Securities Lawyers Blog

Former Merrill Lynch Advisor Roderick Yzaguirre Accused of Stealing Millions From Clients

June 28, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Roderick Yzaguirre (Yzaguirre) has been the subject of at least 10 customer complaints and one firm termination. Customers have filed complaints against Yzaguirre alleging that the broker made misrepresentations concerning investments and misappropriated their funds among other claims. To date investors have accused Yzaguirre of misappropriating approximately $3,000,000 in client funds with the true extent of Yzaguirre alleged misconduct still unknown.

Yzaguirre has been a FINRA broker since 1994. From October 2009, through April 2015, Yzaguirre has been associated with Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill Lynch) out of their Ontario, California branch. Merrill Lynch accused Yzaguirre of conduct involving potential misappropriation of client funds and misrepresentations of securities at the time of his termination from the firm.

Under the FINRA rules, a brokerage firm owes a duty to properly monitor and supervise its employees in order to detect and prevent brokers from engaging in illegal investments activity. 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. Investment schemes often occur 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.

Broker Spotlight: Ellwood Jones’ Investment Recommendations

June 26, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Ellwood Jones (Jones) has been the subject of at least four customer complaints. Customers have filed complaints against Bell alleging a number of securities law violations including that the broker made unsuitable investments, misrepresentations and false statements, among other claims. Some of these claims involve recommendations in private placements such as hedge funds, insurance products, and direct participation programs (DPPs).

Since 1997 Jones was associated with NFP Advisor Services (NFP) until March 2011. According to Jones’ BrokerCheck records, Jones has a number of other disclosed outside businesses including Capital Region International, LLC, A.B.R.C., and Synergex International Corporation.

One customer complaint against Jones alleged damages of $10,000,000 resulting from negligence and misrepresentations concerning hedge funds. In another action, the customer alleged misrepresentations in relation to the customer’s participation in a welfare benefit plan. Finally, in a third customer complaint the customer alleged misrepresentations in connection with the sale of insurance and other financial transactions involving alternative investments and limited partnership interests.

Michael Bell Suspended Over Misleading Private Placement Emails

June 25, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Michael Bell (Bell) has been the subject of at least 8 customer complaints, two financial disclosures, two firm terminations, and two regulatory actions. Customers have filed complaints against Bell alleging a litany of securities law violations including that the broker made unsuitable investments, unauthorized trades, breach of fiduciary duty, misrepresentations and false statements, churning, and fraud, among other claims. Some of these claims involve recommendations in penny stocks, private placements, and other speculative securities.

An examination of Bell’s employment history reveals that Bell moves from troubled firm to troubled firm. The pattern of brokers moving in this way is sometimes called “cockroaching” within the industry. See More Than 5,000 Stockbrokers From Expelled Firms Still Selling Securities, The Wall Street Journal, (Oct. 4, 2013). In Bell’s 25 year career he has worked at 18 different firms.

Since 2008 Bell has been registered with Brewer Financial Services, LLC, Herbert J. Sims & Co. Inc., and most recently Westpark Capital, Inc. (Westpark) until July 2014.

Former LPL Financial Broker Robert Tricarico Accused of Stealing Customer Funds

June 25, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently barred broker Robert Tricarico (Tricarico) concerning allegations that Tricarico failed to respond to the regulator’s requests to provide information and documents concerning the an investigation into claims that Tricarico may have stolen money from clients.

Tricarico entered the securities industry in 1986. From June 2003, until April 2009, Tricarico was associated with Citigroup Global Markets Inc. Thereafter, from March 2009, to May 2011, Tricarico became registered with Wells Fargo Advisors Financial Network, LLC (Wells Fargo). Finally, from May 2011, until January 2015, Tricarico was associated with LPL Financial LLC (LPL).

On a Form U5, LPL terminated Tricarico alleging that the broker was the subject of a lawsuit by the executrix of a deceased client that alleged misappropriation of funds. Thereafter, FINRA sought to investigate LPL’s statements by sending Tricarico requests for information. On January 22, 2015, FINRA sent a letter to Tricarico requesting that Tricarico provide documents and information including his personal bank account records. Despite, multiple requests for information and some additional correspondence with Tricarico and his counsel the broker did not provide sufficient documents and information to cover FINRA’s requests. Accordingly, FINRA imposed a bar from the securities industry.

Former Wells Fargo Broker Douglas Melzer Barred Over Private Securities Transactions

June 24, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently sanctioned and barred broker Douglas Melzer (Melzer) concerning allegations that between November 2011, and May 2012, while registered with Wells Fargo Advisors, LLC (Wells Fargo), Melzer solicited four customers to invest $2,000,000 in an outside investment without providing his firm notice. According to FINRA Melzer was compensated at least $26,500. Unapproved sales activities and transactions are referred to as “selling away” in the industry.

Melzer entered the securities industry in 2008 when he became registered with Wells Fargo. Wells Fargo terminated Melzer’s registration in January 2013 in connection with his unapproved sales activity. Melzer was registered with Park Avenue Securities LLC from March 2013, through January 2015.

The conduct alleged against Melzer is a “selling away” securities violations. 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 the brokerage firm claim ignorance of their advisor’s activities, under the FINRA rules, a brokerage firm owes a duty 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.

Senior Abuse in the Securities Industry A Major Ongoing Concern

June 23, 2015 | by Staff Attorney

As long time readers of our blogs know senior abuse is an ongoing concern in the securities industry. See Massachusetts Fines LPL Financial Over Variable Annuity Sales Practices to Seniors; The NASAA Announces New Initiative to Focus on Senior Investor Abuse; The Problem of Senior Investor Abuse – A Securities Attorney’s Perspective.

Recently, a number of regulatory agencies have begun new initiatives against investment fraud targeted at seniors with the intent to provide resources to seniors and financial advisors. Regulators fear senior abuse in the investment sector will be a growing trend over the next couple of decades if not addressed soon.

According to a National Senior Investor Initiative report cited by the Financial Industry Regulatory Authority (FINRA), the Social Security Administration estimates that each day for the next 15 years, an average of 10,000 Americans will turn 65. According to the U.S. Census Bureau in 2011, more than 13 percent Americans, more than 41 million people, were 65 or older. By 2040, that number is expected to grow 79 million doubling the number that were alive in 2000.

LPL Financial Broker David Hackney Accused by Regulator of Churning Customer Accounts

June 22, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker David Hackney (Hackney) has recently been permanently barred by the agency for failing to respond to requests for documents and information. In addition, the broker has been under investigation by the Illinois Securities Department concerning allegations that Hackney churned – a type of securities fraud – at least three accounts.

Hackney entered the securities industry in 1993. From March 2006 until February 2014, Hackney was associated with LPL Financial LLC (LPL). In February 2014, LPL discharged Hackney alleging that the broker conducted discretionary, otherwise known as unauthorized trades, in customers’ accounts that were excessive.

Investment churning is trading activity characterized by the purchasing and selling of securities including stocks, bonds, mutual funds, and options that is excessive and serves no practical purpose for the investor. Brokers engage in churning solely to generate commissions without regard for the client’s interests. In order to establish a churning claim the investor must show that the trading was first excessive and second that the broker had control over the investment strategy. 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.

JHS Capital Advisors Broker Mark Weindling Barred Over Forging Signatures in Deceased Customer’s Account

June 19, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently barred broker Mark Weindling (Weindling) concerning allegations that Weindling failed to respond to the regulator’s requests to provide information and documents concerning the an investigation into claims that Weindling effected transactions within the account of a deceased customer.

Weindling entered the securities industry in 1982. From October 2007 until April 2012, Weindling was associated with Paulson Investment Company, Inc. Thereafter, in April 2012, Weindling became registered with JHS Capital Advisors, LLC (JHS). On May 16, 2014, JHS filed a Form U5 that terminated Weindling’s registration with JHS.

On the form, JHS reported that Weindling effected transactions within the account of a deceased customer and that he was aware of journal requests containing the forged signature of the deceased customer. Thereafter, FINRA sought to investigate JHS’s statements by sending Weindling requests for information. On January 27, 2015, FINRA sent a letter to Weindling’s counsel requesting that Weindling provide documents and information. Despite, multiple requests for information, Weindling acknowledged receipt of FINRA’s requests but confirmed that he did not intend to provide the requested documents and information.

FINRA Alleges National Securities Corporation Misled Customers On Fees

June 18, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) entered into an agreement whereby the regulatory fined National Securities Corporation (NSC) while alleging that in 2013, NSC acted as the exclusive placement agent for two private placements of its parent company, National Holdings Corporation (National Holdings). The FINRA rules require that offerings of unregistered securities issued by a control entity of a member firm disclose to investors the selling compensation to be paid to the member in connection with the offering. FINRA found that while NSC generally disclosed to investors that it would receive compensation in connection with the sale of both private placements the firm failed to disclose in writing to investors the amount of selling compensation it would receive.

NSC has been registered with FINRA as a since 1947 and engages in a number of businesses, including retail brokerage, investment banking, and investment advisory. NSC has 760 registered representatives in 140 branch offices. Our law offices have been tracking a number of regulatory and customer complaints involving NSC and its brokers including:

National Securities Broker Vito Balsamo Under FINRA Investigation Over V.W. Industries Sales

Broker Michael Gates Alleged to Have Made Unauthorized Trades in Client Accounts

June 17, 2015 | by Staff Attorney

According to broker Michael Gates (Gates) Financial Industry Regulatory Authority (FINRA) BrokerCheck records the representative was recently sanctioned concerning allegations that from January 2011, through October 2011, he effected approximately 22 discretionary transactions for two firm customers without written authorization from the customers or approval from the firm.

Gates first entered the securities industry in September 1997. Thereafter, in April 2004, Gates became registered with Wells Fargo Advisors, LLC (Wells Fargo). In March 2012, Wells Fargo terminated Gates alleging that the broker may have entered mutual fund sales without authorization of his clients. After termination of his registration with Wells Fargo, Gates became registered with Morgan Stanley where he is currently registered. In addition, at least two customers have filed complaints against Gates alleging unsuitable investments, and excessive trading (churning).

NASD Rule 2510 prohibits brokers from exercising any discretionary power in a customer’s account unless there is written authorization and the account has been accepted by the member. FINRA alleged that Gates was not approved by his firm to exercise discretion in the customers accounts but nonetheless effected 22 discretionary transactions for two customers.