Securities Lawyers Blog

Advisor Diane Zhu Investigated Over Undisclosed Outside Business Activities

October 11, 2019 | by Staff Attorney

The law offices of Gana Weinstein LLP are currently investigating claims that advisor Diane Zhu (Zhu) engaged in undisclosed outside business activities (OBAs) that were not approved by the brokerage firm. Zhu, formerly registered with PFS Investments Inc. (PFS Investments) was subject to a regulatory investigation according to records kept by The Financial Industry Regulatory Authority (FINRA). In addition, Zhu disclosed one employment termination for cause.

In July 2019, FINRA alleged that Zhu accepted a bar from the financial industry, without admitting or denying the findings, that she refused to provide documents and information requested by FINRA in connection with FINRA’s investigation into Zhu’s outside business activity that led to her termination from her member firm.

In November 2018 Zhu was discharged by PFS Investments after the firm claimed that she engaged in an undisclosed outside business activity.

At this time it is unclear what the activity was that was the focus of FINRA’s investigation or the scope of Zhu’s activities. Zhu’s publicly available BrokerCheck information discloses several OBAs including the sale of home security and automation products and a company called Stars Accounting which appears to be a tax accounting business. It is unknown whether the activity investigated by FINRA involves any of these entities.

Our law firm has significant experience bringing cases on behalf of defrauded victims when their advisors engage in receiving loans from clients or selling fraudulent securities sales through OBAs. The sale of unapproved investment products – 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. Continue Reading

Advisor Robert Montes Investigated Over Missue of Elderly Investor’s Assets

October 11, 2019 | by Staff Attorney

The law offices of Gana Weinstein LLP are currently investigating claims that advisor Robert Montes (Montes) engaged in undisclosed outside business activities (OBAs) and investment sales that were not approved by his brokerage firm. Montes, formerly registered with Morgan Stanley was subject to a regulatory investigation according to records kept by The Financial Industry Regulatory Authority (FINRA). In addition, Montes disclosed three customer complaints.

In July 2019, FINRA alleged that Montes accepted a bar from the financial industry, without admitting or denying the findings, that he refused to provide documents and information requested by FINRA in connection with an investigation into whether he potentially misused an elderly customer’s assets.

At this time it is unclear what the activity was that was the focus of FINRA’s investigation or the scope of Montes’ activities. Montes’ publicly available BrokerCheck information discloses several OBAs including a real estate venture and a company called R.J.R. Asset Management, LLC. It is unknown whether the activity investigated by FINRA involves any of these entities.

Our law firm has significant experience bringing cases on behalf of defrauded victims when their advisors engage in receiving loans from clients or selling fraudulent securities sales through OBAs. The sale of unapproved investment products – 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.

Broker Thomas Marino Subject Allegations of Misusing Client Funds

October 10, 2019 | by Staff Attorney

The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that financial advisor Thomas Marino (Marino), formerly employed by R.M. Stark & Co., Inc. (R.M. Stark) has been subject to at least three customer complaints, one regulatory sanction, one financial disclosure, and two terminations for cause. According to records kept by The Financial Industry Regulatory Authority (FINRA), Marino’s customer complaints alleges that Marino recommended unsuitable securities recommendations among other allegations of misconduct relating to the handling of their accounts.

In July 2019 Marino consented to the sanction and to the entry of findings that Marino refused to provide documents and information requested by FINRA in connection with its investigation into his possible misuse of funds from a senior customer. As a result, Marino drew an automatic bar from the industry.

In June 2019 Marino was discharged from R.M. Stark after the firm alleged that he engaged in inappropriate and unsuitable investments for a client’s risk tolerance and objectives.

In April 2019 a customer complained that Marino violated the securities laws by alleging that the financial advisor made inappropriate and unsuitable investments for her risk tolerance. The claim alleges $300,000 in damages and is currently pending.

Advisor Adam Lunceford Has Complaint Over Alternative Investments

October 10, 2019 | by Staff Attorney

Advisor Adam Lunceford (Lunceford), currently employed by LPL Financial LLC. (LPL Financial) has been subject to at least two customer complaints during the course of his career. According to a BrokerCheck report one customer complaint concerns alternative investments such as direct participation products (DPPs) like non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and equipment leasing programs. The attorneys at Gana Weinstein LLP have represented investors who suffered losses caused by these types of products.

In June 2019 a customer complained that Lunceford violated the securities laws by alleging that Lunceford disregarded the Claimant’s objectives by recommending that he invest more than half his portfolio in illiquid non-traded REITS. The claim alleges $250,000 in damages and is currently pending.

In September 2014 a customer complained that Lunceford violated the securities laws by alleging that Lunceford changed the investment objective for their accounts which resulted in unsuitable trading. The claim was denied by the firm.

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.

George Shadie Discharged By NYLife Over Securities Sales Practices

October 7, 2019 | by Staff Attorney

According to BrokerCheck records financial advisor George Shadie (Shadie), formerly employed by NYLife Securities LLC (NYLife Securities) has been subject to one employment termination for cause, five customer disputes, and three civil liens or judgements during his career. According to records kept by The Financial Industry Regulatory Authority (FINRA), the customer complaints against Shadie concerns allegations over variable annuity sales practices.

In July 2019 a customer complained that Shadie violated the securities laws by alleging that Shadie sold two variable annuities issued on or about November 18, 2015 and December 17, 2015 were unsuitable investments due to liquidity restrictions and various fees associated with the accounts. The claim was settled for $45,000.

In February 2019, NYLife Securities discharged Shadie claiming that he was terminated after the company’s review of his business practices raised a number of concerns regarding the quality of his business.

In October 2018 a customer complained that Shadie violated the securities laws by alleging that transactions in January and May 2018 in two variable annuities were initiated without her authorization. Customer demands rescission of all products purchased and compensation in the amount of $100,000. The claim was settled for $60,000.

Variable annuities are complex financial and insurance products. In fact, the Securities and Exchange Commission (SEC) released a publication entitled: Variable Annuities: What You Should Know encouraging investors to ask questions about the variable annuity before investing. Essentially, a variable annuity is a contract with an insurance company under which the insurer agrees to make periodic payments to you. The investor chooses the investments made in the annuity and value of your variable annuity will vary depending on the performance of the investment options chosen. The primary benefits of variable annuities are the death benefit and tax deferment of investment gains.

Advisor David Volpe Subject to Regulatory Bar Over Unauthorized Securities Sales

October 6, 2019 | by Staff Attorney

The law offices of Gana Weinstein LLP are currently investigating claims that advisor David Volpe (Volpe) engaged in private securities transactions and borrowed customer funds that were not approved by his brokerage firm. Volpe, formerly registered with First Financial Equity Corporation (First Financial) and LPL Financial LLC (LPL Financial) was subject to an investigation by The Financial Industry Regulatory Authority (FINRA) over these allegations. In addition, Volpe disclosed one bankruptcy filing, and two employment terminations for cause.

In August 2019 FINRA alleged that Volpe consented to the sanctions resulting in a bar from the industry and to the entry of findings that Volpe refused to produce information and documents requested by FINRA in connection with an investigation into whether he engaged in a private securities transaction or borrowed funds from a customer.

In April 2019 Volpe was discharged by First Financial after the firm claimed that Volpe failed to notify firm of private securities transaction involvement and violation of firm policy regarding borrowing funds from a client.

In December 2018 Volpe was discharged by LPL Financial after the firm claimed that Volpe violated the firm’s private securities transactions policy for involvement in capital raising efforts without prior disclosure.

John Dobbertin Subject to Customer Complaint and Regulatory Sanction

October 6, 2019 | by Staff Attorney

The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that financial advisor John Dobbertin (Dobbertin), currently employed by American Portfolios Financial Services, Inc. (American Portfolios) has been subject to at least one customer complaint, one regulatory sanctions, one criminal disclosure, and one termination for cause. According to records kept by The Financial Industry Regulatory Authority (FINRA), Dobbertin’s customer complaint alleges that Dobbertin recommended unsuitable securities recommendations among other allegations of misconduct relating to real estate and annuity securities.

In May 2019 a customer complained that Dobbertin violated the securities laws by alleging that the financial advisor committed violations of FINRA Rules 2110 and 2111, misrepresentation and omissions of material facts, and breach of fiduciary duty. The claim is currently pending.

In December 2014 Dobbertin consented to the sanction and to the entry of findings that Dobbertin failed to timely amend his Form U4 and disclose in eight subsequent Form U4 Amendments that he had been charged with a fdony offense. FINRA also found that Dobbertin also failed to timely ammd his Form U4 and disctose in subsequent Form U4 Amendments two unsatisfied federal tax liens that were levied in 2013.

In June 2009 Dobbertin was permitted to resign from LPL Financial after the firm alleged that he failed to follow the firm’s policies and procedures relating to processing variable annuity transactions.

Summit Brokerage Broker Jeffrey Poosch Subject to a Complaint Over Unauthorized Trading

October 3, 2019 | by Staff Attorney

The law offices of Gana Weinstein LLP are currently investigating claims against broker Jeffrey Poosch (Poosch), currently associated with Summit Brokerage Services, Inc. (Summit Brokerage) out of Fort Gratiot, Michigan. According to a BrokerCheck report, Poosch has been subject to at least four customer disputes during the course of his career. According to records kept by The Financial Industry Regulatory Authority (FINRA), Poosch’s customer complaints concern allegations of unauthorized trading and misrepresentations among other claims.

In February 2018 a customer filed a complaint alleging that Poosch made unauthorized trading and failed to disclose fees associated with a variable annuity. The customer requested over $500,000 in damages. The claim was denied.

In December 2016 a customer alleged that Poosch failed to disclose penalties to them. The amount of damages was not specified. The claim settled for $6,269.

Advisors are not allowed to engage in unauthorized trading. Such trading occurs when a broker sells securities without the prior authority from the investor. All brokers are under an obligation to first discuss trades with the investor before executing them under NYSE Rule 408(a) and FINRA Rules 2510(b). These rules explicitly prohibit brokers from making discretionary trades in a customers’ non-discretionary accounts. The SEC has also found that unauthorized trading to be fraudulent nature because no disclosure could be more important to an investor than to be made aware that a trade will take place.

Advisor Marilyn Zehntner Subject to an Investment Complaint

October 3, 2019 | by Staff Attorney

The law offices of Gana Weinstein LLP are investigating broker Marilyn Zehntner (Zehntner), currently associated with Rhodes Securities, Inc. (Rhodes Securities) out of Fort Worth, Texas. According to a BrokerCheck report, Zehntner has been subject to at least one customer dispute during her career. According to records kept by The Financial Industry Regulatory Authority (FINRA), the customer complaint against Zehntner alleges breach of fiduciary duty.

In January 2017 customers filed a complaint alleging that Zehntner and her member firm, Rhodes Securities, violated the securities laws by, among other things, engaging in breach of fiduciary duty, negligence, and breach of contract causing over $2,000,000 in damages. The claim settled for $810,000.

Brokers are required under the securities laws to treat their clients fairly. This obligation includes the duties to disclose material risks of the investments they recommend and to present products, particularly complex or confusing products, in a fair and balanced manner that allows the client to evaluate the recommendation. Another important obligation advisors have is to make only suitable recommendations for investments to the client. There are many investments that are not appropriate for the majority of investors or for certain investors given their risk tolerance, age, and other factors. Advisors should not present these investment options to clients. There are two screens that advisors must employ to determine whether an investment is suitable for a client. First, there must be a reasonable basis for the recommendation – meaning that the product has been investigated and due diligence conducted into the investment’s features, benefits, risks, and other relevant factors. The advisor must conclude that the investment is suitable for at least some investors and some securities may be suitable for no one. 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.

Advisor Herbert Shiraishi Has Several Variable Annuity Sales Practice Complaints

October 1, 2019 | by Staff Attorney

The securities attorneys at Gana Weinstein LLP are investigating advisor Herbert Shiraishi (Shiraishi), currently registered with Independent Financial Group, LLC (Independent Financial) out of Honolulu, Hawaii and Hilo, Hawaii. According to a BrokerCheck report, Shiraishi has been subject to at least four customer complaints and one employment termination for cause during his career. According to records kept by The Financial Industry Regulatory Authority (FINRA), many of the complaints against Shiraishi concern allegations of variable annuity sales practices.

In May 2018 a customer filed a complaint alleging that Shiraishi’s investments in variable annuities were unsuitable to the customer’s needs. The customer requested $25,500 in damages. The claim was closed.

In January 2017 a customer alleged that Shiraishi failed to disclose his purchase of a variable annuity to the customer causing $7,708 in damages. The claim was denied.