Financial Firms

CFTC Cases: Ex-Citigroup Global Markets Traders Settle Spoofing Charges and Vision Financial Partners to Pay Over $6.5M in Off-Exchange Binary Options Fraud Case

Published on: March 31, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Former Citigroup Global Markets Traders to Pay Penalties for Spoofing

Ex-Citigroup Global Markets Inc. (C) traders Jonathan Brims and Stephen Gola have settled spoofing charges that the US Commodity Futures Trading Commission brought against them. According to the regulator, the two men engaged in spoofing while trading for the firm, and they must now pay $200K and $350K in civil monetary penalties, respectively. They also are temporarily “banned from trading in futures markets.” Goal and Brims won’t be allowed to resume trading in the futures markets until six months after they’ve paid their penalties in full.

According to their respective orders, the two men engaged in spoofing, which involves making a bid or offer with the intention to cancel the bid or offer prior to execution of the bid. They did this over 1,000 times in different Chicago Mercantile Exchange US Treasury futures products. They would make offers or bids of at least 1,000 lots even though they planned to cancel the orders before they actually occurred.

The orders were made after another small offer or bid was made on the other side of the same market “or a correlated futures or cash market.” The CFTC said that the two men initiated the orders in order set up or increase an already existing imbalance in the order book. They purportedly canceled the orders after the smaller orders were filed or if they determined that there was too high a risk that their orders might actually go through.

UBS Financial Services Ordered to Pay Many Millions to Another Investor For Puerto Rico Bond And Closed-End Fund Losses

Published on: March 31, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Once again, a Financial Industry Regulatory Authority (FINRA) panel has ordered UBS Financial Services (UBS) to pay a large arbitration award to an investor. Dr. Luis E. Cummings claimed losses related to his investing in Puerto Rico bonds and Puerto Rico closed-end funds. Cummings also said sustained losses from loans made against these securities.

In his Puerto Rico bond fraud case, Cummings accused UBS of negligence, recklessness, deceit, fraud, and fault. Meantime, the brokerage firm is once again claiming that this is yet another investor who was experienced enough to make a “fully informed decision” about whether to leverage investments and invest a healthy portion of his portfolio in Puerto Rico closed-end funds and bonds.

But as Shepherd Smith Edwards & Kantas Partner Sam Edwards said when commenting on a previous case in which UBS also was ordered to pay an investor over their similar losses, “even customers who are business savvy can be abused.” The FINRA Panel ultimately awarded Dr. Cummings more than $5 million in compensation as well as forgiveness of a similar amount of debt.

Securities News: Deutsche Bank Unit Ordered to Pay $150M for Libor Rigging, FINRA Bars Broker Indicted in NY Pension Fund Scam, and Hedge Fund Manager Who Lost Investors’ Money In Madoff Ponzi Scam Commits Suicide

Published on: March 30, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Judge Orders Deutsche Bank Subsidiary to Pay $150Mfor Libor Rigging
A federal judge is ordering Deutsche Bank Group Services, a subsidiary of Deutsche Bank (DB), to pay $150M for its involvement in an interest rate manipulation scam. The London unit pleaded guilty last year to rigging the London Interbank Offered Rate benchmark.

The fine comes two years after Deutsche Bank settled Libor rigging allegations with US and British regulators for $2.5B. According to prosecutors, derivatives traders at the German bank and at other banks colluded together to manipulate LIBOR rates to preference their trading positions.

Libor rigging allegations are not the only claims that Deutsche Bank has been contending with. Recently, the German Bank reached a $7.2B settlement with the US DOJ over its part in the 2008 global financial crisis. Meantime, NY and British officials ordered Deutsche Bank to pay $630M in fines because of alleged money laundering that occurred in Russia.

MBS Fraud Cases: Wells Fargo, Deutsche Bank AG, and Royal Bank of Scotland Reach $165M Class Action Settlement, Bank of NY Mellon Ordered to Face $1B Lawsuit Brought by Commerzbank, and Judge Says Royal Park Must Better Define “Class” in Securities Case

Published on: March 25, 2017 | by Shepherd Smith Edwards & Kantas, LLP

$165M Class Action Settlement Reached in MBS Fraud Case Involving NovaStar Securities
Royal Bank of Scotland Group Plc (RBS), Wells Fargo & Co. (WFC), and Deutsche Bank AG (DB) have reached a $165M with investors in their class action mortgage-backed securities case involving underwriting for NovaStar Mortgage Inc., a former subprime lender. The lead plaintiff in the case is the New Jersey Carpenters Health Fund.

NovaStar, which filed for bankruptcy last year, had specialized in low quality residential mortgages. Many of these were bundled into risky securities that were issued prior to the 2008 financial crisis. The class action settlement resolves claims contending that the offering documents put together by the banks misled investors into thinking that the loans underlying about $7.55B of NovaStar MBSs were safe and had been underwritten properly.

A district court judge must still approve the settlement. Meantime, despite the resolution, the banks continue to deny wrongdoing.
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Insider Trading Cases: Ex-Oppenheimer Adviser Sentenced to Six Months, Las Vegas Sports Gambler is on Trial, and SEC Files Civil Case Against Ex-Home Security Guard

Published on: March 18, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Ex-Oppenheimer Stockbroker Pleads Guilty in Insider Trading Case
David Hobson, an ex-Oppenheimer Holdings (OPY) investment adviser, was sentenced to six months behind bars for insider trading using information provided to him by a friend who was employed with Pfizer Inc. at the time.

Hobson pleaded guilty to the criminal charges against him. He was ordered to forfeit over $385K. His friend, Michael Maciocio, reached a plea deal with prosecutors for his part last year.

Hobson started insider trading in 2008 while employed at RBC Capital Markets and he continued with his illicit activities at Oppenheimer. He was Maciocio’s stockbroker.

Stifel Ordered to Pay Back Retired Couple More Than $100K For their Puerto Rico Bond Fraud Losses

Published on: March 17, 2017 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority (FINRA) panel said that Stifel, Nicolaus & Co. (“Stifel”) must pay June and Perry Burns over $100K for losses they sustained from Puerto Rico bonds and oil and gas investments. The Burns are in their eighties and they invested a “substantial” amount of their life savings with Stifel.

In their Puerto Rico bond fraud arbitration claim, the couple accused Stifel of negligence, unauthorized trading, and unsuitable investments, among other violations. For that portion of their case, the FINRA panel awarded the Burns $79,709, which was everything they lost, and also fees and interest. Despite the ruling, Stifel, in its own filings, continues to deny the couple’s allegations. The broker-dealer tried to have the case thrown out and removed from its FINRA records.

Senior Investors Sustained Losses From Investing in Puerto Rico Bonds
Unfortunately, the Burns are not the only senior investors whose retirement savings were seriously harmed because brokerage firms and their brokers recommended that retirees invest in Puerto Rico bonds and Puerto Rico bond funds even though these securities were too risky for their portfolios and/or not aligned with their investment objectives. For the past few years, our senior financial fraud lawyers at Shepherd Smith Edwards and Kantas have been working with older investors in the US mainland and the island of Puerto Rico to help them get their lost investments back. Aside from Stifel, other brokerage firms are accused of inappropriately recommending Puerto Rico bonds and close-end bond funds to investors, including UBS Puerto Rico (UBS-PR), Santander Securities (SAN), Banco Popular, Merrill Lynch, Morgan Stanley (MS) and others.

Securities News: SEC Orders Voya to Pay $3.1M For Not Disclosing Mutual Fund Sale-Related Payments, FINRA Bars Ex-Waddell & Reed Broker, and Alabama Pension Fund Loses Millions in Ponzi Scam

Published on: March 15, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Voya Accused of Not Disclosing Revenue Received for Mutual Fund Sales
The US Securities and Exchange Commission said that Voya Financial Advisors (VOYA) would pay approximately $3.1M to regulators and investors for not telling customers about revenue the firm was paid related to a mutual fund program that didn’t bill transaction fees. Voya’s clearing broker-dealer paid the firm a percentage of the money made from the mutual fund sales. This was information that should have been shared with investors.

Also, since 2014, Voya and the third-party brokerage firm were involved in a separate agreement under which Voya provided certain administrative services in return for a percentage of service fees involving certain mutual funds. The regulator said that these payments were a conflict because they gave Voya incentive to preference these funds over other investments, which could have impacted what the firm recommended to advisory clients. As part of the settlement, Voya will pay about $2.6M of disgorgement, approximately $175K of interest, and a $300K penalty. The firm is not, however, denying or admitting to the SEC’s findings.

Fired Waddell & Reed Broker is Barred from the Securities Industry
The Financial Industry Regulatory Authority has barred an ex-Waddell & Reed Inc. broker from the industry. Paul D. Stanley was fired from the firm last year for allegedly violating its policies regarding supervision, compensation, and conduct.

Wells Fargo Advisors Must Pay $357K Securities Arbitration Award Over Unsuitable Investments

Published on: March 13, 2017 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority securities arbitration panel ruled that Wells Fargo Advisors (WFC) must pay investor Anthony J. Pryor $357K related to purportedly unsuitable housing and energy investments. In his securities fraud claim, Pryor alleged negligent misrepresentation, negligent supervision, breach of fiduciary, and other causes. Wells Fargo denies Pryor’s allegations.

His advisor, Jeff Wilson, who was not named as a party in the securities arbitration case, has three customer disputes on his BrokerCheck record. One of the other claims that were settled for $250K also allegedly involving unsuitable investments.

Unsuitable Investments

Not every investment is suitable for every investor. Some investments may too be risky for certain investors or are not in alignment with their investment goals or financial needs. For example, many older retail investors that are about to retire will likely require a more conservative investment plan that a much younger, single investor.

Hedge Funds Pursing More than $3B From PriceWaterhousCoopers in MF Global Lawsuit

Published on: March 5, 2017 | by Shepherd Smith Edwards & Kantas, LLP

The trial in which a number of hedge funds and creditors are partly blaming PricewaterhouseCoopers for the collapse of MF Global is about to begin in U.S. District Court in New York. The plaintiffs, alleging malpractice involving “erroneous accounting advice,” are seeking over $3B in damages. Former MF Global CEO Jon Corzine, also an Ex-Goldman Sachs (GS) co-chairman and formerly both a New Jersey governor and US senator, is expected to testify in court.

MF Global, once a global financial derivatives broker, is no longer in business. The firm failed in 2011 after customers left when they learned that Corzine had placed big bets on European sovereign debt during a volatile time for the markets. This caused a $1.6B shortfall in client accounts.

Yet, because MF Global employed repo-to-maturity instruments to bet on the debt, this let the firm report the bets as gains, which enhanced the way its revenue looked. Also, clients’ funds were commingled with MF Global’s funds even though they should not have been mixed together.

Elder Financial Fraud: Ex-K.C. Ward Financial Rep. Barred Over $15M in Unsuitable Investments

Published on: February 27, 2017 | by Shepherd Smith Edwards & Kantas, LLP

FINRA Bars Registered Rep For $15M In Unauthorized Trades

The Financial Industry Regulatory Authority has barred Craig David Dima, a former registered representative with KC Ward Financial, for making about $15M in unsuitable and unauthorized trades in the account of a 73-year-old retiree. According to the self-regulatory organization, there were 11 times when Dima sold nearly all of the customer’s stock in Colgate-Palmolive that she’d accrued from working with the company for nearly thirty years and he did that without permission.

After the elderly client told Dima not to sell the stock, he proceeded to sell them anyways. When the customer confronted Dima, he purportedly misrepresented that a computer or technical mistake had caused the sale. Meantime, the client was “deprived” of the “substantial dividends” from the Colgate shares she used to own. Dima charged the customer over $375K in fees, mark-downs, and mark-ups.

By settling, Dima is not denying or admitting to FINRA’s charges of elder financial fraud.