Securities Lawyers Blog

Teryl Trenchard Under FINRA Investigation for Fraud

December 4, 2017 | by Staff Attorney

The securities attorneys at Gana Weinstein LLP are investigating potential claims against former Capital Securities Management Inc. broker Teryl Trenchard (Trenchard). According to Trenchard’s BrokerCheck records, he was identified in a Financial Industry Regulatory Authority (FINRA) investigation on March 10, 2017. FINRA is examining alleged fraudulent activities of Trenchard.

Trenchard was terminated by Capital Securities Management on March 10, 2017 based upon the FINRA investigation for fraud.

In a pending customer complaint, it has been alleged that Trenchard engaged in misappropriation, forgery, fraud and unauthorized trading in unsuitable transactions between 2005 and 2017. The alleged damages are $1,800,000.

Broker Tommy Mai Sanctioned by FINRA

December 3, 2017 | by Staff Attorney

The investment lawyers of Gana Weinstein LLP are investigating the regulatory action brought by the Financial Industry Regulatory Authority (FINRA) against Broker Tommy Mai (Mai).

According to Mai’s Brokercheck records, he has been sanctioned by FINRA because he allegedly “forged or caused to be forged customers’ signatures on various types of customer account documents including his member firm’s new account forms and non-firm insurance applications. In total, 53 customer account forms were forged, altered, or otherwise improperly signed (i.e., signed when partially completed or blank). The findings also stated that Mai paid to air a television program, on two Los Angeles Vietnamese-language television stations, appeared in every episode of the program and discussed a range of insurance and investment-related topics, without obtaining prior approval from the firm or FINRA prior to airing the program. In addition, the content of the program was, at times, misleading, promissory, and/or unbalanced.” Mai was suspended from FINRA for four months and fined $10,000.

The term “securities fraud” relates to inappropriate and illegal activities. Principally, it relates to investor deception and market maipulation. Fraud can sometimes include the unauthorized trading, false or misleading representations and of course, Ponzi schemes. Many laws protect investors.

CEO of Brokerage Firm Financial West Group Sanctioned Over Private Placement Practices

December 3, 2017 | by Staff Attorney

According to BrokerCheck records the CEO and Chief Compliance Officer of Firm Financial West, Gene Valentine (Valentine) has been subject to one customer complaint, three tax liens, and one regulatory action. According to records kept by The Financial Industry Regulatory Authority (FINRA) Valentine has been accused by FINRA of failing to have supervisory procedures for due diligence on private placement offerings.

FINRA alleged that from October 1, 2008, through June 30, 2015, Financial West’s written supervisory procedures failed to address the firm’s due diligence process for private placements. FINRA found that Financial West’s written supervisory procedures did not describe the process for approving private placement offerings and did not describe how or when to evaluate private placement offerings. FINRA also found that the firm failed to consistently follow the written procedures that did exist such as failing to document the review as described in the procedures.

Under FINRA Regulatory Notice 10-22 firms are provided with detailed guidance while reminding them of their “obligation to conduct a reasonable investigation of the issuer and the securities they recommend” in private placement offerings. The notice also provides that a firm’s supervisory procedures must be reasonably designed to ensure that the firm engages in a rigorous due diligence process. In order to comply with FINRA’s rules and “[t]o demonstrate that it has performed a reasonable investigation, a [firm] should retain records documenting both the process and results of its investigation.” In this case, FINRA found that Financial West failed to meet these requirements.

Former Morgan Stanley Broker Peter Doyle Barred by FINRA

December 3, 2017 | by Staff Attorney

The investment lawyers of Gana Weinstein LLP are investigating the regulatory action brought by the Financial Industry Regulatory Authority (FINRA) against former Morgan Stanley broker Peter Doyle (Doyle).

According to BrokerCheck records, Doyle was terminated from Morgan Stanley in June 2016 for failing to adhere to industry rules and/or firm policies including with regard to the use of trading discretion. Doyle’s failure to appear for FINRA requested on-the-record testimony in connection with its investigation into the conduct that led to his termination led to his bar from the industry. Without admitting or denying the findings, Doyle consented to the sanction and to the entry of findings that he refused to appear.

Before Doyle’s termination, Morgan Stanley was ordered by a FINRA arbitration panel to pay over $8 million in damages in a customer dispute concerning allegations that Doyle made unauthorized trades, failed to disclose fees, and engaged in the financial abuse of an elderly customer.

Summit Healthcare REIT Investment Loss Options

December 3, 2017 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating investor losses in Summit Healthcare REIT a non-traded real estate investment trust (Non-Traded REIT). According to the firm’s website, Summit Healthcare REIT is headquartered in Lake Forest, California and its objective is to provide investors with a diversified, income-producing portfolio of assets in the healthcare sector. Summit Healthcare acquires, leases, and manages healthcare real estate and invests in the healthcare sector and diversifies by property type, location, and tenant. Summit Healthcare REIT focuses on senior housing operators throughout the United States. The types of facilities the REIT works on are assisted living, memory care and skilled nursing facilities.

Recently, MacKenzie Realty Capital offered to purchase up to 330,000 shares of Summit Healthcare for only $1.34 per share – a significant loss on the original purchase price.

Our firm often handles cases involving direct participation products (DPPs), private placements, Non-Traded REITs, and other alternative investments. These products are almost always unsuitable for middle class investors. In addition, the brokers who sell them are paid additional commission in order to hype inferior quality investments providing perverse incentives for brokers to sell high risk and low reward investments.

Clement Chichester and Brittney Sias Barred Over Claims of Receiving Customer Funds

November 30, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisors Clement Chichester (Chichester) and Brittney Sias (Sias), in October 2017, were terminated by their firm, Western International Securities, Inc. (Western International) based on allegations that they accepted a FINRA sanction. Chichester and Sias were barred from the industry by FINRA after FINRA requested documents and information and they failed to provide FINRA with the requested documents and information after initially providing partial responses to a previous request in connection with FINRA’s investigation of their alleged receipt of funds from a customer of the firm.

At this time it is unclear the extent and scope of Chichester’s and Sias’ private securities activities. Chichester CRD lists that he is engaged in insurance as an outside business activity. The providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.

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.

Investment Advisor Nadav Baum Subject to Fourteen Customer Complaints

November 30, 2017 | by Staff Attorney

The investment lawyers at Gana Weinstein LLP are investigating customer complaints against Pennsylvania Broker/Investment Advisor Nadav Baum (Baum). According to BrokerCheck records, Baum has been subject to fourteen customer complaints and two regulatory sanctions. The customer complaints allege that Baum engaged in securities law violations, including making unsuitable investments in client’s accounts.

In March 2017, the New Jersey Bureau of Securities sanctioned Baum after he allegedly failed to comply with the terms of a supervisory agreement. He was ordered to cease and desist and to pay a fine of $6,000.

In August 2009, the Financial Industry Regulatory Authority (FINRA) sanctioned Baum following allegations he executed discretionary trades without written authorization in the account of a deceased customer and executed discretionary trades in other accounts without authorization. He was issued a 30-day suspension and a fine of $15,000.

Patrick Maddren Subject to Customer Complaint For Excessive Trading

November 30, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Patrick Maddren (Maddren) has been subject to two customer complaints and two tax liens. Maddren is currently registered with WestPark Capital, Inc. (WestPark Capital). In March 2016 a customer filed a complaint alleging a number of securities law violations including that the broker engaged in churning (excessive trading), material misrepresentations and omissions, unauthorized trading, unsuitable recommendations, and breach of contract among other claims. The claim alleged $1,000,000 in damages and is now settled.

In 2012 several tax liens were filed against Maddren in amounts totaling over $300,000. Large tax liens on a broker’s CRD can be a red flag that the broker may be influenced to engage in high commission activity in order to satisfy personal debts. In addition, a broker’s inability to manage their own finances is relevant in a customer’s decision to use their services.

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.

Aegis Capital Broker Paul Falcon Receives Customer Complaints over Unsuitable Trades

November 28, 2017 | by Staff Attorney

The investment lawyers of Gana Weinstein LLP are investigating claims against Aegis Capital broker, Paul Falcon (Falcon). Falcon allegedly recommended unsuitable investments, executed unauthorized trades, made excessive transactions and recommended investments that performed properly.

According to BrokerCheck records, Falcon has received four customer complaints and one pending customer complaint.

In April 2017, a customer alleged Falcon recommended unsuitable investments, executed unauthorized trades, made excessive transactions and recommended investments that performed poorly. The customer is seeking $190,000 in damages and the complaint is still pending.

Alonza Barnett Barred By FINRA Over Failure to Respond to Requests for Information

November 28, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Alonza Barnett (Barnett), in March 2017, was barred from the industry by FINRA after FINRA requested documents and information and he failed to request termination of his suspension within three months of the date of the Notice of Suspension drawing an automatic bar from association with any FINRA member in all capacities. Previously, Barnett was registered with Ameritas Investment Corp. (Ameritas).

In February 2017 a customer filed a complaint alleging that for a 15 year period Barnett engaged in conversion of funds, breach of fiduciary duty and constructive fraud, and violation of the North Carolina Investment Advisors Act. The claim appears to involve private securities. The claim alleged $1,750,000 in damages and is currently pending.

At this time it is unclear the extent and scope of Barnett private securities activities. Barnett CRD lists that he is engaged in fixed insurance products and operates a d/b/a called Dacthler Wealth Management as an outside business activity. The providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.