP, www.sseklaw.com, are investigating claims involving Donna Tucker and UBS Financial Services, Inc. Donna Tucker worked as a broker with A.G. Edwards for four years until she joined UBS Financial Services in November of 2007. After working at UBS for about six years, Ms. Tucker was permanently barred from the industry by the Financial Institute Regulatory Authority (“FINRA”). FINRA began conducting an investigation sometime in 2013, during which it requested information from Ms. Tucker. When Ms. Tucker refused to comply with that request, her license was suspended, and she was later permanently barred from working in the industry.

Recently, the Securities and Exchange Commission charged Donna Tucker of operating a Ponzi scheme for almost the entire period of time she was working at UBS. According to the SEC complaint, Ms. Tucker stole over $730,000 from her clients between January 2008 and April 2013. She did this by forging checks drawn on client accounts, establishing margin loans on customer accounts without the knowledge or approval of the client, and used those funds to repay other customers. To hide her actions, she ensured that her clients only received electronic statements, which Ms. Tucker knew her elderly clients would not check, and then falsified records that did not show anything amiss. Ms. Tucker then used this money to fund a lavish lifestyle for herself, including vacations, multiple cars, expensive clothing, and a country club membership.

Oppenheimer Found Liable for Representative Mark Hotton’s Fraud

Published on: August 29, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Recently, Oppenheimer was found liable for the conduct of one of its former brokers named Mark Hotton. Hotton joined Oppenheimer in November 2005, and proceeded to fleece a number of his clients, according to financial regulators. FINRA, the Financial Industry Regulatory Authority, has filed a disciplinary action against Hotton which is still pending.

According to the complaint, Hotton outright stole almost $6 million from his brokerage customers, and directed another $2.5 million to outside businesses that Hotton was affiliated with in some way. These numbers don’t even include the millions of dollars that FINRA believes that Hotton caused by excessively trading, or churning, customer accounts to generate commissions for himself.

The level of fraud that Hotton was engaging in should be shocking if it wasn’t becoming increasingly commonplace. In 2006, a customer filed a lawsuit against Hutton after it was convinced by Hotton to invest $4 million in real estate transactions. The customer claimed that Hotton simply stole the entire investment, which was accomplished by forging contracts, forging mortgages, forging account statements, and directing the investment being made into a shell corporation that he had created with a similar name to the company that was supposed to be invested in. Ultimately, that lawsuit was settled for millions of dollars which Hotton was individually liable for. Yet this lawsuit, its allegations, and its results were never disclosed to other customers as regulations require, permitting Hotton to continue to seek new customers to bilk.

Oppenheimer Continues to Show Serious Supervisory Deficiencies

Published on: August 28, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Date: August 7, 2013

The attorneys at Shepherd, Smith, Edwards & Kantas LLP are investigating claims by investors with Oppenheimer & Co. Although the firm’s investigations are usually target more specifically at particular conduct of a firm or broker, Oppenheimer & Co.’s supervisory system has been found so woefully inadequate by numerous regulators and arbitration Panels over the last several years that almost any trading strategy permitted in Oppenheimer customer accounts becomes suspect.

For example, in 2008 the Massachusetts Securities Division filed suit against Oppenheimer for its sales of Auction Rate Securities (ARSs). Specifically, the regulator alleged that Oppenheimer marketed ARSs as safe alternatives to money markets and certificate of deposits (CDs). In actuality, ARSs are complex debt securities that can suffer complete failures and ultimately leave the investor holdings a completely illiquid asset with no way to get their money back out. The regulator further claimed that Oppenheimer was aware of many disruptions and failures that occurred in the ARS market in 2007, but blithely ignored these warnings. Oppenheimer did not investigate the potential ramifications for the ARS securities that had been, and were currently being, sold to their clients. Oppenheimer did not warn its clients of these warning signs.

Ex-Wells Fargo Advisors Claim Bank Pressured Them to Sell Products That Charged Higher Fees to High-Net Worth Investors

Published on: August 23, 2018 | by Shepherd Smith Edwards & Kantas, LLP

According to Yahoo Finance, a number of Wells Fargo (WFC) advisors who used to work for the Private Bank’s wealth management unit are claiming that the firm pushed them to place client funds in investments that charged higher fees to clients. The ex-bank employees contend that they were pressured to cross-sell products and bill clients for fees that they would not have had to pay otherwise.

Yahoo Finance reported that there are internal company documents verifying the former employees’ claims. The media outlet said that it conducted interviews with a number of these former advisors.

The ex-Wells Fargo advisors were reportedly encouraged to place clients’ funds in complex products and separately managed accounts. The advisors claim that they were told that if they did not meet sales quotas for certain products, their compensation would suffer.

Shepherd Smith Edwards & Kantas LLP Investigating Claims Involving Puerto Rico UBS Bond Funds

Published on: August 21, 2018 | by Shepherd Smith Edwards & Kantas, LLP

San Juan, Puerto Rico – October 3, 2013

Lawyers with the Securities Law Firm of Shepherd Smith Edwards & Kantas LLP, are investigating claims involving Puerto Rico UBS bond funds. UBS has been the most prominent broker-dealer operating in Puerto Rico for a number of years. As a result, many, if not most, individuals in Puerto Rico with brokerage accounts use UBS, resulting in UBS managing roughly $10 billion of assets of Puerto Rico residents.

Unfortunately, UBS recommended that many of these clients make significant investments in proprietary UBS bond funds. These UBS bond funds, such as the Tax-Free Puerto Rico Fund II, invest primarily in Puerto Rico municipal bonds.

Larry Dearman, Sr. Ponzi Scheme Investigation

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

The attorneys with the law firm of Shepherd, Smith, Edwards & Kantas LLP are currently investigating claims involving Larry Dearman, Sr. Larry Dearman moved to Bartlesville, Oklahoma in 2005, when he began working as a financial advisor in the area. He was registered both with the Financial Industry Regulatory Authority (“FINRA”) as a broker, as well as being registered as an investment advisor representative, which is done through the Securities Exchange Commission (“SEC”). Since 2005, Mr. Dearman has been registered with Cambridge Legacy Securities, LLC, Securities America, Inc., Brecek & Young Advisors, and The Focus Group Advisors.

Recently, Mr. Dearman was charged by the SEC, along with a woman named Marya Gray, of defrauding a number of his clients in a variety of ways. According to the SEC complaint, Mr. Dearman solicited his clients to invest in an internet company and a real estate company, among others, telling those customers that these investments bore very little risk and were good investment opportunities. Specifically, the complaint alleges that Mr. Dearman specifically solicited clients of his who had known him and his family for decades, members of his church, and people who know of him as a popular wedding singer. All told, he collected almost $5 million from various clients for these investments.

The SEC alleges that, in reality, the money was being stolen by Mr. Dearman and his cohort, Marya Gray. They were making Ponzi scheme style payments to earlier investors to keep those individuals complacent and to avoid arousing suspicion, all the while stealing the rest of the funds and spending it on themselves. The SEC also claims that Ms. Gray has admitted that the real estate business had never actually conducted any business, which would add substantial credence to the fraudulent nature of these investments.

Defective Security Swaps

Published on: August 14, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The attorneys at the law firm Shepherd, Smith, Edwards & Kantas LLP are currently investigating claims of institutional investors involving swaps or other ongoing, inappropriate investments. Many companies, state municipalities, and other governments were talked into entering into swap transactions, either as a part of another securities transaction such as a new bond issuance, or on their own. Typically, these swaps were sold as ways to hedge fluctuating liabilities that the customer already had, or in some other way to reduce financing expenses.

In a typical swap, the two parties are effectively exchanging a fixed rate and a variable rate. The party that currently has a variable rate liability, oftentimes a bond, enters into the transaction to avoid the carrying costs associated with that bond’s benchmark rising. In exchange, that party agrees to pay the other party a fixed, periodic payment. If the swap is done correctly, it allows the party with the original variable rate to avoid the consequences of its bond, or other liability, rate increasing because, if the rate were to increase, that rate increase would actually end up being paid by the swap counterparty. Conversely, if the rate on the bond decreased, the costs of that obligation would go down correspondingly to the increased cost of the swap, creating a wash. The party has effectively transformed a variable obligation to a fixed one.

Unfortunately for many of those customers, many of these swaps have proven wholly ineffective in fulfilling their expressly stated purposes. The reasons for these failures can vary significantly. In some cases, the swaps are set up incorrectly, such as not taking into account various reasons that the underlying obligation could fluctuate, or not marking the swap to the same benchmark as the underlying obligation. Whatever the reasons for their failure, many institutions have found themselves with hugely expensive carrying costs for these swaps and equally huge termination penalties to try to get out of them.

Precious Metal Investments

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

Date: June 17, 2013

The attorneys at Shepherd Smith Edward & Kantas are investigating the claims of investors who purchased positions in gold, silver, or other precious metals at the recommendation of their broker or financial adviser. Recently, increasing numbers of brokers have been pushing their clients to invest in precious metals or securities based on precious metals for various reasons, including, representations that such investments are “hedges” against a falling market or simply speculating on the price of precious metals, such as gold. Below is a chart showing the returns of many of the currently available investment options in gold and other precious metals.

Fund Name	Ticker	Share Price	1 month	6 month	1 yr return
ETFS Phsical Asian Gold Shares ETF	AGOL	136.52	-2.30%	-18.84%	-14.46%
FactorShares 2x Gold Bull/S&P Bear ETF	FSG	9.71	-4.33%	-54.84%	-59.20%
the Market Vectors Gold Miners ETF	GDX	28.36	-1.22%	-38.98%	-39.56%
Market Vectors Gold Miners Junior ETF	GDXJ	11.32	-4.47%	-46.85%	-45.34%
Global X Pure Gold Miners ETF	GGGG	12.11	-5.98%	-41.67%	-45.94%
StreetTracks Gold Shares ETF	GLD	134.15	-2.66%	-18.27%	-15.01%
Global X Gold Explorers ETF	GLDX	15.82	0.89%	-47.82%	-50.56%
the UltraShort Gold ProShares ETF	GLL	85.61	4.05%	39.86%	24.36%
iShares COMEX Gold Trust ETF	IAU	13.48	-2.67%	-18.40%	-14.85%
Direxion Daily Gold Miners Bull 3x Shares ETF	NUGT	9.77	-9.54%	-81.87%	-84.78%
ETFS Physical Swiss Gold Shares ETF	SGOL	136.79	-2.65%	-18.42%	-14.91%
RBS Gold Trendpilot ETN	TBAR	28.07	0.11%	-5.49%	-3.04%
the ProShares Ultra Gold ETF	UGL	56.9	-5.69%	-35.10%	-31.15%
iShares MSCI Global Gold Miners Fund	RING	11.63	-4.83%	-39.74%	-43.24%
PowerShares DB Base Metals Fund ETF	DBB	16.76	-0.59%	-13.79%	-8.37%
Powershares DB Precious Metals Fund ETF	DBP	45.63	-51.40%	-72.87%	-17.87%
ETFS Physical Precious Metal Basket Shares	GLTR	74.9	-3.73%	-21.71%	-15.96%
the PowerShares Global Gold & Precious Metals ETF	PSAU	22.81	-3.63%	-37.56%	-36.09%
the SPDR S&P Metals & Mining ETF	XME	35.71	-5.15%	-19.88%	-9.43%
the ProShares Ultra Silver ETF	AGQ	21.78	-11.68%	-56.34%	-47.99%
PowerShares DB Silver Fund ETF	DBS	37.21	-6.41%	-33.22%	-24.96%
Global X Silver Miners ETF	SIL	13.65	-1.66%	-41.04%	-31.51%
iShares MSCI Global Silver Miners Fund	SLVP	13.24	-2.58%	-40.84%	-31.33%
ETFS Physical Silver Shares ETF	SIVR	21.81	-5.71%	-31.61%	-23.26%
iShares Silver Trust ETF	SLV	21.3	-5.63%	-31.67%	-23.44%
Global X Copper Miners ETF	COPX	9.94	-6.84%	-25.88%	-10.13%
First Trust ISE Global Copper Index Fund	CU	22.91	-5.80%	-24.21%	-9.87%
the ETFS Platinum Physical Shares ETF	PPLT	141.82	-3.79%	-10.81%	-3.10%
First Trust ISE Global Platinum Index ETF	PLTM	11.74	-2.41%	-17.38%	-22.66%

The results that these investments have seen over the last year vary tremendously for a number of different reasons. First, while most of the precious metals securities are designed to increase in value as the price of its target precious metal increases, some of them do the exact reverse and increase in value as the price of its target precious metal falls (“inverse funds”). As a result, many of the inverse funds have achieved positive returns over the last year as the price of many precious metals have plummeted. However, if prices rise, these funds could quickly lose value.

Second, some of these investments are “leveraged,” meaning the investment borrows money or uses another strategy to let it get returns greater than the change in the underlying value of the precious metal it is tracking. For example, the UltraShort Gold ProShares ETF is designed to return three times the amount that the value of gold falls. So if the price of gold fell 10%, an investment in this fund would increase approximately 30%.

However, on a more basic level, these investments have fared differently because they invest in fundamentally different assets. Some of these investments gain exposure to gold or some other precious metal by actually purchasing the metal and storing it in vaults. This is the most obvious and simple way for a fund to invest in these assets. Others are investing not in gold, but in mining companies that mine gold. These funds theorize that those types of companies should increase or decrease in value with the changes in value of the product they produce; namely gold, silver, or copper. However, there are some flaws in this analysis, as most experts agree that on a long time line, the share price of these companies will not keep up with the value of the metal they produce.

Finally, some, if not most of, these funds gain their exposure to the target metal by buying futures contracts on them. That means that the fund buys the right to purchase gold or some other metal at a fixed price at a fixed time in the future. However, instead of ever collecting the gold, these funds sell their right to purchase the gold before it comes due and instead purchase a new future, or right to buy. In doing so, the fund avoids the expense of ever actually having to process and handle gold, while still being affected in value by changes in the price of gold.

Recently, the funds which are based upon gold mining companies have fared the poorest. Not only have they lose value as the price of gold has plummeted, but the share price of those companies also suffered because equity markets worldwide have been weak. However, none of these funds, other than the inverse funds, have performed well. One of the funds, Direxion Daily Gold Miners Bull 3x Shares ETF, lost almost 85% of its value over the last twelve months. Many others lost half their value or more.

The moral of the story is that many brokers have been pushing their clients into investing in these or similar securities, without the clients being aware of the fact that these investments can be, and have been, very high risk investments which can end up wiping out an investor’s life savings in a matter of months. If you have invested in these or other investments in precious metals based upon your broker’s recommendation, contact the law firm Shepherd, Smith, Edwards & Kantas LLP for a free evaluation of a potential claim to recover some or all of the investment that you lost. All communications will be kept strictly confidential and you will not be billed in any way for a consultation.

SSEK Investigating Claims Involving Jeff Wilson and Wells Fargo

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

The securities lawyers with Shepherd, Smith, Edwards, & Kantas LLP (“SSEK”) are investigating claims of investors and clients of Jeffrey Randolph Wilson (“Wilson”) who works with Wells Fargo Clearing Services, LLC (“Wells Fargo”) in Las Cruces, New Mexico. In the last 18 months, at least three of Mr. Wilson’s clients have filed arbitration claims against Wells Fargo claiming that Wilson and/or Wells Fargo acted improperly regarding those clients’ accounts. These customer claims include allegations that Mr. Wilson excessively traded customer accounts, made unsuitable investment recommendations, and exposed the clients to excessive risk.

All brokers are required to make only suitable recommendations to their clients and manage their clients’ investments appropriately. That means that the brokers, like Mr. Wilson, are supposed to consider a client individually and consider that client’s willingness to take risks, age, and other factors – like whether the client is retired – into account when deciding what investments to recommend. Similarly, some investments which might have been appropriate for a client can become inappropriate, or unsuitable, if they are bought and sold too often in a client’s account. Generally, the more frequent the trading in an account, the higher risk the investment strategy.

In the case with Mr. Wilson’s clients, more than one has complained that Mr. Wilson improperly advised them to invest in energy related investments which led to substantial losses. Recently, a FINRA arbitration panel agreed with that allegation, ordering Wells Fargo Advisors to pay a client $357,000 for losses suffered in unsuitable energy and housing based investments, as well as use of margin trading.

Strategic Return Notes

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

The attorneys at Shepherd Smith Edward & Kantas are investigating the claims of investors who purchased Strategic Return Notes (“SRNs”). Bank of America and Merrill Lynch created Strategic Return Notes, which are an unsecured promissory note issued by Bank of America. Bank of America has no obligation to and will not make any interest payments throughout the duration of the notes, which go through 2016 if held until maturity. Investors also have no guarantee of getting back the original purchase price of the note at maturity. Instead, investors are paid back a variable amount based upon the performance of an underlying index, the Investable Volatility Index (“VOL”).

The VOL is a complicated index which measures the volatility of the S&P 500, essentially attempting to calculate how volatile the stock market as a whole is and predict how volatile it will be in the coming months. If the computation indicates that the market will be less volatile, or that the market will fluctuate less in the time period, then the index falls. Conversely, if the computation indicates that the market will be more volatile in the coming months, then the index rises. The result is that investors in these SRNs achieve returns or losses based not upon how high the market rises or how low it falls, but rather on how wildly the market was swinging on the way there.

These products are very complicated, and are only suitable for certain types of investors. It is believed that many investors who were sold these products were not told the risks that were involved, or were promised that this product could be used as a hedge to reduce overall portfolio risk when that was not true. Many investors have suffered substantial losses in these products.