Securities Lawyers BlogThe Wall Street Journal and Reuters quoted managing partner, Adam J. Gana after he received a $2.8 Million award in Jacobs v. Van Zandt, FINRA Case No. 12-00156. Seven claimants alleged that Robert Van Zandt orchestrated a $35 million ponzi scheme leading to Mr. Van Zandt’s criminal indictment by the New York Attorney General. Mr. Gana was pleased with the victory and the outcome for the claimants. “These are hard working people from the Bronx who did not deserve to be defrauded by Mr. Van Zandt. This type of fraud is rampant in the securities industry and it is up to the regulators and the attorneys to weed it out and bring these people to justice.”
Articles Posted in Failure to Supervise
Centaurus Financial, Inc Broker Ralph Saviano Barred From Securities Industry
The Financial Industry Regulatory Authority (FINRA) has barred Ralph Saviano (Saviano) from the securities industry after the broker failed to respond to FINRA’s requests for information and an interview concerning unreported tax liens, a civil judgment, and a customer complaint involving the misuse of funds.
During a routine investigation of Centaurus, FINRA discovered information regarding certain undisclosed liens, judgments, and possible customer loans. Thereafter, in June 2012, Centaurus filed a regulatory tip disclosing that a customer had provided Saviano with a cashier’s check for approximately $66,000 that was made payable to Saviano. Saviano’s transactions with the customer concerned a possible misuse or conversion of funds.
Saviano has been associated with several brokerage firms in the past decade. Until 2004 Saviano was a registered representative of Royal Alliance Associates, Inc. From April 2004 until December 2006, Saviano was associated with USAllianz Securities, Inc. Thereafter, from December 2006 until July 2007, Saviano was a registered representative of Questar Capital Corporation. Finally, Saviano was registered with Centaurus Financial, Inc. (Centaurus) until his termination in June 2012. According to Saviano’s FINRA disclosure records he is also the president of Saviano Financial Group.
David Mura Accused of Selling Unregistered Securities and Churning
David Mura was recently barred by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) over allegations concerning the sale of unregistered securities away from his associated brokerage firm.
From September 2002 through April 2011, Mura was a registered representative and branch office manager with J.P. Turner & Co., LLC (J.P. Turner), a broker-dealer headquartered in Atlanta, Georgia. Thereafter, Mura was associated with Aegis Capital Corp. from April 2011 until October 2012. According to the SEC, from mid-2007 through 2012, Mura led a team of individuals that managed several limited liability companies (LLCs) including Charge-On Demand LLC (COD), Innovations Group Enterprises LLC (IGE), and Stucco LLC and directed and participated an effort to solicit investors in the sale of unregistered promissory notes issued by the LLCs (LLC Promissory Notes).
According to the SEC’s order, Rising Storm Technologies LLC (“Rising Storm”) was created 2006 to pursue various business ideas. Mura invested in Rising Storm in 2008 and caused the LLCs to take over Rising Storm’s business. Edward Tackaberry (Tackaberry), a resident of Fairport, New York was allegedly employed by Mura as a product salesman. Tackaberry had been previously barred from associating with any broker or dealer based on a September 2007 case brought by the SEC accusing Tackaberry of securities fraud.
Eric Foster Accused of Unauthorized Trading and Churning Customer Accounts
In April 2013, the Financial Industry Regulatory Authority (FINRA) requested that Eric Foster (Foster) provide information concerning possible securities laws violations. By July 2013, Foster failed to respond to FINRA’s requests and imposed a permanent bar from the securities industry.
The FINRA bar isn’t the first time Foster has been sanctioned by FINRA. In February 2012, Foster settled charges that he violated FINRA Rule 2110 by effecting unauthorized transactions in the account of a deceased customer. In so doing, Foster exercised discretion in the customer’s account without written authorization. The settlement resulted in a $12,471 fine and restitution and a three month suspension. In December 2011, Foster settled charges brought by Illinois Securities Department concerning allegations that he churned the account of a senior citizen earning large commissions for himself while reducing the equity in the account to zero
Foster was a registered representative of Halcyon Cabot Partners, Ltd. from July 2010 through June 2012. Previously, Foster was associated with Arjent Services, LLC from October 2010, until July 2010. Foster was also associated with Maxim Group LLC from October 2002 until October 2008.
Financial Advisors Have an Obligation to Provide Truthful Information When Selling Securities
The Financial Industry Regulatory Authority (FINRA) recently barred broker Scottie Brent Chitwood (Chitwood) from the securities industry over allegations that he sold clients variable annuities by making false and misleading representations concerning the securities features. Chitwood was also accused of exercising discretionary authority in clients’ accounts. FINRA’s action reinforces the regulator’s rules that brokers have an obligation to disclose truthful and balanced information in the sale of securities products to investors.
A variable annuity is a contract where an insurance company agrees to make periodic payments to an investor either immediately or at some future date. The purchase of a variable annuity contract either involves a single purchase payment or a series of purchase payments.
Variable annuities offer a range of investment options to invest in and the value of the investment will vary depending on the performance of the investment options selected. The investment options typically include mutual funds that invest in stocks and bonds. Variable annuities distribute periodic payments for the rest of the investor’s life (or any other person you designate). Most variable annuities encourage investors to remain invested for a period of years and discourage early termination through expensive surrender fees. The insurance company can charge investors in some cases up to 7% of the investment for early termination.
Turker Ergun Barred From Financial Industry for Alleged Misappropriation of Customer Funds
Turker Ergun (Ergun) settled charges brought by the Financial Industry Regulatory Authority (FINRA) concerning the sale of private securities and misappropriating customer funds by accepting a bar from the securities industry.
From January 2004 until December 2008, Ergun was associated with WaMu Investments, Inc. From December 2008 through October 2009, Ergun was associated with Banc of America Investment Services, Inc. After Banc of America, Ergun was associated with Merrill Lynch, Pierce, Fenner & Smith, Inc. (Merrill Lynch) until September 2012.
Ergun’s public records do not disclose any businesses, other than his previous brokerage employers, that he was involved with. However, in August 2012, Merrill Lynch filed a U-5 termination form reporting that Ergun was discharged following an internal review concerning conduct involving recommending a customer’s purchase of securities not offered by the Merrill Lynch and accepting personal loans from a customer without firm approval.
Michael Kmetz Barred From Financial Industry for Alleged Private Securities Sales
Michael J. Kmetz (Kmetz) was barred by the Financial Industry Regulatory Authority (FINRA) over allegations concerning the sale of securities away from his member firm involving an elderly customer by accepting a bar from the securities industry.
On February 15, 2013, FINRA sent a letter to Kmetz requesting that he appear for testimony in connection with a complaint from an elderly investor who alleged that Kemtz had engaged in a variety of business activities and transactions. The customer’s complaint alleges that Kemtz sold securities away from Park Avenue. On March 12, 2013, Kemtz advised FINRA that he would not cooperate with the regulator’s requests for documents or testimony. Consequently, Kemtz was barred from the securities industry.
The accusations made against Kemtz are consistent with a “selling away” violation. Selling away occurs when a securities broker solicits securities that are not approved by the broker’s affiliated firm. Selling away is prohibited under FINRA Rule 3040, as well as other securities laws. The most common securities products solicited in selling away schemes are private placements and promissory notes.
Jason T. Knapp Accused of Selling Away Violations
At least one action has been initiated against Jason T. Knapp (Knapp) accusing the broker of running a Ponzi scheme. Knapp is a former broker of Dawson James Securities, Inc. (Dawson James) and operated under the company name Steeple Chase Group, LLC (Steeple Chase). Steeple Chase holds itself out as a real estate, financial lending, consulting, and investment related company.
From 2006 through September 2008 Knapp was a registered representative of Chicago Investment Group, LLC. From September 2008 through June 2012 Knapp was registered with Dawson James. Dawson James terminated Knapp citing that Knapp had falsified documents and solicited clients to purchase investments, presumably in Steeple Chase, that were not approved by the firm. In addition, an allegation was made by another client that Knapp engaged in an unauthorized transaction that Knapp could not provide the firm with a satisfactory explanation for.
In total two customer actions have been initiated against Knapp and Dawson James Securities for failing to supervise Knapp’s business activities. In March 2013, FINRA barred Knapp from the securities industry when he failed to respond to the agency’s request for additional information concerning the customer complaints and the circumstances of his termination.
Two Cantella & Co. Brokers Barred From the Financial Industry for Allegedly Misappropriating Customer Funds
The Financial Industry Regulatory Authority (FINRA) has barred Todd Lloyd Goedeke and Ronald W. Nichter from the financial industry after the brokers were accused of misappropriating funds from customers.
In March 26, 2004, Goedeke became a registered representative with Cantella & Co., Inc. (Cantella), a FINRA regulated broker-dealer. Goedeke remained associated with Cantella until his termination on June 18, 2010. On or about July 1, 2010, Cantella filed a Form U5 that stated that Goedeke had been terminated. On or about February 22, 2011 and March 16, 2011, Cantella filed amendments to their Form U5 disclosing allegations that Goedeke may have converted customer funds. Goedeke’s public disclosures also list that he is employed by Wealthcare & Retirement Solutions, a financial planning company that provides insurance, fixed annuities, and life insurance.
Ronald W. Nichter became registered in the securities industry in December 2008 with Cantella Nichter’s registration was terminated by Cantella on April 4, 2013.
ACGM, Inc. Settles Charges with FINRA Concerning Misleading Advertising
HKC Securities, Inc., known as ACGM, Inc. (ACGM), and Harold Kenneth Cohen (Cohen) of Palm Beach, Florida, reached a settlement the Financial Industry Regulatory Authority (FINRA) over the firm’s use of certain hedge fund sales material that allegedly failed to fairly present the risks and potential disadvantages of hedge fund investing. According to FINRA, the sales materials violated FINRA Rule 2210(d) by only highlighting the hedge fund’s positive features, not providing a sound basis for evaluating the investment, containing exaggerated language, failing to identify the basis for factual statements made, and containing an inadequate discussion of the performance of the funds.
The settlement states that between January 2008 and June 2011, the firm marketed hedge funds to large institutional investors such as educational and other endowment funds. The regulator found that ACGM’s procedures for the review and approval of hedge fund institutional sales material were not reasonably designed or implemented to achieve compliance with FINRA’s content standards for institutional sales material and were not appropriate for a business actively engaged in the third-party marketing of hedge funds. Cohen was the firm’s Chief Compliance Officer and the principal responsible for the review and approval of institutional sales material. The complaint alleges that Cohen failed to adequately supervise the review of sales materials in order to achieve compliance with FINRA’s content standards.
The settlement provided some examples of the alleged misleading and exaggerated content provided to investors. One example referred to a fund as having “significantly outperformed its benchmarks” or a fund’s performance as “remarkable.” Another summary document referred to the performance of the underlying fund managers for a fund of funds over 1-year, 3-year, and 5- year time horizons, even though the fund of funds had only been in operation for approximately three months at the time of the document. Other documents failed to identify the basis for factual statements made and only described the fund as the “#l hedge fund in Israel” and describing another fund as the “#l performing equity market neutral fund in the world in 2005.”