Investor Lawyers Blog

SEC Allegations Against Broker Accused of Fraudulent Trading Scheme Involving Archer Alexander Securities Corp. Will Not Be Dismissed, Says Court

Published on: May 24, 2007 | by Shepherd Smith Edwards & Kantas, LLP

A Securities and Exchange Commission action against Jamie Solow, a former stockbroker who is accused of allegedly taking part in a fraudulent trading scheme involving unsuitable and risky securities, including collateralized mortgage obligations, will not be dismissed, says the U.S. District Court for the Southern District of Florida.

According to the court, the SEC’s antifraud charges satisfied a “level of specificity” for this type of pleading’s particularity requirements. The complaint also gives Solow proper notice of the claims (and their basis) that he aided and abetted Archer Alexander Securities Corp. in their violation of securities laws.

The court has also said that Archer allegedly committed records and books violations and did not comply with FOCUS reporting requirements. The court says that since Solow knew that his conduct was improper, and because he was a registered Archer representative, the firm was obligated to maintain proper records.

SEC Says Credit Suisse First Boston Broker’s Tips on TXU Used by Pakistani Banker

Published on: May 22, 2007 | by Shepherd Smith Edwards & Kantas, LLP

The SEC says it is requesting that the name of Pakistani banker Ajaz Rahim be added to the lawsuit charging the trading in of call options for TXU Corp that were based on insider information regarding an investment group’s leveraged buyout of the entity. The commission filed its third amended complaint in the U.S. District Court for the Northern District of Illinois.

The SEC is accusing Rahim of accepting tips offered by CSFP banker Hafiz Naseem, who is said to have misappropriated information from Credit Suisse, LLC, which advised TXU regarding the buyout.

Naseem was charged in connection to his alleged involvement in the controversy in the SEC’s second amended complaint. The SEC had issued allegations of insider trading just before the TXU buyout against “Certain Unknown Purchasers of TXU Call Options.

RBC Dain Rauscher Fined $90K for Compliance Program Flaws

Published on: May 21, 2007 | by Shepherd Smith Edwards & Kantas, LLP

The New York Stock Exchange Regulation Inc. announced that RBC Dain Rauscher Inc. consented to be fined $90,000 for failures related to its anti-money laundering compliance program.

According to an exchange press release, the Minneapolis-based firm failed to establish written procedures regarding filing of suspicious activity reports. Additionally, the exchange alleged, the firm did not have an adequate monitoring system to review and document follow-up on exceptions found by the firm’s department, the release stated.

The firm, which neither admitted nor denied the allegations, consented to the fine and a censure, according to the release.

SIPC Insurance of Brokerage Accounts to be Disclosed to Investors But Not Explained

Published on: May 21, 2007 | by Shepherd Smith Edwards & Kantas, LLP

For decades investors have been told their accounts were protected by the Securities Investor Protection Corporation (SIPC) without being told what was covered by this insurance. Few realize this protection only provided that whatever securities and cash are in an account when a firm goes out of business would be returned to the investor. (Furthermore, such claims are difficult to file and often take years to process.)

Thus, if investors are defrauded into purchasing investments, if their accounts are churned for commissions or if other wrongdoing occurs in their accounts, they are NOT protected by this Federal insurance. Even claims for unauthorized transactions, including the sale of viable securities in order to purchase worthless securities from the firm or its officers are not always refunded. In short: Fraud is not covered by SIPC!

After years of complaints, efforts by attorneys representing investors and pressure by some consumer-friendly legislators, the National Association of Securities Dealers, Inc. (NASD) and the Securities Exchange Commission (SEC) were finally persuaded to act. However, rather than force brokerage firms to disclose the insurance coverage (or lack of it) the NASD and SEC passed a much less effective requirement.

“Pump and Dump”, Annuities, Real Estate, Affinity Fraud and “Free Lunch Seminars” Are Top Scams in 2007 Say State Securities Regulators

Published on: May 21, 2007 | by Shepherd Smith Edwards & Kantas, LLP

The North American Securities Administrators Association released its “Top 10 Traps” likely to ensnare investors, a list that included real estate investment contracts, affinity fraud, foreign exchange trading, and Internet fraud.

Other problematic areas, according to NASAA, include: “free lunch” investment seminars; oil and gas scams; prime bank schemes; private securities offerings; unlicensed professionals and unregistered products; and unsuitable sales.

“The path to safe investing is littered with traps that are likely to catch unwary investors,” Joseph Borg, NASAA’s president and the director of the Alabama Securities Commission, said in the release. “It always pays to remember that any investment that sounds too good to be true usually is.”

Wachovia is Among the Financial Institutions Accused of Assisting Scam Artists To Bilk Seniors

Published on: May 20, 2007 | by Shepherd Smith Edwards & Kantas, LLP

For decades, telemarkers in “boiler rooms” have bilked the elderly by convincing touting them to buy investments which supposedly pay high rates of return or have fabulous growth potential.

Now thieves operating in small offices in Canada and warehouses in India work day and night targeting elderly Americans. Working from lists of names and phone numbers, they call War veterans, retired schoolteachers and thousands of other elderly Americans and posed as government and insurance workers updating their files.

Then, the criminals empty their victims’ bank accounts!

Micah S. Green, Expected New CEO of Largest Securities Industry Group, Resigns During Scandal

Published on: May 18, 2007 | by Shepherd Smith Edwards & Kantas, LLP

The Securities Industry and Financial Markets Association (SIFMA) was recently formed by a merger of The Securities Industry Association and The Bond Market Association. On its website the SIFMA claims “We are committed to enhancing the public’s trust and confidence in the markets…” and that in 2007 it will focus on goals including “Ensure the public’s trust in the securities industry and financial markets.”

Yet, within months, SIFMA has already fallen prey to its own financial scandal. The trade group today acknowledged that Micah S. Green resigned after it was learned that he approved improper loans to employees while he headed the Bond Market Association before the merger. Mr. Green made one of the loans to himself (later paid in full).

Mr. Green was widely thought to be in line for leadership of the newly-merged group until it was suddenly announced in late March that he would resign and that his co-chair Marc E. Lackritz would head the organization. Lackritz was though to be planning to resign before the investigation over the loan improprieties was revealed.

Penthouse International Inc., a Former Director, and a Former Shareholder Agree to Settle SEC Charges of Alleged Involvement in a Revenue Recognition Scheme

Published on: May 18, 2007 | by Shepherd Smith Edwards & Kantas, LLP

Penthouse International Inc., Charles Samel-a former Penthouse director and executive vice president-and former shareholder Jason Galanis have agreed to settle SEC allegations that they were involved in a revenue recognition scheme.

The SEC says the two men took part in accounting and financial reporting violations while at Penthouse in early 2003. Penthouse then allegedly improperly included in its financial statements revenue of $1 million. It had gotten the money as an up-front payment related to a five-year Web site management agreement. Including the amount on its statements, says the SEC, had increased the company’s reported revenue and changed a $167,000 quarterly net loss to an $828,000 profit.

The commission also cited other ways in which Penthouse’s Form 10-Q was materially misleading. The SEC says that the electronic signature of Penthouse’s principal executive and financial officer was included in the statements to meet Sarbanes-Oxley certification requirements for the publishing company’s 2003 quarterly report. Apparently, the signature made it seem that the officer, Robert Guccione, had looked at and signed the document when he actually had not, says the SEC. The commission also says that Penthouse’s outside counsel and auditors did not review the filing and that this lack of review was not revealed in the filing.

Swindlers of Seniors Targeted by Massachusetts’ Head Securities Regulator

Published on: May 16, 2007 | by Shepherd Smith Edwards & Kantas, LLP

William F. Galvin, Head of the Massachusetts Securities Division, declared war against deceptive financial advisers who prey on senior citizens.

Massachusetts became the first state in the nation to adopt regulations governing brokers or advisers who use credentials or professional designations suggesting expertise in advising senior citizens on financial matters.

Effective June 1, the new regulations state that only credentials accredited by a nationally recognized accreditation agency – also approved by the Secretary of the Commonwealth – may be used when offering seniors financial advice.

LPL Financial Services is Playing Hardball to Prevent Competitor from Raiding Its Newest Brokers.

Published on: May 16, 2007 | by Shepherd Smith Edwards & Kantas, LLP

Linsco Private Ledger (LPL) has apparently warned competitor National Planning Holdings, Inc. (NPH) to stop its aggressive recruiting practices aimed at luring registered representatives away from three broker-dealer firms LPL is in the process of acquiring. Reportedly, LPL has threatened to steer all its representatives away from selling insurance products of the parent firm of NPH if such recruiting tactics do not end.

After months of negotiations, LPL, the largest independent-contractor broker-dealer in the industry, said at the beginning of March that it was acquiring three broker-dealers owned by Pacific Life Insurance Co. of Newport Beach, Calif. Along with Mutual Service Corp., the other broker-dealers were Associated Securities Corp. of El Segundo, Calif., and Waterstone Financial Group of Itasca, Ill.

National Planning is a Santa Monica, Calif.-based network of four broker-dealers owned by Jackson National Life Insurance Co. of Lansing, Mich. Industry observers said that National Planning recruiters were talking to and negotiating with reps and advisers affiliated with the three Pacific broker-dealers LPL is acquiring.