Securities Lawyers Blog

Kevin Curry Sanctioned By FINRA Over Unauthorized Trading

July 7, 2017 | by Staff Attorney

According to BrokerCheck records Kevin Curry (Curry) has been sanctioned by The Financial Industry Regulatory Authority (FINRA) over allegations that the broker exercised discretion in a customer’s account without obtaining written authorization or written approval of the account as discretionary from his brokerage firm. FINRA found that Curry and spoke to the customer and agreed upon investments but that Curry exercised time and price discretion in executing transactions on dates when he had not spoken with the customer in violation of the rules.

In addition, to the FINRA sanctions, two customers have lodged complaints against Curry alleging a number of securities law violations including that the broker made engaged in churning (excessive trading), unauthorized trading, and fraud among other claims.

In June 2014, a customer complaint was filed alleging churning, unauthorized trading, fraud, and failure to supervise claiming $400,000 in damages. The claim was settled.

Morgan Stanley Broker Michael Fitz-Gerald Subject to Customer Complaints

July 7, 2017 | by Staff Attorney

Morgan Stanley financial advisor Michael Fitz-Gerald (Fitz-Gerald) has subject to five customer complaints according to BrokerCheck records. Fitz-Gerald has been employed with Morgan Stanley since November 2008. According to BrokerCheck the most recent customer complaints allege unsuitable investments and failure to diversify the portfolio among other claims.

The most recent complaint was filed in February 2017 and alleges investments in energy stocks since 2014 were unsuitable and did not specify damages. The claim is currently pending. In February 2016 another customer filed a complaint alleging $50,000 in damages as a result of a failure to diversify the portfolio. The claim was settled. The securities lawyers of Gana Weinstein LLP continue to investigate the customer complaints against Fitz-Gerald.

Our firm is currently tracking a number of brokers that severely concentrated their clients in the oil and gas and commodities sectors which has historically possessed speculative risks due to the volatile nature of commodities prices. Before making such recommendations, financial advisors must ensure that the oil and gas and commodities related investments being recommended to their client is appropriate for the investor and conduct due diligence on the company before making the recommendation. Unfortunately, sometimes adivsors fail to conduct sufficient research or understand the risks and prospects of the company and the volatile nature of commodities.

FINRA Files Complaint Against Dennis Mehringer Over Mutual Fund Switching

July 6, 2017 | by Staff Attorney

According to BrokerCheck records The Financial Industry Regulatory Authority (FINRA) has filed a complaint against Dennis Mehringer (Mehringer) over allegations that Mehringer made unsuitable recommendations that caused a customer to engage in excessively expensive short-term trading of mutual fund Class A shares. According to FINRA, Mehringer repeatedly recommended, and caused the customer to engage in, short-term purchases and sales of 84 mutual fund Class A positions in five of the customer’s accounts. FINRA alleged that in 47 of the 84 purchase transactions, the customer paid front-end sales loads ranging from four to five percent and that all but 17 of these 84 mutual fund positions were held for less than six months while 35 of them were held for less than three months. FINRA found that Mehringer received $169,735 in commissions from the transactions and that the trades were without reasonable grounds to believe that the recommendations were suitable for the customer in light of the frequency and nature of the transactions based on the customer’s investment objectives.

Class A mutual fund share investments are long-term trades that come with significant sales loads. Frequent trading and switching between the mutual funds and mutual fund families is unsuitable for any customer.

Mehringer is currently associated with Western International Securities, Inc. (Western International) and has been subject to nine customer complaints alleging unsuitable investments, overconcentration, excessive commission charges among other claims. The securities lawyers of Gana Weinstein LLP continue to investigate the customer complaints against Mehringer.

Lee Rosenberg Subject to Variable Annuity Complaint

July 6, 2017 | by Staff Attorney

In February 2017, broker Lee Rosenberg (Rosenberg) was subject to a customer complaint alleging $250,000 in damages concerning mutual funds and variable annuities. The complaint is currently pending. Rosenberg is currently associated with Cadaret, Grant & Co., Inc. (Cadaret Grant). The law offices of Gana Weinstein LLP are currently investigating customer complaints concerning this broker. According BrokerCheck the Rosenberg has a total of four customer complaint disclosures including allegations of unsuitable investments and unauthorized trading among other claims.

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.

However, the benefits of variable annuities are often outweighed by the terms of the contract that include exorbitant expenses such as surrender charges, mortality and expense charges, management fees, market-related risks, and rider costs.

Broker John Hudson Has Massive Tax Liens

July 5, 2017 | by Staff Attorney

Since the beginning of 2010 broker John Hudson (Hudson), currently employed by Next Financial Group, Inc. (Next Financial), racked up eight total tax liens and other debts. Some of these tax liens are quite large including on in September 2010 for $1,492,190. According to BrokerCheck this tax lien is still active and hasn’t been satisfied. While no customer complaints have been filed against Hudson and the presence of large liens does not necessarily mean that the broker will engage in risky behavior it is an important red flag for investors to consider. The risk is that the broker will be influenced to recommend high commission products or trading strategies to satisfy the liens at investors’ expense. In extreme cases brokers have even misappropriated funds or asked clients for loans to satisfy their personal debts. There is no indication that any wrongdoing has occurred in Hudson’s case.

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.

According to newsources, only about 7.3% of financial advisors have any type of disclosure event on their records among brokers employed from 2005 to 2015. Brokers must publicly disclose reportable events on their CRD customer complaints, IRS tax liens, judgments, investigations, and even criminal matters. However, studies have found that there are fraud hotspots such as certain parts of California, New York or Florida, where the rates of disclosure can reach 18% or higher. Moreover, according to the New York Times, BrokerCheck may be becoming increasing inaccurate and understate broker misconduct as studies have shown that 96.9% of broker requests to clean their records of complaints are granted.

Advisor Thomas Oliphint Terminated By LPL Financial Over Outside Business Activities

July 5, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA), in November 2016, Thomas Oliphint (Oliphint) was discharged and terminated by LPL Financial LLC (LPL) over allegations that Oliphint violated firm policy regarding outside business activities. Oliphint has two other customer complaints on his record. In the industry all such activities must be disclosed and approved by the firm before the broker can engage in them.

According to Oliphint’s disclosures his outside business activities include Oliphint Associates, LLC d/b/a One Advocate Group and Grand Purpose Advocate. At this time it is unclear what outside business activity Oliphint was engaged in that led to his termination. However, 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”. Brokerage firms are responsible for supervising and preventing such activities.

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.

Abraham Heimann Subject to Multiple Customer Complaints

July 3, 2017 | by Staff Attorney

Since the beginning of 2017 broker Abraham Heimann (Heimann) has subject to three customer complaints alleging millions in damages. Heimann left his last employer Cetera Advisors LLC (Cetera) in February 2016. According BrokerCheck the customer complaints allege breach of fiduciary duty, unsuitable investments, negligence, and failure to diversify the portfolio, among other claims.

The most recent complaint was filed in April 2017 and alleges breach of fiduciary duty, negligence, and failure to diversify the portfolio and claims $30,000 in damages. The claim is currently pending. In March 2017 a customer filed a complaint alleging $2,000,000 in damages due to breach of fiduciary duty and negligence. The complaint is currently pending. The securities lawyers of Gana Weinstein LLP continue to investigate the customer complaint against Heimann.

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.

Richard Lucker Subject to $14,000,000 Customer Complaint

July 3, 2017 | by Staff Attorney

In March 2017, Broker Richard Lucker (Lucker) was subject to a massive complaint alleging $14,447,501 in damages. Lucker is currently employed by Wells Fargo Clearing Services, LLC (Wells Fargo). According BrokerCheck the customer complained that there was a failure to supervise with respect to Lucker’s management of her account from 2011 to 2013. There are no other details provided as to which products or the type of trading activity that occurred that caused the losses complained of. The complaint is currently pending. The securities lawyers of Gana Weinstein LLP continue to investigate the customer complaint against Lucker.

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.

According to newsources, only about 7.3% of financial advisors have any type of disclosure event on their records among brokers employed from 2005 to 2015. Brokers must publicly disclose reportable events on their CRD customer complaints, IRS tax liens, judgments, investigations, and even criminal matters. However, studies have found that there are fraud hotspots such as certain parts of California, New York or Florida, where the rates of disclosure can reach 18% or higher. Moreover, according to the New York Times, BrokerCheck may be becoming increasing inaccurate and understate broker misconduct as studies have shown that 96.9% of broker requests to clean their records of complaints are granted.

Financial Adviser Michael Jay Sharenow Subject to Multiple Client Disputes

June 27, 2017 | by Staff Attorney

The investment fraud lawyers of Gana Weinstein LLP are examining multiple customer disputes filed with the Financial Industry Regulatory Authority (FINRA) against broker Michael Jay Sharenow (Sharenow). Sharenow’s FINRA BrokerCheck record shows several disclosures mainly pertaining to unsuitable investments.

In November 2016, a customer alleged that he or she instructed Sharenow to buy highly rated bonds but Sharenow instead bought two inappropriate securities. This dispute settled in November 2016 for the amount of $8,258.42.

A currently pending case against Sharenow was filed in October 2016 for allegedly over-concentrating a client’s portfolio during the period of 2012 to 2015 while he was employed at Wells Fargo Advisors. The clients claim that the alleged damages are greater than $810,000.00.

James Lynn Subject to Multiple Complaints Over REIT Investment Sales

June 27, 2017 | by Staff Attorney

Broker James Lynn (Lynn) was recently terminated by his former employer Voya Financial Advisors, Inc. (Voya). According BrokerCheck Voya alleged that Lynn provided misleading information to the firm during a complaint investigation. In addition to the termination, Lynn has been subject to six customer complaints, one bankruptcy and three judgments or tax liens. The securities lawyers of Gana Weinstein LLP are investigating the customer complaints against Lynn.

Many of the complaints concern variable annuities or direct participation products (DPPs) such as non-traded real estate investment trusts (REITs). The most recent complaint filed in May 2017 requested $115,000 in damages alleging that the investor claimed the that the REIT investments and the replacement of a variable annuity policy was unsuitable. The REITs were purchased in 2014 and 2015. The claim is currently pending.

All of these investments come with high costs and historically have underperformed even safe benchmarks, like U.S. treasury bonds. For example, products like oil and gas partnerships, REITs, and other alternative investments are only appropriate for a narrow band of investors under certain conditions due to the high costs, illiquidity, and huge redemption charges of the products, if they can be redeemed. However, due to the high commissions brokers earn on these products they sell them to investors who cannot profit from them. Further, investor often fail to understand that they have lost money until many years after agreeing to the investment. In sum, for all of their costs and risks, investors in these programs are in no way additionally compensated for the loss of liquidity, risks, or cost.