Securities Lawyers Blog

Victor Lessinger Suspended Over Reg BI Violation

December 2, 2024 | by Staff Attorney

Financial advisor Victor Lessinger (Lessinger), formerly employed by brokerage firm Colorado Financial Services Corporation (Colorado Financial) has been suspended by The Financial Industry Regulatory Authority (FINRA). In addition, Lessinger has been subject to at least four other regulatory complaints and one customer complaint during the course of his career.

In October 2024 Lessinger consented to a FINRA finding to the sanctions that he willfully violated Exchange Act Rule 15l-1(a)(1) by recommending that a retail customer invest in three high-risk closed-end management investment companies that were not in the customer’s best interest based on her investment profile. According to the FINRA findings the customer, who is a senior, reported that her risk tolerance was moderate, and her investment objective was income. But FINRA found that Lessinger recommended that the customer invest up to 37 percent of her net worth in the high-risk closed-end funds and as a result the customer lost $5,029.85.

Brokers are required to adhere to the SEC’s Regulation Best Interest (Reg BI) standard of care under the Securities Exchange Act of 1934 which establishes a “best interest” standard for broker-dealers and associated persons. This standard applies when brokers make recommendations to retail customer for any securities transaction or investment strategy involving securities, including recommendations of types of accounts. Reg BI is drawn from fiduciary principles that include an obligation to act in the retail investor’s best interest and the broker is prohibited from placing their own interests ahead of the investor’s interest.

Wells Fargo Advisor James Paige Has Customer Complaints

December 2, 2024 | by Staff Attorney

Financial advisor James Paige (Paige), currently employed by brokerage firm Wells Fargo Clearing Services, LLC (Wells Fargo) has been subject to at least five customer complaints and one tax lien or judgement during the course of his career. According to the most recent complaints, Paige has been accused by customers of engaging in unsuitably risky investments among other allegations against the financial advisor.

In February 2024 a customer complained that Paige violated the securities laws by alleging that Paige in or around the year 2021 made financial recommendations that were unsuitable and too risky for Claimants’ investment knowledge and needs. The claim is currently pending.

In May 2023 a customer complained that Paige violated the securities laws by alleging that Paige, sometime after 2020, failed to diversity her portfolio and made unsuitable investment recommendations without disclosing the risks involved with the investments. The claim settled for $95,000.

Brokers are required to adhere to the SEC’s Regulation Best Interest (Reg BI) standard of care under the Securities Exchange Act of 1934 which establishes a “best interest” standard for broker-dealers and associated persons. This standard applies when brokers make recommendations to retail customer for any securities transaction or investment strategy involving securities, including recommendations of types of accounts. Reg BI is drawn from fiduciary principles that include an obligation to act in the retail investor’s best interest and the broker is prohibited from placing their own interests ahead of the investor’s interest.

Did Your Financial Advisor Recommend Super Micro Computer? – Investor Loss Recovery

November 25, 2024 | by Staff Attorney

The attorneys at Gana Weinstein LLP are investigating claims that investors were recommended to invest substantial amounts of their savings in high risk stock Super Micro Computer, Inc. (SMCI). Investors whose advisors failed to act in their clients best interests may seek recovery before The Financial Industry Regulatory Authority (FINRA).

Super Micro Computer stock investors have been on the proverbial “wild ride” of the year. At the beginning of 2024 Super Micro Computer stock traded under $30 per share. By March of 2024 – in only 3 months – the stock was trading just shy of $120 per share and nearly a 300% gain during that time. Since March 2024 however, Super Micro Computer stock investors have watched the stock slide all the way down back to under $20 in November 2024 only to then begin to rebound.

What’s causing the wild moves? Super Micro Computer has been one of the big gainers in the artificial intelligence (AI) space and demand for its server systems has surged. Super Micro Computer’s revenues have more than doubled in 2024 and the consensus estimates see another additional 80% increase potentially. With that said, Super Micro Computer has been plagued by an accounting scandal and potential delisting from the stock exchange. Recently, Super Micro Computer hired BDO as its public auditor to replace the quitting Ernst & Young firm that resigned in October after it raised concerns regarding the company’s financial statements. With a new auditor, Super Micro Computer hopes to file two overdue financial reports including its 10-K report for the fiscal year ending June and its most recent quarterly filing for September. Super Micro Computer has also submitted a compliance plan to stay on the stock exchange. However, in August Hindenburg Research pointed to multiple red flags in the company’s accounting practices and The Wall Street Journal reported in late September that the U.S. Justice Department may be probing the company.

Glennon Cole Has Many Customer Investment Complaints

November 25, 2024 | by Staff Attorney

Former financial advisor Glennon Cole (Cole), formerly employed by brokerage firm Moloney Securities Co., Inc. (Moloney) has been subject to at least 13 customer complaints, one tax lien, one employment termination for cause, and one criminal matter during the course of his career. According to a BrokerCheck reports most of the recent customer complaints concern either corporate debt securities or alternative investments such as direct participation products (DPPs) like business development companies (BDCs), non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and private placements. The attorneys at Gana Weinstein LLP have represented hundreds of investors who suffered losses caused by these types of high risk, low reward products.

In June 2019 it appears that Cole had a domestic criminal matter involving harassment and threating to disseminate images. Thereafter in February 2021 Moloney discharged Cole as being disqualified under the securities laws.

DDPs include products such as non-traded REITs, oil and gas offerings, equipment leasing products, and other alternative investments. These alternative investments virtually never profit investors and are almost always unsuitable for investors because of their high fee and cost structure. Brokers selling these products are paid additional commission in order to hype these inferior quality investments providing a perverse incentives to create an artificial market for the investments.

Several studies have confirmed that Non-traded REITs underperform publicly traded REITs with some showing that Non-Traded REITs cannot even beat safe benchmarks, like U.S. treasury bonds. Brokers selling these products must disclose to the investor that non-traded REITs provide lower investment returns than treasuries while being high risk and illiquid – but almost never do. Because investors are not compensated with additional return in exchange for higher risk and illiquidity, these kinds of alternative investment products are rarely, if ever, appropriate for investors. Continue Reading

Advisor John Micera Has Structured Products Complaint

November 24, 2024 | by Staff Attorney

The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that financial advisor John Micera (Micera), currently employed by RBC Capital Markets, LLC (RBC) has been subject to at least two customer complaints during the course of his career. According to records kept by The Financial Industry Regulatory Authority (FINRA), Micera’s most recent customer complaint alleges that Micera recommended unsuitable investments in structured products and makes allegations concerning misconduct relating to the handling of the customer’s accounts.

In April 2024 a customer complained that Micera violated the securities laws by alleging that Micera recommended unsuitable investments in high risk, illiquid, high commission/fee structured notes. The claim alleges $2.275 million in damages and is currently pending.

Structured products are a class of derivative products that derive their performance from market linked data. A structured product generally references a source against which market risk is taken. The source can be a single security, a basket of securities such as a market index, commodities, interest rates, or a real estate loan portfolio. The variety of products that can be structured demonstrates the difficulty in formulating a single unified definition of a structured product.

Morgan Stanley Advisor Brian Pfeifler Has Alternative Investment Complaints

November 24, 2024 | by Staff Attorney

Broker Brian Pfeifler (Pfeifler), currently employed at Morgan Stanley (Morgan Stanley) has been subject to at least two customer complaint during the course of his career. The complaints allege that Pfeifler made unsuitable trading recommendations, and recommending an overconcentration of high risk alternative investments including private placements and hedge funds.

According to a BrokerCheck report, in December 2023, a customer alleged that Pfeifler engaged in violations of the securities laws by, among other things, making unsuitable investments with respect to alternative investments from 2022 to 2023. The claim is currently pending.

In January 2024, a customer alleged that Pfeifler engaged in violations of the securities laws by, among other things, making unsuitable investments with respect to alternative investments from December 2021 to January 2024. The claim is currently pending.

Alternative investments include a number of different type of products including DDPs, non-traded REITs, oil and gas offerings, equipment leasing products, hedge funds, and other alternative investments. Depending on the type and structure of some alternative investments they can be configured in ways that virtually never profit investors and are almost always unsuitable for investors because of their high fee and cost structure. Brokers selling these products are paid additional commission in order to hype these inferior quality investments providing a perverse incentives to create an artificial market for the investments.

Robert Daly Barred Over Private Investment Allegations – Investor Recovery Options

November 23, 2024 | by Staff Attorney

The law offices of Gana Weinstein LLP are currently investigating claims that advisor Robert Daly (Daly) has been accused by a financial regulatory of engaging in private securities transactions a/k/a selling away. Daly was terminated by his employer and sanctioned by a regulator concerning accusations of engaging in undisclosed investment activities including undisclosed outside business activities (OBAs). According to records kept by The Financial Industry Regulatory Authority (FINRA), it appears that Daly was employed by Xtellus Capital Partners, Inc. (Xtellus Capital) at the time of the activity. If you have been a victim of Daly’s alleged misconduct our firm may be able to assist you in recovering funds.

According to Daly’s disclosures he is also engaged in several OBAs including Latigo Ventures, a financial consulting and capital raising business venture. Also disclosed are The Latigo Group, Lipper/Daly Productions Latigo Filsm, Ava Living Recovery, and United Friends of Children. It is unknown whether the accusations relate to any of these entities or businesses.

In October 2024 FINRA barred Daly after Daly consented to the sanction and to the entry of findings that he refused to produce information and documents requested by FINRA during an investigation that originated from a regulatory tip it received related to possible undisclosed private securities transactions.

In addition, Daly also has a customer complaint in September 2024 claiming that purchases in First Republic Bank shares were not in the clients’ best interests. 2021. The claim is currently pending.

James Seijas Accused of Being Involved in Q3 Trading Club Scam – Investor Recovery Options

November 23, 2024 | by Staff Attorney

The law offices of Gana Weinstein LLP are currently investigating claims that advisor James Seijas (Seijas) has been accused by investors of engaging in a Ponzi scheme investment called 3Q Trading Club. Seijas was barred The Financial Industry Regulatory Authority (FINRA) and left the employ of Wells Fargo Clearing Services, LLC in March 2019 relating to engaging in undisclosed investment activities including undisclosed outside business activities (OBAs). If you have been a victim of Seijas’s alleged misconduct our firm may be able to assist you in recovering funds.

In November 2021 Seijas consented to sanctions and findings that he refused to appear for on-the-record testimony requested by FINRA in connection with its investigation concerning the Form U5 amendment filed by Wells Fargo. Seijas disclosed that he had been named as a defendant in a lawsuit alleging that he had misrepresented investments as part of a Ponzi scheme. Thereafter, multiple clients have filed complaints relating to Seijas’ involvement.

In an SEC complaint, the agency alleged that Michael W. Ackerman, July 1, 2017 until at least December 1, 2019, through Q3 Trading Club and Q3 I, LP raised at least $33 million from more than 150 investors through the offer and sale of securities to investors who were mostly physicians. According to the SEC, Ackerman was the principal trader of the Q3 companies and told investors he developed and used a proprietary trading algorithm that allowed him to take advantage of the volatility of cryptocurrencies when trading investor funds. In fact, Ackerman invested no more than $10 million of the $33 million raised from investors in cryptocurrencies and profits were minimal. The SEC accused Ackerman of concealing the truth from investors by preparing false financial records by doctoring screenshots showing Q3 trading account balances as well as monthly newsletters falsely reflecting that the Q3 Companies generated monthly profits of at least 15%. Further, Ackerman and his partners paid themselves about $4 million of the investors’ funds as purported licensing fees based on use of the algorithm.

Our law firm has significant experience bringing cases on behalf of defrauded victims when their advisors engage in receiving loans from clients or selling securities sales through OBAs. The sale of unapproved investment products, fake investments that cover misappropriated funds, and other fraudulent behavior – is a practice known in the industry as “selling away” – a serious violation of the securities laws. In the industry the term selling away refers to when a financial advisor solicits investments in companies, promissory notes, or other securities that are not pre-approved by the broker’s affiliated firm. Sometimes those investments have some legitimacy but often times these types of investments can end up being Ponzi schemes or the advisor can be engaging in the conversion of funds.

Starwood Real Estate Income Trust Inc. (SREIT) – Recovery Options

November 18, 2024 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating broker-dealers and advisors who sold Starwood Real Estate Income Trust Inc., otherwise known as SREIT – a non-traded net asset value real estate investment trust (non-traded REIT). Our representations focus on the failure of brokerage firms to conduct adequate due diligence on Starwood REIT and the failure of advisors to act in the best interests of their clients. Investment advisors are obligated to conduct due diligence on securities recommended by the firm. The due diligence rule is heightened for non-traded REITs because the offering is non-public and investors have access to little publicly available information.

Starwood is the second largest interval non-traded REIT with $9.8 billion in assets. Its competitor – Blackstone REIT – has claimed in 2024 to have assets of $114 billion. Back in May 2024, Starwood REIT announced it limiting redemptions each month due to conditions in the the market for commercial real estate and due to high interest rates. It has been further reported, that Starwood REIT is trying to preserve its available cash and credit as the fund was hit with $1.3 billion in withdrawal requests earlier in 2024 but satisfied less than $500 million of them.

Non-traded REITs have come under close scrutiny by investor groups and regulators for several decades now. Not only do non-traded REITs like SREIT get large fees but they also pay hefty commissions to financial advisors who steer their clients to invest. For example, the aforementioned Blackstone REIT has paid Wall Street brokers more than $700 million in brokerage fees that can add up to a cap of 8.75% of the investment amount.

Sam Schoner Has Customer Complaints Related to First Republic Preferred Stock

November 18, 2024 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Sam Schoner (Schoner), currently associated with J.P. Morgan Securities LLC (JP Morgan), has been subject to at least four customer complaints during his career. The most recent complaints against Schoner alleged that Schoner recommended unsuitable investments in stocks and preferred stocks, including in First Republic Bank, among other allegations of misconduct relating to the handling of their accounts.

In December 2023 a customer complained that Schoner, from January 2012 to September 2023, engaged in unsuitable investment advice. The claim alleges $2.5 million in damages and is currently pending.

In September 2023 a customer complained that Schoner, from 2017 through 2023, engaged in unsuitable investment advice. The claim alleged almost $7.5 million in damages and settled for $950,000.

In May 2023 a customer complained that Schoner, from January 2021 to November 2021, engaged in unsuitable investment advice. The claim alleged $6.5 million in damages and settled for $950,000.

Preferred stocks are a hybrid of debt and equity and have attributes of both securities. Preferred stocks pay a stream of fixed or floating-rate payments similar to debt coupon payments but provide no participation in the issuer’s residual (equity) gains or any voting rights. Preferred stocks are far less stable than bonds and can even be more volatile than stocks based on market conditions. When a company is under stress, its equity and preferred stock can trade nearly in tandem with little difference in performance. The in tandem trading demonstrates that the market believes that there is little additional security protection provided by preferred stocks being higher up in the capital structure than common equity.