Securities Lawyers Blog

Broker Investigation: Customer Complaints Against McNally Financial Broker Marshall Cassedy

February 6, 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 Marshall Cassedy (Cassedy). According to BrokerCheck records Cassedy is subject to 17 customer complaints, 3 regulatory actions, and one employment separation. The customer complaints against Cassedy allege securities law violations that including unsuitable investments, churning (excessive trading), unauthorized trading, misrepresentations, and breach of fiduciary duty among other claims.

The most recent regulatory action was filed by the State of Florida in 2010 and alleged unauthorized trading and unregistered activity. Prior to that, Capitol Securities Management, Inc. terminated Cassedy alleging that the broker had customer complaints concerning violations of the firm’s policies with respect to the handling of their accounts. In 2006, the State of Georgia filed a regulatory action against Cassedy alleging that the broker failed to disclose another regulatory investigation by the State of Florida. That investigation was filed in 2005 and alleged unsuitable securities.

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.

Investment Investigation: Sales of Adageo Energy Private Placements

February 5, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating potential unsuitable investments and recommendations in a number of oil and gas related ventures including Adageo Energy. According to the company’s website Adageo Energy specializes in high-growth, high-return opportunities in the energy sector. The company’s focus includes the identification, acquisition, drilling, development, and operation of oil and gas properties. Adageo Energy is a sponsor of several oil and gas private placements.

One such issuance is Adageo Energy Partners, LP which according to SEC filings sought to raise $50 million and raised at least $31 million of that amount through brokerage firms including Direct Capital Securities, Inc., Madison Avenue Securities, Inc., WFP Securities, Inc., Arete Wealth Management, LLC, Newbridge Securities Corporation, Charter Pacific Securities, LLC, ePLANNING Securities, Inc., Sunset Financial Services, Inc., Jesup & Lamont Securities Corp., and Capital Guardian, LLC.

As reported in Reuters for issuers other than Adageo Energy, many of these types of private placement deals fail and investors take outsized risks compared to the scant compensation they are likely to receive. The issue with oil and gas private placements is two fold. First the much of the investor’s funds are eaten up by fees and costs and are never used for investment purposes. For instance and analysis of Atlas Energy LP found that the issuer typically charged between 15 percent and 20 percent in upfront fees from investors and paid brokers an additional 10 percent of the total offering in sales commissions. According to Reuters, investors only get to see 65-70% of their capital actually put to work on oil and gas projects.

LPL Financial Broker Alfred Talens Accused of Selling Unregistered Securities

February 5, 2016 | by Staff Attorney

The investment fraud lawyers of Gana Weinstein LLP are investigating customer complaints and the termination by LPL Financial, LLC (LPL) of broker Alfred Talens (Talens). There is at least one customer complaint against Talens alleging that the broker made unsuitable investments in connection with the sale of a variable annuity. The customer also alleges that the broker sold an unregistered security and claimed damages of $500,000. The conduct allegedly engaged in by Talens is also referred to as “selling away” in the industry. It is unclear from public disclosures the nature of the outside business but Talens public disclosures disclose that the broker has outside business activities including Ascension Wealth Management, a DBA for insurance and tax preparation, and AWM Consulting.

In addition, there is one employment separation disclosed. LPL alleged that Talens violated firm policy regarding outside business activities and borrowed money from clients. Thereafter, FINRA sent Talens a request for documents and information which the broker refused to respond to. Accordingly, FINRA automatically barred Talens from the securities industry on July 7, 2015.

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.

FINRA Sanctions William Watson Over False and Misleading Marketing of Securities

February 4, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints and a FINRA action against broker William Watson (Watson). The Financial Industry Regulatory Authority (FINRA) brought an enforcement action (FINRA No. 2013038091901) against Watson. In addition, there are at least five customer complaints against Watson and four judgements or liens. In the FINRA regulatory action against Watson, the agency alleged that from March 2013 through June 2014 while employed at Finance 500, Inc. (Finance 500) Watson participated in securities offerings with four different issuers where he used marketing materials that were not fair and balanced because they failed to discuss each of the issuers poor financial performance and made misleading unwarranted or unsupported statements.

FINRA alleged that Watson was the Vice President of Corporate Finance at Finance 500 and identified companies that needed financing and worked with those companies to sell the companies’ securities to customers. FINRA found that Watson used or permitted issuers to use marketing presentations that were not fair and balanced, made misleading, unwarranted or unsupported statements, and failed to disclose Finance 500’s name and involvement in the offerings. FINRA determined that Watson also sent these presentations to retail customers through email and used them on telephone conference calls with retail investors. Watson also allegedly used, or permitted issuers to use, powerpoint presentations that contained inadequate risk disclosure and failed to provide a balanced presentation of the risks and rewards of the investment.

Specifically, FINRA alleged that for issuer by the initialed “BB” which upon information and belief refers to Bill the Butcher, Inc., (BB) the presentations failed to disclose BB’s accumulated deficits, net losses, or the fact that BB’s auditor had issued a “going concern” opinion. In addition, the BB presentations compared the sales-to-investment ratio of BB, a start-up company, to that of well established fast-food restaurants. Similar issues were cited by FINRA for presentations for issuers initialed CP, GE, and SC. FINRA found the lack of disclosures from the foregoing presentations to be in violation of industry rules.

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

February 4, 2016 | by Staff Attorney

The investment fraud attorneys with Gana Weinstein LLP continue investigate oil and gas and commodities related investment losses. Investors may have potential legal remedies due to unsuitable recommendations by their broker to invest in this speculative and volatile area. Goldman Sachs MLP and Energy Renaissance Fund (Ticker Symbol: GER) is a Master Limited Partnership (MLP) closed-end mutual fund. The Fund opened at about $20 per share in September 2014. However, since that time, due to the fund’s holdings in MLPs, the value for the fund has plummeted to $4.19 representing an almost 80% loss.

About 86% of the total MLP securities market, a $490 billion sector, can be attributed to energy and natural resource companies. According to Bloomberg, many oil companies are in trouble and are going bankrupt as U.S. high-yield debt issued to junk-rated energy companies grew four-fold to $208 billion. The bankruptcies have been devastating causing forced selling at fire sale prices.

Moreover, our firm has been receiving an alarming number of complaints concerning how these speculative investments are being marketed and sold to investors. 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. However, in the past year, investors have lost $20 billion in publicly traded in master limited partnerships and 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.

Investor Recovery Options for High Yield Fund Investors

February 3, 2016 | by Staff Attorney

The investment attorneys of Gana Weinstein LLP are investigating potential recovery options for investors in various high yield “junk” bond funds. InvestmentNews recently published a list of 10 high yield funds that have a high level of exposure to distressed debt:

Federated High Yield Service (FHYTX)
Waddell & Reed High-Income A (UNHIX)

FINRA Bars Broker Ricardo Fancois During Investigation Into Sales Practices

February 3, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating the termination by The Financial Industry Regulatory Authority (FINRA) of broker Ricardo Fancois (Fancois). According to BrokerCheck records Fancois is subject to one regulatory action, one investigation, and two judgement or lien.

FINRA terminated Fancois after the broker failed to respond to a letter request for information in July 2015. Prior to that time, in March 2015, FINRA opened an investigation into Fancois alleging potential willful violations of the securities fraud laws and FINRA rules. Because FINRA terminated Fancois due to the broker’s failure to respond to the regulator’s requests for information, there is no additional information listed with specifics of Fancois’ alleged wrongdoing. Prior to that time Fancois was subject to over $3,000 in liens.

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.

Investor Recovery Options for Milagro Oil & Gas Losses

February 2, 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. Milagro Oil & Gas and several of its affiliates filed for Chapter 11 bankruptcy protection in July 2015. At that time, Milagro Oil reported that it had $1 million to $10 million in assets and $500 million to $1 billion in liabilities that it would not be able to pay because its business became unprofitable in light of the decline in the oil market. The company has 1,200 wells in South Texas, Gulf Coast, and in Louisiana. The company plans to sell its oil and gas properties and liabilities to Houston-based White Oak Resources VI for $217 million in cash and equity.

Our firm continues to file complaints on behalf of investors who have been overconcentrated in oil and gas investments. Oil and gas and commodities related investments have been recommended by brokers under the assumption that commodities prices would continue to go up. Some experts are saying that if production volume continues to be as high as it currently is and demand growth weak that the return to $100 a barrel is years away.

Before recommending investments in oil and gas and commodities related investments, brokers and advisors must ensure that the investment is appropriate for the investor and conduct due diligence on the company in order to understand the risks and prospects of the company. Oil and gas and commodities related investments have been recommended by brokers under the assumption that commodities prices would continue to go up. However, brokers who sell oil and gas and commodities products are obligated to understand the risks of these investments and convey them to clients.

FINRA Bars Broker Honetta Kao During Investigation Into Sales Practices

February 2, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Honetta Kao (Kao). According to BrokerCheck records Kao is subject to two customer complaints, one regulatory action, onr investigation, and one financial matter.

FINRA terminated Kao after the broker failed to respond to a letter request for information in August 2015. Prior to that time, in January 2015, FINRA opened an investigation into Kao alleging potential willful violations of securities fraud laws and FINRA rules. In addition, in April 2015, a customer filed a complaint alleging that Kao mishandled the account and provided bad advice. The complaint is pending. Another client alleged in May 2013, that Kao engaged in unsuitable recommendations and unauthorized trading.

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.

FINRA Bars Broker James Starks During Investigation Into Sales Practices

February 1, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker James Starks (Starks). According to BrokerCheck records Starks is subject to one regulatory action, two investigations, and one criminal matter.

FINRA terminated Starks after the broker failed to respond to a letter request for information in July 2015. Prior to that time, in January 2015, FINRA opened an investigation into Starks alleging potential willful violations of the FINRA rules. Prior to that time, in March 2014, FINRA opened another investigation into Starks alleging potential willful violations of securities fraud laws and FINRA rules.

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.