Securities Lawyers Blog

Targa Resources Partners (NGLS) Loss Recovery Options

February 25, 2016 | by Staff Attorney

Our firm is investigating potential securities claims against brokerage firms over sales practices related to the recommendations of oil & gas and commodities products such as exchange traded notes (ETNs), structured notes, private placements, master limited partnerships, leveraged ETFs, mutual funds, and individual stocks. Investors may have potential legal remedies due to unsuitable recommendations by their broker to invest in this speculative and volatile area. Targa Resources Partners (Ticker Symbol: NGLS) is a Master Limited Partnership (MLP). About 86% of the total MLP securities market, a $490 billion sector, can be attributed to energy and natural resource companies. Targa Resources Partners has declined about 81% in value over the last two years and is trading at less than $10 a share. According to its website, Targa Resources Partners is a growth-oriented provider of midstream services and one of the largest independent midstream energy companies operating in North America. The company owns, operates, acquires, and develops a diversified portfolio of midstream energy assets.

Our firm continues to file complaints on behalf of investors who have been overconcentrated in MLPs like Targa Resources Partners. Our clients tell us similar stories that their advisors hyped MLPs as high yielding investments without significant discussion of risk. In a recent Associated Press article, common stories of how investors are pitched by their financial advisors on oil and gas private placements were reported on. Often times these products are pitched as ways to ride the boom in U.S. oil and gas production and receive steady streams of income.

In the past year, investors have lost $20 billion in publicly traded in master limited partnerships, publicly traded oil funds. This amounts to an astonishing $8 of every $10 they had invested, according to a report prepared for The Associated Press article. The research does not include losses from $37 billion of bonds sold by the partnerships in the five years since 2010 or losses from private placement partnerships. However, banks like Citigroup, Barclays, and Wells Fargo made an estimated $1.1 billion in fees for selling these products to investors.

FINRA Alleges Caldwell International Securities Engaged In Systematic Churning

February 25, 2016 | by Staff Attorney

The investment attorneys of Gana Weinstein LLP are investigating a regulatory complaint filed (Disciplinary Proceedings No. 2014039091903) by The Financial Industry Regulatory Authority’s (FINRA) against brokerage firm Caldwell International Securities Corp. [CRD No. 104323], and its employees Greg Caldwell [CRD No. 2816295], Lennie Freiman [CRD No. 1007506], Paul Jacobs [CRD No. 4658235], Alain Florestan [CRD No. 2818942], Alex Etter [CRD No. 2981742], Lucas Lichtman [CRD No. 5542092], Richard Lim [CRD No. 4949289], and Richard Lee [CRD No. 2768039]. FINRA’s allegations are that For more than three and a half years, Respondent Caldwell International Securities Corp. (Caldwell) “put profits before customers, growth before compliance, and subterfuge before transparency.” FINRA alleged Caldwell has a “culture of non-compliance” causing there to be serious sales practice, supervisory, and reporting violations.

Our firm has written several articles on brokers associated with or previously employed by Caldwell concerning similar allegations by customers and regulators. See FINRA Bars Broker Ricardo Fancois During Investigation Into Sales Practices; FINRA Bars Broker Honetta Kao During Investigation Into Sales Practices; FINRA Bars Broker James Starks During Investigation Into Sales Practices; FINRA Bars Broker Marat (a/k/a Matt) Zeltser; FINRA Bars Richard Adams Over Churning Customer Accounts; FINRA Files Complaint Against Chris Fulco Over US Coal Corporation Transactions

FINRA alleged that from December 2010 through July 2014 Caldwell through Greg Caldwell, Lennie Freiman, and Paul Jacobs, failed to enforce a supervisory system reasonably tailored to its business model that allowed many of its brokers to recommend an unsuitable active trading investment strategy that the representatives did not understand and which caused significant financial losses to customers while generating substantial profits for the firm. FINRA also alleged that other brokers at Caldwell were allowed to engage in trading with discretion without authorization, and trading which exceeded the benchmarks for excessive trading and churning without any meaningful supervision of this activity. FINRA found that Caldwell and its principals were aware of virtually all of this misconduct but took no meaningful steps to stop the activity or supervise it because doing so would reduce the commissions and fees being generated from their customers.

Arch Coal Investor Recovery Options

February 22, 2016 | by Staff Attorney

According to Reuters, Arch Coal which is the second-largest U.S. coal miner has filed for Chapter 11 bankruptcy in mid-January. The investment attorneys at Gana Weinstein LLP continue to report on investor losses in commodities related investments. Our firm is investigating potential securities claims against brokerage firms over improper sales practices related to recommendations in commodities products such as bonds, exchange traded notes (ETNs), structured notes, private placements, mutual funds, and individual stocks.

Arch Coal plans to cut $4.5 billion in debt from its balance sheet after suffering through a prolonged coal market downturn. Arch Coal has about 4,600 employees. As we have previously reported, coal related companies around the world are being pushed to the brink of bankruptcy due to the falling prices of commodities. Other bankruptcy filings this year include Walter Energy (Stock Symbol: WLTGQ), JW Resources, Patriot Coal, Xinergy, and James River Coal Co. among others. According to Bloomberg, more than three dozen coal operations have filed bankruptcy in just over three years. Due to a combination of factors the combined market value of U.S. coal company shares shrank to $12 billion in late July 2015 from $78 billion in 2011.

In the case of Arch Coal the company became saddled with debt since its 2011 acquisition of International Coal Group and then was unable to overcome a range of negative market trends including a drop in coal prices. The company expects its mining operations and shipments to continue uninterrupted through the reorganization process. According to sources, 25 percent of U.S. coal industry is currently in bankruptcy.

John Randall “JR” Gladden Accused of Selling Church Fund Loans Away from Brokerage Firm

February 22, 2016 | by Staff Attorney

The investment attorneys of Gana Weinstein LLP are investigating a regulatory complaint filed (Disciplinary Proceedings No. 2014038996201) by The Financial Industry Regulatory Authority’s (FINRA) against broker J. Randall Gladden (Gladden). FINRA alleged in the complaint that Gladden was associated with Securities Equity Group and participated in creating Church Development Fund, LLC (Church Development Fund) and a successor fund, Church Fund LLC (Church Fund) for the purposes of making loans to churches for refinancing their existing real estate loans. According to FINRA, Gladden participated in the management of the Church Development Fund and Church Fund and served as a governing member of the funds’ respective managers, CDF Managing Partners, LLC (CDF Managing Partners) and CF Manager, LLC (CF Manager).

According to the complaint, from May 2011 through September 2013, Gladden solicited seven investors to invest more than $2.1 million in the funds. The fund represented that it would pay investors a 6% per annum “Priority Return” on their investment. CDF Managing Partners was also to receive a monthly “Operator Fee” based upon a percentage of the outstanding principal amount of the loan portfolio of the Fund and a “Loan Fee” based upon a percentage of the original principal amount of each loan.

The conduct allegedly engaged in by Gladden is also referred to as “selling away” in the industry. 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. However, even though when these incidents occur the brokerage firm claims ignorance of their advisor’s activities the firm is obligated under the FINRA rules to properly monitor and supervise its employees in order to detect and prevent brokers from offering investments in this fashion. In order to properly supervise their brokers each firm is required to have procedures in order to monitor the activities of each advisor’s activities and interaction with the public. Selling away misconduct often occurs where brokerage firms either fail to put in place a reasonable supervisory system or fail to actually implement that system. Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including selling away.

Broker Investigation: Excessive Trading Claims Against Broker John Fenimore

February 20, 2016 | by Staff Attorney

The securities fraud lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker John Fenimore (Fenimore). According to BrokerCheck records Fenimore has been the subject of at least two customer complaints. The customer complaints against Fenimore allege a number of securities law violations including that the broker made unsuitable investments and churning (excessive trading) among other claims.

The most recent customer complaint filed in June 2014 and alleged unsuitable recommendations and excessive trading from January 2010 through April 2014 claiming $250,000 in damages. The claim is still pending. In April 2013, another client filed a complaint alleging Fenimore engaged in a reckless trading. The claim settled for $210,000.

When brokers engage in excessive trading, sometimes referred to as churning, the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time. Often times the account will completely “turnover” every month with different securities. This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades. Churning is considered a species of securities fraud. The elements of the claim are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions. A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements. Certain commonly used measures and ratios used to determine churning help evaluate a churning claim. These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.

Linn Energy (LINE) and LinnCo (LNCO) on the Verge of Bankruptcy

February 18, 2016 | by Staff Attorney

The investment attorneys with Gana Weinstein LLP continue to report on investor related losses in oil and gas and commodities related investments. Investors may have potential legal remedies due to unsuitable recommendations by their broker to invest in this speculative and volatile area.

Among the MLPs that have suffered significant declines and now is in jeopardy of bankruptcy is Linn Energy (LINE) and LinnCo (LNCO). Both stocks have plummeted in value by about 98% in value over the last year. According to the company’s website, LinnCo is a limited liability company created to enhance LINN Energy LLC ability to raise additional equity capital to execute a growth strategy. While LinnCo’s initial purpose was to own units in its affiliate in connection with the acquisition of Berry Petroleum Company, LinnCo allowed the acquisition and subsequent transfer of assets to Linn Energy. Linn Energy is a top-20 U.S. independent oil and natural gas company and owns approximately 7.3 Tcfe(2) of proved reserves in the Rockies, California, Hugoton Basin, Mid- Continent, Permian Basin, east Texas and north Louisiana, Michigan, Illinois and South Texas.

Now according to analysts, Linn Energy and LinnCo announced a plan to “explore strategic alternatives related to its capital structure.” Simply put, it appears that Linn Energy is out of money and has drawn down the last of its credit facility with only $919 million left out of $3.6 billion line for general corporate purposes.

Broker Investigation: UBS Financial Broker William Carlton

February 18, 2016 | by Staff Attorney

The securities fraud lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker William Carlton (Carlton). According to BrokerCheck records Carlton has been the subject of at least five customer complaints and two judgments or liens. The customer complaints against Carlton allege a number of securities law violations including that the broker made unsuitable investments and misrepresentations among other claims.

The most recent customer complaint filed in October 2015 alleged unsuitable recommendations and concentrated positions in mutual funds, ETFs, and equity investments alleging losses of $1,264,355 in damages. The claim is still pending. Another claim was filed in January 2015 and alleged unsuitable concentrated positions in real estate limited partnerships and oil and gas stocks. In addition, Carlton has a tax lien of $132,060 that was filed in October 2014. Brokers are required to disclose financial matters that impact their personal finances. Substantial judgements and liens on a broker’s record can reveal a financial incentive for the broker to recommend high commission products or services. A broker’s inability to handle their personal finances has also been found to be relevant in helping investors determine if they should allow the broker to handle their finances.

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client. In order to make a suitable recommendation the broker must meet certain requirements. First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors. Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

Mutual Fund Duff & Phelps Select Energy MLP (DSE) Investor Recovery Options

February 18, 2016 | by Staff Attorney

The investment attorneys with Gana Weinstein LLP continue to report on investor related losses in oil and gas and commodities related investments. Investors may have potential legal remedies due to unsuitable recommendations by their broker to invest in this speculative and volatile area. Our firm has been tracking a number of leveraged Master Limited Partnership (MLP) closed-end funds that have suffered significant losses. Among those funds is Duff & Phelps Select Energy MLP Fund (NYSE:DSE). The Duff & Phelps fund opened in June 2014 and has plummeted in value by 75% since then losing hundreds of millions in investor funds.

As a background, about 86% of the total MLP securities market, a $490 billion sector, can be attributed to energy and natural resource companies. In the past year, investors have lost $20 billion in publicly traded in master limited partnerships, publicly traded oil funds. This amounts to an astonishing $8 of every $10 they had invested, according to a report prepared for The Associated Press article. The research does not include losses from $37 billion of bonds sold by the partnerships in the five years since 2010 or losses from private placement partnerships. However, banks like Citigroup, Barclays, and Wells Fargo made an estimated $1.1 billion in fees for selling these products to investors.

Our clients tell us similar stories that their advisors hyped MLPs as high yielding investments without significant discussion of risk. In a recent Associated Press article, common stories of how investors are pitched by their financial advisors on oil and gas private placements were reported on. Often times these products are pitched as ways to ride the boom in U.S. oil and gas production and receive steady streams of income.

Broker Investigation: National Securities Advisor Kyle Harrington

February 16, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Kyle Harrington (Harrington). According to BrokerCheck records Harrington has been subject to 6 customer complaints, one regulatory action, one employment separation, and one financial disclosure. The customer complaints against Harrington allege securities law violations that including misrepresentations, breach of fiduciary duty, and negligence among other claims. The regulatory finding was made by FINRA which alleged that Harrington failed to disclose certain information that had to be disclosed on Harrington’s Form U4. The employment separation by Matrix Capital Group, Inc. (Matrix) also concerns allegations of failure to disclose reportable information.

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client. In order to make a suitable recommendation the broker must meet certain requirements. First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors. Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

The number of events listed on Harrington brokercheck is high relative to his peers. According to InvestmentNews, only about 12% of financial advisors have any type of disclosure event on their records. Brokers must publicly disclose certain types of reportable events on their CRD including but not limited to customer complaints. In addition to disclosing client disputes brokers must divulge IRS tax liens, judgments, and criminal matters. However, FINRA’s records are not always complete according to a Wall Street Journal story that checked with 26 state regulators and found that at least 38,400 brokers had regulatory or financial red flags such as a personal bankruptcy that showed up in state records but not on BrokerCheck. More disturbing is the fact that 19,000 out of those 38,400 brokers had spotless BrokerCheck records.

Mutual Fund Goldman Sachs MLP and Energy Renaissance Fund (GER) Investor Recovery Options

February 16, 2016 | by Staff Attorney

The investment attorneys with Gana Weinstein LLP continue to report on investor related losses in oil and gas and commodities related investments. Investors may have potential legal remedies due to unsuitable recommendations by their broker to invest in this speculative and volatile area. Our firm has been tracking a number of leveraged Master Limited Partnership (MLP) closed-end funds that have suffered significant losses. Among those funds is Goldman Sachs MLP and Energy Renaissance Fund (NYSE:GER) $1.0 billion in assets. The Goldman Sachs MLP fund opened in September 2014 and has plummeted in value by 75% since then losing hundreds of millions in investor funds.

As a background, about 86% of the total MLP securities market, a $490 billion sector, can be attributed to energy and natural resource companies. In the past year, investors have lost $20 billion in publicly traded in master limited partnerships, publicly traded oil funds. This amounts to an astonishing $8 of every $10 they had invested, according to a report prepared for The Associated Press article. The research does not include losses from $37 billion of bonds sold by the partnerships in the five years since 2010 or losses from private placement partnerships. However, banks like Citigroup, Barclays, and Wells Fargo made an estimated $1.1 billion in fees for selling these products to investors.

Our clients tell us similar stories that their advisors hyped MLPs as high yielding investments without significant discussion of risk. In a recent Associated Press article, common stories of how investors are pitched by their financial advisors on oil and gas private placements were reported on. Often times these products are pitched as ways to ride the boom in U.S. oil and gas production and receive steady streams of income.