Securities Lawyers Blog

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.

FINRA Bars Advisor William Wyman Over Private Securities Transactions

September 24, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor William Wyman (Wyman), in January 2017, was barred by FINRA over his failure to respond to FINRA inquiries. FINRA’s inquiries came after a customer complained about a private securities transaction. Wyman’s employment with his brokerage firm, Ameriprise Financial Services, Inc. ended in November 2016 on the heels of the allegations. At this time it is unknown the extent of Wyman’s private securities transactions. His disclosures list ownership of Wyman and Shier Financial Services and do not disclose involvement in other outside businesses.

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”.

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.

FINRA Bars Former AXA Representative John P. Correnti

September 20, 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 John P. Correnti (Correnti), working out of Cleveland, Ohio. Correnti allegedly failed to provide FINRA staff with information and documents related to an investigation into claims that Correnti engaged in undisclosed outside business activities. The failure to provide those documents and information to FINRA resulted in an automatic bar from the industry.

Correnti began his securities career in 2007. From 2007 until 2015, Correnti was associated with MVP Financial. He moved to Forest Securities in 2015 and was with them for less than a year. Finally, he moved to AXA Advisors where he was terminated in less than a year.

According to BrokerCheck records, Correnti was terminated by AXA Advisors in July 2016 “due to his apparent involvement in the possible market manipulation of a low price security.”

Newbridge Securities Advisor Gaetano “Guy” Magarelli Subject to Multiple Customer Complaints

September 20, 2017 | by Staff Attorney

According to BrokerCheck records Gaetano “Guy” Magarelli (Magarelli), now associated with Newbridge Securities Corporation (Newbridge), has been subject to five customer complaints and one lien. According to records kept by The Financial Industry Regulatory Authority (FINRA) Magarelli has been accused by customers of unsuitable investment advice. Some customers have also alleged unauthorized trading among other claims.

The most recent complaint filed in June 2017 alleges $84,000 in damages stemming from a two year period. The claim is currently pending. Another claim was filed by a customer in March 2017 alleging that there were unsuitable trades from 2010 through 2017 causing $131,000 in damages. The claim has been denied by the firm.

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client. In order to make a suitable recommendation the broker must meet certain requirements. First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors. 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 Todd Ryman Subject to Multiple Customer Complaints

September 20, 2017 | by Staff Attorney

According to BrokerCheck records Todd Ryman (Ryman), now associated with SunTrust Investment Services, Inc. (SunTrust), has been subject to six customer complaints and one regulatory action in his career. According to records kept by The Financial Industry Regulatory Authority (FINRA) Ryman has been accused by customers of unsuitable investment advice in a variety of securities including equities, private equity investment funds, and other types of investment vehicles. Some customers have also alleged unauthorized trading, misrepresentations and failure to follow instructions, among other claims.

One customer complaint filed in November 2016 alleged an unsuitable investment in a private equity fund resulting in $250,000 in damages. The claim was settled for $205,193.

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client. In order to make a suitable recommendation the broker must meet certain requirements. First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors. 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.