Securities Lawyers Blog

Advisor Frederick Houck Sanctioned Over Unauthorized Trading

November 10, 2017 | by Staff Attorney

According to BrokerCheck records financial advisor Frederick Houck (Houck), formerly associated with Freedom Investors Corp. (Freedom Investors), has been subject to one customer complaint, six tax liens or judgments, and one FINRA sanction. According to records kept by The Financial Industry Regulatory Authority (FINRA) Houck has been accused by a customer of churning, negligence, excessive trading, and breach of fiduciary duty from August 2011 to January 2016 causing $150,000 in damages. The claim is currently pending.

In August 2017 FINRA sanctioned Houck alleging that Houck exercised discretion in executing 491 transactions in the accounts of two customers as part of a recommended investment strategy without obtaining prior written authorization to exercise discretion and without his member firm having approved these accounts for discretionary trading.

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. Often times, brokers engage in unauthorized trading as part of an attempt to churn or excessively trade a client’s account.

Dennis McMurray Barred Over Claims of Private Securities Transactions

November 9, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Dennis McMurray (McMurray), in August 2017, was terminated by his firm, Girard Securities, Inc. (Girard Securities) based on allegations that McMurray violated the firm’s policy on selling away and private securities transactions. The firm also alleged that McMurray used a non-approved email address. In addition, McMurray was barred from the industry by FINRA after FINRA requested documents and information related to an investigation into the circumstances surrounding his termination from Girard and McMurray refused to provide documents.

At this time it is unclear the extent and scope of McMurray’s private securities activities. McMurray’s CRD lists that he is engaged in several outside business activities including 2 Truths – a mobile application development company, and is a part owner of Veritas IQ – a marketing, networking and personal development company. At this time it is unclear whether or not McMurray’s private securities activities involve these entities or one that is not listed.

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”.

Jonathan Freeze Barred By FINRA Over Variable Annuity Practices

November 9, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Jonathan Freeze (Freeze), in August 2017, was accused by FINRA of failing to cooperate in an investigation into the circumstances surrounding Freeze’s alleged sale of variable annuities. Freeze is formerly associated with Fortune Financial Services, Inc. (Fortune Financial). According to the FINRA action, Freeze was barred by the regulator after the broker failed to respond to requests for documents and information during the investigation.

In 2015, Feeze was also sanctioned by FINRA concerning allegations that he borrowed $20,000 from his customer and failed to provide the firm with prior notice of the loan and failed to obtain prior written pre-approval for the loan. Freeze has also been subject to two terminations for cause and multiple financial disclosures.

Variable annuities are complex financial and insurance products. In fact, recently 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 Anthony Vultaggio Barred By FINRA in Connection With Undisclosed Sales of Securities

November 8, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Anthony Vultaggio, Jr. (Vultaggio), in September 2017, was accused by FINRA of failing to cooperate in an investigation into the circumstances surrounding Vultaggio alleged sale of undisclosed securities through an undisclosed outside business. Vultaggio is formerly associated with American Capital Partners, LLC (American Capital). According to the FINRA action, Vultaggio was barred by the regulator after the broker failed to respond to requests for documents and information during the investigation.

At this time the extent of Vultaggio’s outside business activities and securities sales are unknown. The only public disclosure on Vultaggio’s BrokerCheck contains is Vultaggio’s investments in commercial and residential real estate.

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”.

Christopher Parr Under Investigation in Connection With Borrowing Client Funds

November 8, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Christopher Parr (Parr), in October 2017, was under investigation by FINRA based on a preliminary determination that Parr’s conduct allegedly violated FINRA Rules 3240, 3280, and 2010. In addition, the state of Kansas has a pending regulatory mater concerning allegations that Parr borrowed money from a client on three occasions and did not disclose the loans to his firm. These allegations concern conduct that occurred while Parr was registered with KCD Financial, Inc. (KCD Financial).

At this time it is unclear the extent and scope of Parr’s activities. Parr’s CRD lists that he does business under the name First Capital Group, Inc.

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”.

Janney Montgomery Scott Broker Christopher Sinkula Subject to Customer Complaints

November 8, 2017 | by Staff Attorney

According to BrokerCheck records financial advisor Christopher Sinkula (Sinkula), currently associated with Janney Montgomery Scott LLC (JMS), has been subject to seven customer complaints. According to records kept by The Financial Industry Regulatory Authority (FINRA) Sinkula has been accused by a customers of unsuitable investment advice concerning various investment products including energy stocks and variable annuities among other claims. The law offices of Gana Weinstein LLP continue to report on investor related losses and potential legal remedies due to recommendations to investor in oil and gas and commodities related investments.

The most recent claim was filed in July 2017 and alleges that Sinkula made unsuitable investments by concentrating in energy stocks. The customer claimed $100,000 in damages and the claim is currently pending. In 2015 a customer claimed that Sinkula recommended the purchase of annuities and charged excessive fees that were not suitable causing $39,644 in damages. The claim was denied.

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 (MLPs), leveraged ETFs, mutual funds, and individual stocks.

Christopher Wendel Terminated Over Claims of Private Securities Transactions

November 5, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Christopher Wendel (Wendel), in September 2017, was terminated by his firm, SA Stone Wealth Management Inc. (SA Stone Wealth) based on allegations that Wendel violated the firm’s policy on selling away. In addition, Wendel has five customer complaints on his record. The latest customer complaint occurred in May 2013 and alleged that the customer was sold in unsuitable REITs. The claim alleged $171,000 in damages and was settled.

At this time it is unclear the extent and scope of Wendel’s private securities activities. Wendel’s CRD lists that he is engaged in an outside business activity called Smoke on the Water LLC.

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”.

Kestra Broker Herbert Smith Subject to Complaint Over Oil and Gas Investments

November 5, 2017 | by Staff Attorney

According to BrokerCheck records financial advisor Herbert Smith (Smith), currently associated with Kestra Investment Services, LLC (Ketra Investment), has been subject to one customer complaint and two tax liens. According to records kept by The Financial Industry Regulatory Authority (FINRA) Smith has been accused by a customers of unsuitable investment advice concerning energy limited partnership investment among other claims. The law offices of Gana Weinstein LLP continue to report on investor related losses and potential legal remedies due to recommendations to investor in oil and gas and commodities related investments.

In addition, Smith has been subject to two tax liens. The first in May 2014 for $65,692 and the second in July 2016 for $69,542. Tax liens can be sign that a broker may have a conflict of interest to recommend or engage in high risk trades and improper recommendations due to the need to obtain funds. FINRA discloses tax liens information because it is important for investors to know whether or not a broker can manage their own finances.

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 (MLPs), leveraged ETFs, mutual funds, and individual stocks.

Terry Bahgat Accused by SEC of Misappropriating Client Funds

November 5, 2017 | by Staff Attorney

The Securities and Exchange Commission (SEC) recently filed a complaint against former Gradient Securities, LLC (Gradient) and Cambridge Investment Research, Inc. (Cambridge) broker Terry Bahgat (Bahgat) working out of the Amherst, New York. The SEC alleged that from December 2014 through September 2016, Bahgat misappropriated funds seven different clients by obtaining access to their brokerage accounts and then transferring either to himself or WealthCFO – a company that Bahgat controlled. Bahgat operated his advisory business through WealthCFO Advisors, LLC and other firm WealthCFO Partners, LLC.

According to the SEC, in order to effectuate the fraud in some cases Bahgat had his assistant pose as his clients on telephone calls with the brokerage firms in order to obtain bill paying privileges. The SEC alleged that Bahgat’s scheme continued until September 2016 when he then fled the U.S. for Egypt. The Financial Industry Regulatory Authority (FINRA) also barred Bahgat from the securities industry after he failed to respond to a request for information in January. The FINRA investigation involved a different questionable practice – whether Bahgat made misrepresentations in the sale of a variable annuity.

Bahgat entered the securities industry in 1986. From October 2010 until August 2015, Bahgat was associated with Cambridge. From July 2015 until October 2016, Bahgat was registered with Gradient.

Woodbridge Mortgage Fund – Gana LLP Investor Fraud Investigation

November 4, 2017 | by Staff Attorney

The law offices of Gana Weinstein LLP are investigating Woodbridge Group of Companies and the investment funds it controls – a series of Woodbridge Mortgage Funds. The Securities and Exchange Commission (SEC) has recently filed a case seeking documents in connection with its investigation of the Woodbridge Group of Companies for possible violations of the securities laws. The California real estate and investment company has raised over $1 billion from investors under suspicious circumstances. Namely that the firm is engaging in a nationwide investment fraud by offering the sale of unregistered securities through unregistered brokers.

The signs that the Woodbridge Funds are about to become a giant fraud debacle are all there. Woodbridge and its agents have been sanctioned by multiple state regulators for offering unregistered securities. Going back to May 2015, the Massachusetts Securities Division imposed a bar on the Woodbridge Mortgage Investment Funds and ordered the companies to permanently cease and desist from selling unregistered or non-exempt securities in the Commonwealth of Massachusetts.

Thereafter, on July 17, 2015, the Texas State Securities Board issued an emergency cease and desist order against Woodbridge Fund 3, the firm’s owner Robert Shapiro (Shapiro), and other parties and ordered them to stop engaging in fraud in connection with the sale of securities in the state of Texas.