Financial Firms

Transamerica Entities to Pay $97M to Investors Over Flawed Investment Models

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

Four Transamerica entities have settled US Securities and Exchange Charges accusing them of misconduct involving investment models that were faulty. Collectively, the entities, AEGON USA Investment Management LLC (AUIM), its affiliated brokerage firm Transamerica Capital Inc., as well as its affiliated investment advisers Transamerica Financial Advisors Inc. and Transamerica Asset Management Inc., will pay $97M to retail investors that were impacted. However, the entities are not denying or admitting to the regulator’s findings.

The SEC’s order contends that investors placed billions of dollars into mutual funds and strategies that employed flawed investment models that AUIM developed without knowing they had errors. AUIM’s affiliated investment advisers and broker-dealer touted the quantitative models upon which their investment decisions would be made. Between July ’11 and June ’15, they purportedly offered, sold, and oversaw 15 mutual funds, variable annuity investment portfolios, variable life insurance investment portfolios, mutual funds, and separately management account strategies that were based on these quantitative models.

Unfortunately, contends the SEC’s order, the models were created by one junior analyst who was inexperienced. Not only that, but there were a number of errors in the models, which failed to operate as promised. Moreover, said the regulator, the Transamerica entities launched the Strategies and Products without first verifying that the models worked as they were meant to and without disclosing any risks identified with the models.

Securities News: Genstar to Acquire Cetera With $1B in Junk Bond Sales, Financial Adviser Admits to Fraud Involving $2M Trading Loss, and BlackRock Funds Shareholders Sue Over Excessive Fees

Published on: August 27, 2018 | by Shepherd Smith Edwards & Kantas, LLP

$1M in Junk Bond Sales Helps Fund Cetera Acquisition by Genstar Capital

According to InvestmentNews, private equity firm Genstar Capital will sell $1B of junk bonds to help pay for its acquisition of Cetera Financial Group, which will be bought for $1.7B. Genstar will use $700M of its own money in the purchase.

Cetera Financial Group is comprised of six independent brokerage firms with approximately 8,000 brokers and advisers, including Cetera Advisors, Cetera Advisors Network, First Allied Securities, Cetera Financial Institutions, Summit Financial Services, and Cetera Financial Specialists. Cetera initially spun out of ING Groep (ING), a Dutch insurer, in 2010.

Unregistered Brokers Are Charged With Selling More Than $243M of Woodbridge Securities to Over 1600 Investors

Published on: August 24, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Top10-3 Five unregistered brokers and their companies are now facing US Securities and Exchange Commission charges accusing them of selling Woodbridge securities to investors even though they were not registered as broker-dealers and therefore were not allowed to sell these securities. The defendants allegedly made millions of dollars from the Woodbridge securities sales.

The unregistered brokers and their companies are Barry and Ferne Kornfeld and Fek Enterprises, Andrew G. Costa and Costa Financial Insurance Services Corp., Albert D. Klager and Atlantic Insurance & Financial Services Inc., and Lynette M. Robbins and Knowles Systems, Inc. They allegedly sold over $243M of Woodbridge unregistered securities to over 1600 retail investors.

According to the regulator’s complaints, the unregistered brokers and the companies marketed Woodbridge Group of Companies, LLC as an investment that was “safe and secure.” Woodbridge, however, declared bankruptcy last December. The moment Woodbridge filed for bankruptcy protection, investors stopped receiving the interest they were due each month and they still haven’t received a return on their principal.

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.

Securities Cases: Goldman Sachs Investors Can Proceed with $13B CDO Fraud Litigation, Deutsche Bank Resolves Self-Dealing Lawsuit for $21.9M, and Elkhorn Capital Group Founder is Accused in $2.5M ETF Fraud

Published on: August 17, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Shareholders Can Proceed with $13B CDO Fraud Case Against Goldman Sachs

A US district court judge has given Goldman Sachs (GS) shareholders the right to move forward with their $13B collateralized debt obligation fraud lawsuit accusing the bank of not disclosing certain conflicts of interest. Judge Paul A. Crotty granted the investors’ case class action certification.

The CDO fraud lawsuit revolves around investments that Goldman Sachs created and sold prior to the collapse of the housing market. According to the plaintiffs, the bank made false and misleading statements and acted counter to clients’ best interests.

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 Fraud Allegations Against Former Merrill Lynch/RBC Financial Adviser Could Lead to More Unauthorized Trading and Failure to Supervise Claims

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

Earlier this year, the US Securities and Exchange Commission barred ex-RBC broker Thomas Buck from the industry. The action came less than four months after the regulator filed a civil case accusing Buck of investor fraud. He allegedly made material misrepresentations and omissions to investment advisory clients and certain customers while he was a Merrill Lynch financial adviser in order to get get paid excess fees and commissions.

As a result, more than 50 customers and clients under Buck ended up paying over $2.5M unnecessarily.

Buck also allegedly did not tell clients that they could have saved money if only they’d opted for a fee-based payment structure instead of the commission model. Meantime, he’d told Merrill Lynch compliance staff on several occasions that the clients knew about the less costly options.

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.

Retired Couple Awarded $800,000 in Damages From Oppenheimer & Co., Inc

Published on: June 1, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Lawyers representing a retired couple in a claim against Oppenheimer & Co., Inc. recently obtained an award from a Financial Industry Regulatory Authority (“FINRA”) arbitration panel awarding them $800,000 in damages. The claim was based upon an investment of the couple’s money, including retirement assets, into various energy stocks, including Breitburn Energy Partners, Sandridge Permian Trust, Atlas Resource Partners, and Vanguard National Resources. The arbitration panel found that Oppenheimer was negligent in the treatment of the clients, and awarded $800,000 in damages, $61,5217 in costs, and post-judgement interest.

The broker, Evan Fischer, appears to have moved to Ameriprise Financial Services, Inc., despite the fact he currently has four customer claims against him, including the one recently concluded with this award, which allege various types of mismanagement of client assets. It is unclear whether these other customer complaints involve investments in energy stocks like Breitburn or Sandridge.

Unfortunately, when brokers act improperly with some clients, as Mr. Fischer has been accused of doing by at least four different clients, they often do so with many clients. If you are or were a client of Mr. Fischer and believe you may have been inappropriately invested or otherwise lost money with him, contact the law firm of Shepherd, Smith, Edwards & Kantas LLP for a free, no obligation evaluation of your account to determine if you might have a claim to attempt to recover some or all of your losses. All communications will be kept strictly confidential, and you will not be billed in any way for a consultation.

Securities Cases: Anti-Money Laundering Violation Allegations Lead to $5.3M Fine Against ICFBCFS, Three Houston-Based Healthcare Executives are Accused of Falsifying Financial Information, and Pension Fund Accuses Wells Fargo of Holding Back Rebate Fees

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

ICFBCFS and Chardan Capital Markets Accused of Anti-Money Laundering

FINRA has fined the Industrial and Commercial Bank of China Financial Services LLC (ICBCFS) $5.3M for “systemic anti-money laundering compliance failures.” The self-regulatory organization contends that when clearing and settling the liquidation of over 33 billion penny stock shares between 1/2013 and 9/2015, the firm did not have in place an anti-money laundering program that was reasonable enough to identify and report possibly suspect transactions, especially when penny stocks were involved. ICBCFS is settling the case without denying or admitting to the self-regulatory authority’s findings. It has, however, consented to an entry of the findings.

ICBCFS also agreed to pay an $860K penalty to settle a US Securities and Exchange Commission case alleging anti-money laundering violations and the failure to report billions of suspect penny stock sales.