Securities Lawyers Blog

Morgan Stanley Terminates Broker Brian Sak Over Outside Business Activities

September 21, 2016 | by Staff Attorney

The investment fraud lawyers of Gana Weinstein LLP are investigating the employment termination filed with The Financial Industry Regulatory Authority (FINRA) by Morgan Stanley involving broker Brian Sak (Sak). According to BrokerCheck records Sak is subject to one customer complaint and one employment separation for cause, and one judgment or lien.

According to Morgan Stanley, the firm terminated Sak after alleging Sak engaged in outside real estate investment with a client that was not appropriately disclosed to the firm. Often times such filings indicate that the broker is engaging potentially in private securities transactions, promissory notes, or loans away from the firm. 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”.

At this time it unclear the scope of Sak’s OBAs and/or private securities transactions. According to BrokerCheck records Sak has one customer complaint alleging that the broker sold a promissory note concerning real estate and that Sak recommended that the client invest in an outside real estate investment opportunity of which the Sak was a manager from 2011 to 2014. The complaint alleges $250,000 in damages and the dispute is currently pending. In addition, Sak disclosed a civil judgment of $2,355. An inability to pay debts may also be an indicator that a broker may solicit funds form his clients.

Morgan Stanley Terminates Broker Robert Beck Over Outside Business Activities

September 20, 2016 | by Staff Attorney

The investment fraud lawyers of Gana Weinstein LLP are investigating the employment termination filed with The Financial Industry Regulatory Authority (FINRA) by Morgan Stanley involving broker Robert Beck (Beck). According to BrokerCheck records Beck is subject to three customer complaints and one employment separation for cause.

According to Morgan Stanley, the firm terminated Beck after raising concerns relating to employee’s disclosures relating to outside activities. Often times such filings indicate that the broker is engaging potentially in private securities transactions, promissory notes, or loans away from the firm. 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”.

At this time it unclear the nature and scope of Beck’s OBAs and/or private securities transactions. According to BrokerCheck records Beck disclosed that he is involved in outside business activities including rental property in Philadelphia. Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, real estate brokers, or insurance agents to clients of those side practices.

Customers Files Complaints Against Wells Fargo Broker Thomas Braley

September 19, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Thomas Braley (Braley). According to BrokerCheck records Braley has been subject to at least four customer complaints. The customer complaints against Braley alleges securities law violations that including unauthorized trading , unsuitable investments, and misrepresentations among other claims.

In May 2016 a customer filed a complaint against Braley alleging that unsuitable investment recommendations were made, excessive trading, and misrepresentation from January 2013 to February 2016 that caused $180,000 in damages. The complaint is currently pending.

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. Advisors are also 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.

ICON Equipment Leasing Sanctioned By SEC Over False Valuations

September 19, 2016 | by Staff Attorney

The Securities and Exchange Commission (SEC) announced that ICON Capital LLC, an entity that manages equipment leasing funds, agreed to settle charges that it caused four of its funds to report materially inaccurate financial results in their SEC filings and pay a $750,000 penalty.

Our firm has represented many clients in equipment leasing products like LEAF and ICON. All of these investments come with high costs that do not compensate investors for the extreme risk being taken. Equipment leasing funds historically underperform even safe benchmarks, like U.S. treasury bonds. Investors are destined to lose money in equipment leasing programs like LEAF Equipment Leasing Income Funds I-IV and ICON Leasing Funds Eleven and Twelve. The high costs and fees associated with these investments make significant returns virtual impossibility. Further, investor often fail to understand that they have lost money under 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.

On top of these high risks, the SEC has now found that the funds’ opaque nature has allowed the funds to hide more investor losses. According to the SEC’s order instituting a settled administrative proceeding, the four funds’ financial results were misstated due to accounting errors relating to the impairment of assets and that ICON failed to comply with Generally Accepted Accounting Principles (GAAP) on multiple occasions.

Gana LLP Investigates Platinum Partner LP Hedge Funds Investor Losses

September 18, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating the regulatory and criminal investigations concerning the Platinum Partners LP Funds. The hedge funds include the Platinum Partners Value Arbitrage Funds and the Platinum Partners Credit Opportunities Fund.

In June, news sources began reporting that the New York-based hedge fund began liquidating its funds, after the firm’s longtime associate Murray Huberfeld (Huberfeld) was accused of arranging for a $60,000 bribe and kickback, in a Salvatore Ferragamo bag, to a correctional officers’ union official. The alleged bribe was a reward to Norman Seabrook, president of the New York City Correction Officers Benevolent Association, for directing the union’s retirement funds to investment with Platinum. The union official allegedly directed $20 million in union investments into the Platinum Partners Value Arbitrage Fund. In addition, Platinum and its chief investment officer, Mark Nordlicht, are also implicated in the probe. Both Seabrook and Huberfeld pleaded not guilty to the charges.

However, it is uncertain at this time if the bribe charges are the end of the story. Federal agents raided Platinum’s office in late June after the charges were announced for reasons reportedly separate from the bribery case. This has caused news sources to speculate as to a potentially wider fallout including the potential that the purported $1.35 billion funds may be involved in a scheme to defraud investors.

Gana LLP Files Complaint on Behalf of Investor Alleging Breach of Fiduciary Duty in the Sale of Merrill Lynch MLCXX6LSER Commodity Index Fund

September 18, 2016 | by Staff Attorney

The investment attorneys of Gana Weinstein LLP have brought a claim on behalf of an investor who suffered substantial losses due to investment recommendations made by his Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill Lynch) advisor, Craig Kinard (Kinard) a proprietary Merrill Lynch fund called the MLCXX6LSER Index (MLC Index). The fund is also referred to as “The Merrill Lynch Commodity Index eXtra—(Excluding Precious Metals) Excess Return Index.” The MLC Index was run at Merrill Lynch by Guido Graff (Graff), Director of Ultra Structured Solutions at Merrill Lynch.

The complaint alleged that the MLC Index is one of the most complex investment products that could be sold to a retail investor and consequently is suitable for very few investors. The strategy involves extreme leverage, commodities, derivatives, options, and swaps risk. Any investor without significant prior experience in all of these categories will not be able to understand the risks or likely performance of the investment under different market conditions. Indeed, in this case the risks and expected performance of the MLC Index proved to be too great a challenge even for the fund managers to understand. In addition, to these problems the MLC Index was offered by Merrill Lynch to clients subject to enormous costs and fees.

The MLC Index is an absolute return strategy investment fund in the long-short commodity arbitrate space. Absolute return investing seeks to produce positive returns over time regardless market conditions. Even when markets are falling, an absolute return fund is advertised to still have the potential to make money. Arbitrage strategies attempt to benefit from an assumed correlation between different market instruments or different markets.

FINRA Sanctions Financial Advisor Zahir Walji Over Private Securities Transactions

September 17, 2016 | by Staff Attorney

The investment fraud lawyers of Gana Weinstein LLP are investigating the regulatory investigation filed by The Financial Industry Regulatory Authority (FINRA) against broker Zahir Walji (Walji). According to BrokerCheck records Walji is subject to five customer complaints one FINRA matter and one employment separation for cause. The FINRA regulatory matter concerns an investigation surrounding alleged sales of private securities transactions. (FINRA No. 2012034370501).

According to FINRA, from April 2011 through October 2012, while Walji was associated with UBS Financial Services, Inc (UBS), Walji participated in two outside business activities (OBAs) and participated in six private securities transactions without providing prior written notice of the OBAs or the private securities transactions to his firm. In addition, FINRA alleged that although Walji provided notice to UBS of two additional OBAs, he did not comply with the restrictions that UBS placed on him. As a result FINRA determined that Walji violated FINRA Rules. 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”.

At this time it unclear the nature and scope of Walji’s OBAs and private securities transactions. According to BrokerCheck records Walji disclosed that he is involved in outside business acitvities including KML, Inc. – a real estate related company, Round Rock – a real estate company, and Triad Equities, LLC – a real estate company. Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, or insurance to clients of those side practices.

FINRA Bars Financial Advisor Douglas Simanski Over Converting Client Funds

September 17, 2016 | by Staff Attorney

The investment fraud lawyers of Gana Weinstein LLP are investigating the regulatory investigation filed by The Financial Industry Regulatory Authority (FINRA) against broker Douglas Simanski (Simanski). According to BrokerCheck records Simanski is subject to five customer complaints one FINRA matter and one employment separation for cause. The FINRA regulatory matter concerns the agencies attempt to investigate the circumstances surrounding alleged sales of private securities transactions and client fund conversion. (FINRA No. 2016049621301). When Simanski refused to cooperate with the investigation, FINRA automatically barred Simanski from the industry.

According to FINRA, Simanski consented to the sanction and findings related to an investigation into allegations for conversion of funds. 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”. At this time it unclear the nature and scope of Simanski’s outside business activities and private securities transactions. Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, or insurance to clients of those side practices.

Simanski entered the securities industry in 1995. From 1999 until June 2016 Simanski was registered with Next Financial Group, Inc. out of the firm’s Altoona, Pennsylvania office location. At that time Simanski was terminated over allegations that he sold fictitious investments and converted the funds for his own personal use and benefit.

FINRA Bars Scott Muirhead Over Private Security Transaction Investigation

September 16, 2016 | by Staff Attorney

The investment fraud lawyers of Gana Weinstein LLP are investigating the regulatory investigation filed by The Financial Industry Regulatory Authority (FINRA) against broker Scott Muirhead (Muirhead). According to BrokerCheck records Muirhead is subject to one bankruptcy filing in 2013 and one criminal matter. The FINRA regulatory matter concerns the agencies attempt to investigate the circumstances surrounding alleged sales of private securities transactions. (FINRA No. 2015044785301). When Muirhead refused to cooperate with the investigation, FINRA automatically barred Muirhead from the industry.

According to FINRA, Muirhead consented the entry of findings that he failed to respond to FINRA’s requests for documents during its investigation into allegations that Muirhead engaged in unapproved private securities transactions and misused customer funds. 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”. At this time it unclear the nature and scope of Muirhead’s outside business activities and private securities transactions. Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, or insurance to clients of those side practices.

Muirhead entered the securities industry in 2006. From April 2008 until September 2010 Muirhead was registered with Princor Financial Services Corporation. From September 2010 until March 2011 Muirhead was associated with Bright Trading, LLC. Thereafter from June 2011 until June 2012 Muirhead was registered with Signator Investors, Inc. Then from June 2012 until November 2012, Muirhead was associated with Multi-Financial Securities Corporation. Finally, from March 2014 until December 2014, Muirhead was associated with Merrill Lynch, Pierce, Fenner & Smith Incorporated out of the firm’s Jacksonville, Florida office location.

VFG Securities Broker Mark Trewitt Subject to Customer Complaints Over Non-Traded REITs and Private Placements

September 14, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating a customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Mark Trewitt (Trewitt). According to BrokerCheck records Trewitt has been subject to at least four customer complaints. The customer complaints against Trewitt allege securities law violations that including unsuitable investments and misrepresentations among other claims. Many of the complaints involve direct participation products (DPPs) and private placements including non-traded real estate investment trusts (REITs), and other alternative investments.

Our firm has represented many clients in these types of products. 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.

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.