Financial Firms

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.

Financial Fraud: Massachusetts Mayor is Accused of Bilking Investors, Former Wells Fargo Broker Allegedly Stole $1M From Older Clients, and the LendingClub Asset Management Settles $4.27M Securities Case

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

26-Year Old Mayor is Arrested and Accused of Investor Fraud

Jasiel Correira, who is the mayor of Fall River, Massachusetts, has pleaded not guilty to multiple criminal counts of wire fraud and tax fraud. The 26-year-old was arrested this week following allegations that he defrauded investors of over $230K.

Correira maintains that the investor fraud allegations are false. He refuses to step down as city mayor.

Securities News: Citigroup to Pay $12M Over Alleged Dark Pool Misrepresentations, SEC Issues Nearly $4M Whistleblower Award, Ex-Bankrate CEO Who Pleaded Guilty to Fraud Gets 10 Years in Prison

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

Citigroup Must Pay Over $12M Over Dark Pool Allegations

To settle Securities and Exchange Commission that it misled users of a dark pool run by an affiliate, Citigroup Global Markets Inc. (CGMI) and the affiliate, Citi Order Routing and Execution (CORE), will pay $12M. The regulator contends that Citigroup (C) misled users when it told them that high-frequency traders were prohibited from trading in Citi Match, despite the fact that two of the dark pool’s most active users qualified as high-frequency traders. These traders had executed over $9B in orders.

Dark pools are private securities exchange that allows investors, usually big financial institutions, to make anonymous trades. Members of the investing public cannot trade in dark pools. High-frequency trading typically involves the use of supercomputers, usually by financial firms, to make trades within microseconds.

TD Ameritrade Fined $500K For Not Reporting Investment Advisers’ Suspect Activities

Published on: September 26, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission is ordering TD Ameritrade Inc. (AMTD) to pay a $500K fine for not submitting mandatory suspicious activity reports (SARs) even after the broker-dealer stopped doing business with 111 independent investment advisers. The regulator contends that between 2013 and September 2015, the firm ended its business relationships with these advisers, who were not TD Ameritrade employees, due to what it found to be “unacceptable business, credit, operational, reputational or regulatory risk” to itself or customers.

While the brokerage firm did submit a number of suspicious activity reports (SARs) regarding suspect transactions made by some of these advisers it had fired, it did not submit SARs reports on some of the other advisers with whom TD Ameritrade had also ended their business relationships.

The suspect activities at issue allegedly included suspicious trading—including moving losses from trade errors to clients—inappropriate money transfers, and making false and misleading statements to customers while serving as an investment adviser managing their TD Ameritrade accounts.

Another Texas-Based Wells Fargo Broker is Barred by FINRA

Published on: September 12, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority (FINRA) has barred Wells Fargo (WFC) broker Edward O. Daniel, after he failed to participate in a probe into allegations that he made unsuitable investments for one client. Daniel, a Texas-based broker, was with Wells Fargo Advisers for seven years before he stepped down in September 2016. He was a longtime broker of 41 years.

Soon after Daniel resignation two years ago, Wells Fargo disclosed that a customer had filed an arbitration complaint accusing him of making unsuitable investments over a several-year period. The dispute was resolved for $225K. His BrokerCheck record documents that Daniel has been named in eight disclosures, all involving complaints by customers.

Now, FINRA is barring him because he would not cooperate in the self-regulatory authority’s investigation into the unsuitable investment allegations.

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.

Investors Bilked in $1.2B Woodbridge Ponzi Scam Must Pay 16% to Borrow on What They Are Owed

Published on: September 5, 2018 | by Shepherd Smith Edwards & Kantas, LLP

It wasn’t bad enough that over 10,000 investors, many of them retirees and other retail investors, were bilked in the $1.2B Woodbridge Ponzi scam. Now, they are allowed to borrow against what they hope to recover after the bankrupt real estate developer’s assets are liquidated but they must pay a 16% interest rate to do so.

While the rate isn’t necessarily wrong or unfair on the part of hedge fund lender Axar Capital Management—it was the investors that went to the Delaware Bankruptcy court seeking a $215M loan facility so that they could access their funds until Woodbridge’s bankruptcy proceedings are settled—the rate is still a steep sum considering that they thought that their investments would garner an approximately 8% return.

SEC Goes After Woodbridge

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

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.