Financial Advisers

How to Recognize Elder Financial Abuse

Published on: October 25, 2022 | by Shepherd Smith Edwards & Kantas, LLP

Ex-LPL Financial Broker Bradley Goodbred Is In Trouble For Alleged $1.3M Elder Financial Abuse

How Senior Investors Can Pursue Damages Over Their Investment Losses

The US Securities and Exchange Commission (SEC) recently filed charges against former LPL Financial broker Bradley Allen Goodbred. The ex-Chicago financial advisor, who was barred from the Financial Industry Regulatory Authority (FINRA) in 2021 for not cooperating in the self-regulatory organization’s (SR0’s) probe, is accused of stealing $1.3M from an older client with dementia.

Ameriprise Financial to Pay $4.5M Over Alleged Failure to Protect Investors

Published on: August 15, 2018 | by Shepherd Smith Edwards & Kantas, LLP

In a settlement reached with the US Securities and Exchange Commission, Ameriprise Financial Services (AMP) will pay $4.5M over allegations that it did not protect retail investors from five of their financial representatives, who stole over $1.5M. Three of these individuals had previously pleaded guilty to criminal charges involving investor fraud.

The Commission charged Ameriprise, a registered investment adviser and brokerage firm, with inadequate supervision of the representatives and for not having policies and procedures that were “reasonably designed” enough to stop them from misappropriating clients’ monies.

Ameriprise, despite setting, is not denying or admitting to the regulator’s findings. However, it consented to a censure.

Securities Headlines: Ohio Financial Adviser Faces Criminal Charges, Petters Ponzi Scam Investors Still Waiting for Their Money, and FINRA Recommends Disciplinary Action Against Ex-Jefferies Bond Trader

Published on: January 15, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Ohio Financial Adviser is Indicted in $15M Securities Fraud
Evolution Partners Wealth Management owner Larry Werbel has been indicted on criminal charges accusing him of involvement in a securities scam to bilk at least 100 investor of over $15M. Werbel recruited investors for shares of VgTel Inc. He and other brokers purportedly promised high dividends even though the shares were sold and purchased by companies belonging to the alleged scammers so that they could artificially inflate the share price.

According to prosecutors, over $9M of investor funds were pockets by the fraudsters. Werbel, who prosecutors say got investors to purchase $3M in VgTel shares, received over $300K in kickbacks.

He is charged with securities fraud, conspiracy to commit securities fraud and wire fraud, investment adviser fraud, wire fraud, and making false statements to federal officers. Werbel claims he is innocent.

Meantime, the man accused of masterminding the securities scam, Edward Durante, was arrested in Germany and brought back to the US last month. He previously was convicted of securities fraud in 2011. The U.S. Securities and Exchange Commission has filed a civil case against Evolution Partners, Durante, and others.
Continue Reading ›

SEC Judge Orders Two Investment Advisers to Pay Over $6.3M Related to Bernard Madoff-Linked Hedge Funds

Published on: January 9, 2015 | by Shepherd Smith Edwards & Kantas, LLP

A Securities and Exchange Commission administrative law judge says that investment advisers Larry Grossman and Gregory Adams must pay over $6.3M in restitution and fines for misleading clients who invested in hedge funds tied to Ponzi fraud mastermind Bernie Madoff. Administrative law judge Brenda Murray issued her ruling last month.

The two investment advisers are Sovereign International Asset Management founder Larry Grossman and Gregory Adams, who agreed to buy Sovereign from Grossman in 2008. The firm filed for bankruptcy four years later.

Per the SEC administrative complaint, Grossman did not know that the two hedge funds that he primarily recommended to clients were linked to Madoff. The Commission contends that Grossman violated his fiduciary duties to his clients when he neglected to conduct due diligence on the funds, which were run by a man named Nickolai Battoo. Grossman also purportedly did not notify clients that he was getting paid $3.4 million in consulting fees and referral money for recommending certain funds. After Grossman sold Sovereign to Adams, the former owner continued working in several capacities at the firm and never actually told clients that the sale even happened.

FINRA Doesn’t Want Oversight Over Financial Advisers, Says CEO Ketchum

Published on: April 12, 2014 | by Shepherd Smith Edwards & Kantas, LLP

According to Financial Industry Regulatory Authority CEO Richard G. Ketchum, the regulator no longer wants to be given oversight over financial advisers. Speaking to The Wall Street Journal, Ketchum said the self-regulatory agency had done all it could to be granted authority over investment advisers and has decided to stop with additional attempts.

FINRA currently oversees brokers. Meantime, the Securities and Exchange Commission and the states oversee registered investment advisers. The SEC had been exploring having FINRA or another agency police RIAs instead. However, the majority of investment advisers were against such a move because of the way FINRA handles enforcement. They don’t think the regulator understands the way investment advisers operated.

Ketchum is now saying that Congress should give the SEC the resources it needs to enhance its examination program of advisers. The Commission has been asking for more money because it can only afford to examine investment advisor firms about once a decade, which isn’t much oversight at all.

OppenheimerFunds Increases Its Exposure to Puerto Rico Debt Despite Downgrade by Moody’s, S & P, and Fitch to Junk Status

Published on: February 14, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Even though Puerto Rico’s debt has been downgraded to “junk” status by the three major ratings agencies (Standard & Poor’s, Moody’s, and Fitch Ratings), OppenheimerFunds (OPY) has increased its holding of Puerto Rican debt in two of its municipal bond funds that carry lower risk. The credit raters downgraded the US Commonwealth over worries about its failing economy and decreased ability to finance its deficits in capital markets.

According to Reuters, Lipper Inc. says that at the end of last year, the Oppenheimer Rochester Short-Term Municipal Fund’s (ORSCX) exposure to Puerto Rico’s debt had risen 13% from a year ago, while its Intermediate-Term Municipal Fund more than doubled its exposure to 17%. (Details of the holdings in both funds since then are still unavailable.) Both have a 5% limit on how much junk-rated debt they can contain. However, because the US territory’s debt was downgraded after the buys were made, Oppenheimer, which is part of MassMutual Financial Group, may not obligated to unload the assets.

The company has continued to support Puerto Rico municipal bonds, even as a lot of other mutual fund firms have lowered their exposure to Puerto Rico debt. This week, Oppenheimer downplayed the investment risk involved, noting that most bonds involved are insured (Reuters reports that 27% of the holdings in the intermediate-fund and another 4% in the short-term fund, do not have insurance).

Advisors in the Spotlight: Ex-SAC Capital’s Martoma on Trial for $276M Insider Trading Scam, Financial Industry Recruiters Say LinkedIn Hurts Their Business, & A Fugitive Bank Director Wanted for Securities Fraud is Arrested

Published on: January 18, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Former SAC Capital Portfolio Manager Mathew Martoma On Trial for Securities Fraud

Mathew Martoma, the ex-SAC Capital Advisors portfolio manager accused in the insider trading scam that involved $276 million in Wyeth and Elan stocks, is now on trial. Martoma allegedly used tips from a doctor involved in Alzheimer drug trials. The government says that due to the information SAC liquidated a $700 million position and sold its stocks in the firms, which allowed it to make money while avoiding losses.

In court this week, one doctor testified that he was surprised that Martoma knew so much about the results of a clinic trial before they were publicly disclosed. Already, prosecutors have filed charges against 83 people and four SAC entities over what the US is calling the largest illegal trade in our nation’s history. There have been several convictions.

Former Bernard L. Madoff Investment Securities LLC Employee Faces SEC Charges for Creating Fake Trades to Enable Ponzi Scam

Published on: November 23, 2011 | by Shepherd Smith Edwards & Kantas, LLP

David Kugel, who was a long time Bernard L. Madoff Investment Securities LLC (BMIS), has been charged by the Securities and Exchange Commission with fraud. Kugel is accused of making fake trades to keep Madoff’s multi-billion dollar Ponzi scam running. He has consented to settling the securities fraud charges.

The SEC claims that Kugel, who worked for Madoff for nearly 40 years, was asked by the Ponzi mastermind to turn backdated arbitrage trade information into fake trades. Kugel’s own BMIS account included backdated trades. While some of the trades imitated successful ondx made by Kugel for BMIS, others were founded on historical facts that he got from old newspapers.

Over a number of years Kugel even withdrew almost $10 million in profits from these bogus trades in his own BMIS. SEC New York Regional Office George S. Canellos claims that Kugel knew such profits were fake.

Two other people accused of setting up fake trades from the information that Kugel provided were Joann Crupi and Annette Bongiorno. Both allegedly asked him for backdated data about trades that added up to millions of dollars. They would then take the information and design trades that equaled those figures. These bogus trades showed up as trade confirmations on investors’ account statements.

The SEC filed securities charges against the two women last year. The Commission claims that Bongiorno regularly set up bogus books and records and misled investors via phone calls, trade confirmations, and account statements. She also is accused of setting up false trades in her own BMIS counts that allowed her to cash out millions of dollars more than what was put in. Meantime, Crupi was accused of deciding what accounts to cash out and which investors should receive checks as Madoff’s scam stood on the brink of collapse. The two women are facing criminal charges over their alleged involvement. They have denied any wrongdoing.

Prosecutors have filed parallel criminal charges against Kugel. On Monday, he pleaded guilty to six criminal counts, including securities fraud, conspiracy, and bank fraud. He will be sentenced in May.

Meantime, Irving Picard, who has been appointed as the trustee in charge of helping Madoff’s Ponzi victims from recouping their losses, is seeking at least $22.2 million from Kugel and his family.

Ponzi Scams
A Ponzi scheme can be described as a multi-level marketing operation. The director solicits investments while promising clients a given return rate. However, rather than paying investors from real profits, the principal from new investors is used to compensate earlier investors. Ponzi scams can result in devastating losses for investors once the money dries up.

SEC Charges Longtime Madoff Employee With Creating Fake Trades, SEC, November 21, 2011
Read the SEC Complaint (PDF)

Bernie Madoff Cronies Arrested, ABC News, November 18, 2010
More Blog Posts:
SEC Files Charges in $27M Washington DC Ponzi Scam, Stockbroker Fraud Blog, November 21, 2011
Former Texan and First Capital Savings and Loan To Pay $4.5M for Alleged Foreign Currency Ponzi Scheme, Stockbroker Fraud Blog, November 11, 2011
SEC Issues Emergency Order to Stop $26M “Green” Ponzi Scam, Institutional Investor Securities Blog, October 13, 2011 Continue Reading ›

Morgan Keegan & Company Ordered by FINRA to Pay $555,400 in Texas Securities Case Involving Morgan Keegan Proprietary Funds

Published on: September 6, 2011 | by Shepherd Smith Edwards & Kantas, LLP

A FINRA panel in Houston has ordered Morgan Keegan & Company to pay the Claimants of a Texas securities fraud $555,400 in compensatory damages. The Claimants had accused the financial firm of misrepresentation, negligence, vicarious liability, failure to supervise and violating the Texas Securities Act, the Texas Deceptive Trade Practices Act, and NASD Rules.

The securities claim is related to the sale and recommendation of a number of Regions Morgan Keegan proprietary mutual funds that were allegedly touted as diversified, conservative, and low risk despite a supposed higher rate of return:

• Regions Morgan Keegan High Income Fund • Regions Morgan Keegan Advantage Income Fund • Regions Morgan Keegan Multi-Sector High Income Fund • Regions Morgan Keegan Strategic Income Fund
The funds were actually high-risk mortgage-backed securities that were not appropriate for the Claimants.

After a 5-day hearing, the panel found Morgan Keegan liable in the Texas securities case and ordered the financial firm to pay damages to the WCR Family Limited Partnership, as well as a 4% per annum interest on the $550,400 for the period of July 29, 2011 until payment is made in full. The panel did dismiss all claims brought by the Wilhelmina R. Smith Estate.

Morgan Keegan Securities Fraud Cases
For the past couple of years, our Texas stockbroker fraud law firm has been diligently pursuing claims against Morgan Keegan related to their Regions Morgan Funds. The cases came following claims by investors that the financial firm defrauded them by misrepresenting the risk involved in the investments. Investors sustained many of the losses when the subprime mortgage market collapsed.

Over 400 securities claims have been filed over Morgan Keegan’s RMK funds. Already tens of millions of dollars have been awarded to claimants.

Other RMK funds named in the claims include the:

• RMK Select Intermediate Bond Fund • RMK Select High Income Fund
Earlier this summer, Regions Financial Corp. agreed to pay $210 million to settle more securities allegations that it fraudulently marketed mutual funds with subprime mortgages while artificially raising the prices of the funds. FINRA, SEC, and regulators from Kentucky, Alabama, South Carolina, and Mississippi agreed to the settlement.

Examples of FINRA arbitration settlements that Morgan Keegan has been ordered to pay over the RMK Funds:

• $881,000 to several investors. The claimants said their actions were over SEC and FINRA violations, breach of fiduciary duty, negligence, failure to supervise, vicarious liability, negligence, and breach of contract.

• $2.5 million to investor Andrew Stein and his companies. Panel members held Morgan Keegan liable for negligence, failure to supervise, and the sale of unsuitable investments.

Related Web Resources:
Regions Settles S.E.C. Case Over Former Morgan Keegan Funds, NY Times, June 22, 2011
Regions settles fraud case, may sell Morgan Keegan, Reuters, June 22, 2011
Texas Securities Act

More Blog Posts:
Morgan Keegan Settles Subprime Mortgage-Backed Securities Charges for $200M, Stockbroker Fraud Blog, June 29, 2011
Morgan Keegan Ordered by FINRA to Pay RMK Fund Investors $881,000, Stockbroker Fraud Blog, April 24, 2011
Morgan Keegan Ordered by FINRA Panel to Pay Investor $2.5 Million for Bond Fund Losses, Stockbroker Fraud Blog, February 23, 2010

District Court in Texas Decides that Credit Suisse Securities Doesn’t Have to pay Additional $186,000 Arbitration Award to Luby’s Restaurant Over ARS

Published on: June 2, 2011 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. District Court for the Southern District of Texas has ruled that Credit Suisse Securities shouldn’t have to pay Luby’s Restaurants another $186,000 as part of its arbitration to the investor. The case is Luby’s Restaurants LP v. Credit Suisse Securities (USA) LLC. Shepherd Smith Edwards and Kantas Founder and Texas Securities Fraud Attorney William Shepherd had this to say about the ruling: “Attorneys for each side have the opportunity to submit language to the arbitrators that it desires to be reflected in an award. In cases where the award sought is anything more than payment of a specific amount it is wise to submit such language.”

Luby’s Restaurants LP bought over $30 million in auction-rate securities from Credit Suisse. The investor bought the ARS based on the financial firm’s representation that the instruments were very liquid, safe, and a suitable investment.

Luby’s later filed its arbitration claim with FINRA for ARS losses. By then it had gotten back everything but $8.9 million in securities. Then, after initiating the proceedings-but prior to the arbitration hearing-Luby’s redeemed another one of its securities for less than par and lost $186,000.

The arbitration panel would go on to rule in favor of Luby’s. Credit Suisse was directed to buy back the ARS from Luby’s at par and with interest. While both parties sought to confirm the award, they were in dispute over whether the $186,000 that Luby’s lost after it filed its arbitration case should be included.

The court says that Credit Suisse does not have to pay that amount to Luby’s. The court noted that the Award doesn’t mention the additional damages that Luby’s sustained when it sold some of the securities under par during pendency of the arbitration but prior to the hearing.

Related Web Resources:
$186K Under Arbitration Award, BNA Securities Law Daily, May 31, 2011
Luby’s Restaurants LP v. Credit Suisse Securities (USA) LLC, Justia

More Blog Posts:
Credit Suisse Group AG Must Pay ST Microelectronics NV $431 Million Auction-Rate Securities Arbitration Award, Stockbroker Fraud Blog, April 5, 2010
Texas Securities Commissioner’s Emergency Cease and Decease Order Accuses Insignia Energy Group Inc. of Misleading Teachers, Stockbroker Fraud Blog, May 23, 2011
Goldman Sachs and Wells Fargo Investments Repurchase $26.9M in Auction-Rate Securities from New Jersey Investors, Institutional Investors Securities Blog, May 25, 2011 Continue Reading ›