Securities Lawyers Blog

Advisor Adam Veron Barred Over Contract Funding Securities Transactions

October 8, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Adam Veron (Veron), in February 2017, was terminated by his then employer Questar Capital Corporation (Questar). Questar stated that Veron was terminated due to undisclosed outside business activities and the sale of unapproved products.

Thereafter, in August 2017, FINRA brought action against Veron barring him from the industry. FINRA alleged that in July 2015, Veron formed Contract Funding and Corporate Management, LLC (CFCM) and served as its President. CFCM allegedly provides a line of credit to a company which uses the funds to fulfill its federal procurement contracts and then pays profits to CFCM. FINRA found that Veron sold approximately $1.8 million worth of shares in CFCM. FINRA found that Veron participated in CFCM by soliciting the investors, hiring legal counsel to draft the Subscription Agreement and Private Offering Memorandum, accepting investments by check, depositing those checks into a bank account that he controlled, providing the investors with the Offering Documents, distributing profits from CFCM, managing CFCM’s relationship with the company, and deciding who could invest in CFCM.

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”.

Wells Fargo Advisor Regan Rohl Has Multiple Complaints Over Oil & Gas Investments

October 7, 2017 | by Staff Attorney

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. According to BrokerCheck records, customers have filed about ten complaints with the Financial Industry Regulatory Authority’s (FINRA) against broker Regan Rohl (Rohl), a registered representative with Wells Fargo Advisors Financial Network, LLC (Wells Fargo) out of the firm’s Fargo, North Dakota office location.

Many of the customer complaints against Rohl allege a number of securities law violations including that the broker made unsuitable investments and overcenoncetrated clients in oil & gas related investments among other claims. The most recent complaint was filed in August 2017 and alleged Rohl recommended an unsuitable portfolio over concentrated in energy sector investments and to hold these investments after they began to decline in value causing $75,000. The claim is currently pending.

In July 2017 another customer filed a complaint alleging $150,000 in damages. The claim is currently pending. In June 2017 a customer alleged that from April 2011 through December 2016, Rohl made unsuitable investment recommendations to buy and concentrate their portfolio of four accounts into oil and gas sector master limited partnerships and closed end funds causing $1,500,000 in damages. The claim is currently pending.

Raymond James Terminates Broker James Lyons Over Unauthorized Trades

October 6, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) financial advisor James Lyons (Lyons), has been subject to five customer complaints and one employment terminations for cause. Lyons was formerly associated with Raymond James & Associates, Inc. (Raymond James) until April 2017 when the firm terminated his employment due to customer allegation of unauthorized trading.

The most recent customer complaint filed against Lyons alleged that from December 2013 through June 2017 the broker engaged in unauthorized and unsuitable trading resulting in $800,000 in damages. The complaint was filed in June 2017 and is currently pending. Previously a customer in April 2016 alleged unauthorized trading resulting in $1.2 million in damages. That claim was eventually settled for $400,000.

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.

Broker Investigation: Financial Advisor James Dresselaers

October 3, 2017 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker James Dresselaers (Dresselaers) is under FINRA investigation and subject to one customer complaint. Dresselaers is currently employed by H. Beck, Inc. (H. Beck). The FINRA investigation is looking into potential violations of NASD Rules 2310 and 2110 or Rules 2111 and 2010 relating to the suitability of recommendations to purchase securities made to one customer. In December 2015 a customer filed a complaint alleging Dresselaers that recommended unsuitable investments in exchange traded funds and equity securities.

A common problem with exchange traded funds is a subset of investments called leveraged exchanged traded funds (Non-Traditional ETFs). As a background, Non-Traditional ETFs behave drastically different and have different risk qualities from traditional ETFs. While traditional ETFs seek to mirror an index or benchmark, Non-Traditional ETFs use a combination of derivatives instruments and debt to multiply returns on underlining assets, often attempting to generate 2 to 3 times the return of the underlining asset class. Non-Traditional ETFs are also used to earn the inverse result of the return of the benchmark.

However, the risks of holding Non-Traditional ETFs go beyond merely multiplying the return on the index. Instead, Non-Traditional ETFs are generally designed to be used only for short term trading as opposed to traditional ETFs. The use of leverage employed by these funds causes their long-term values to be dramatically different than the underlying benchmark over long periods of time. For example, between December 1, 2008, and April 30, 2009, the Dow Jones U.S. Oil & Gas Index gained two percent while the ProShares Ultra Oil and Gas, a fund seeking to deliver twice the index’s daily return fell six percent. In another example, the ProShares UltraShort Oil and Gas, seeks to deliver twice the inverse of the index’s daily return fell by 26 percent over the same period.

Advisor Joe Hede Terminated By Paulson Investment Company Over Private Securities Transactions

October 2, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Minish “Joe” Hede (Hede), in April 2017, was terminated by his then employer Paulson Investment Company, LLC (Paulson Investment) subsequent to the initiation of customer arbitration claim alleging fraud, negligence and unjust enrichment and for failure to comply with internal investigation.

Also in April 2017 Hede was subject to an arbitration complaint alleging damages of $1,000,000 stemming from the sale of a promissory note and allegations of fraud, negligent misrepresentations, negligence, and unjust enrichment. The claim is currently pending.

At this time the extent and scope of Hede’s sales of this product is unknown. The only outside business activity disclosure Hede made publicly is that he is a silent partner in a restaurant called Prime 16. FINRA requires brokers to disclose their outside businesses because the risk to investors is that the broker will use such businesses to engage in unauthorized securities activities. 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”.

James Geake Subject to Variable Annuity and Alternative Investment Complaints

October 2, 2017 | by Staff Attorney

In February 2017, broker James Geake (Geake) was subject to a customer complaint alleging $347,083 in damages concerning equity indexed annuities. The customer alleges that he was sold equity indexed annuities that gave the broker a bonus for signing clients and that it was a bait and switch scheme. The complaint is currently pending.

Geake is currently associated with Madison Avenue Securities, LLC (Madison Avenue). The law offices of Gana Weinstein LLP are currently investigating customer complaints concerning this broker. According BrokerCheck Geake has a total of four customer complaint disclosures including allegations of unsuitable investments in annuities and alternative investments among other claims.

Equity indexed and 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.

Gana LLP Investigates Pharmaceutical Companies Underwritten by Brokerage Firms

September 29, 2017 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating pharmaceutical company stocks underwritten and recommended by brokers at National Securities Corporation and vFinance. IPOs and offerings of small pharmaceutical companies are incredibly risky – on par with the risks of penny stocks. Most small pharmaceutical companies have limited business operations other than research and development of a handful of drugs. Often times the entire value of the company’s stock is a wager on FDA or other regulatory approval of a limited number of drugs – in some instances a single drug. Every announcement concerning the fate of drug can be the death knell of the stock and company.

Take the example of Northwest Biotherapeutics, Inc. The stock peaked in July 2015 at over $12 a share. Then one month later in one day the stock dropped 16% after news came out that a phase 3 clinical trial was halted for the company’s lead compound. By July 2016 the company would trade at under $.50 a share, nearly a complete loss.

National Securities Corporation or vFinance are believed to be underwriting and offering investments in the following pharmaceutical companies:

Advisor Peter Butler Terminated Over Private Securities Sales

September 29, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Peter Butler (Butler), in January 2017, was terminated by his firm Ameriprise Financial Services, Inc. (Ameriprise) over claims by the firm that Butler “resigned while on suspension pending termination for violation of company policy related to selling away and disclosure of an outside activity.” In addition to the termination Butler has been subject to one regulatory action and four customer complaints.

The regulatory action by FINRA found that Butler failed to reasonably supervise a broker who was employed as a sales associate and office manager. FINRA found that Butler failed to detect and prevent the office manager from converting money from a business organization belonging to Butler. FINRA determined that the office manager used this control to convert funds from the business in order to pay himself an additional salary and unauthorized commissions, as well as to otherwise take money to which he was not entitled. In addition, funds were converted from firm customers who were also his family members and domestic partner by depositing those funds into the business’ bank account, from which he continued to make unauthorized withdrawals.

At this time it is unknown the extent and nature of the private securities transactions that formed the basis of the employment separation. FINRA requires brokers to disclose their outside businesses because the risk to investors is that the broker will use such businesses to engage in unauthorized securities activities. 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”.

FINRA Bars Former First Allied Broker John Kai

September 26, 2017 | by Staff Attorney

The investment lawyers of Gana Weinstein LLP are investigating allegations made by The Financial Industry Regulatory Authority (FINRA) against former First Allied broker John Kai (Kai), working out of Hilo, Hawaii. According to Kai’s file on FINRA’s BrokerCheck, he was suspended in June 2017 for failing “to respond to FINRA requests for information” and was barred from the securities industry on September 12, 2017.

Kai entered the industry in 1991 and worked for Merrill Lynch, Pierce, Fenner & Smith Incorporated until 1995. He then moved to Painewebber Incorporated from 1995 until 1999. From 1999 until 2006, he was with Linsco/Private Ledger Corp. From 2006 until 2010, Kai was with Commonwealth Financial Network. And finally, he was with First Allied Securities, Inc. from 2010 until 2017 when he was terminated.

First Allied terminated John Kai in April for violating “numerous firm policies including communication with the public, undisclosed private securities transactions and outside business activity, borrowing funds from a client, and exercising discretion in clients’ brokerage accounts without the firm’s approval.”

American Realty Capital Hospitality Investors Suffer Losses

September 25, 2017 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating investor losses in American Realty Capital Hospitality Trust Inc. (Hospitality Trust), a non-traded real estate investment trust (Non-Traded REIT). The company then changed its name to Hospitality Investors Trust Inc.

Hospitality Trust acquires select-service lodging properties and brand national hotel. Hospitality Trust initial offering was January 2014 and raised $911 million. Hospitality Trust suspended dividend distributions in January 2017 and is not currently offering a redemption plan to shareholders trapping investors in the product.

According to a secondary market providers which allow investors to bid and sell illiquid products such as Non-Traded REITs, Hospitality Trust sells for just $10.50 per share – a significant loss on the original purchase price of $25.00.