Securities Lawyers Blog

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.

Broker Christopher Cowans Subject to Multiple Churning Complaints

September 14, 2016 | by Staff Attorney

The securities fraud lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Christopher Cowans (Cowans). According to BrokerCheck records Cowans has been the subject of at least nine customer complaints and one regulatory action. The customer complaints against Cowans allege a number of securities law violations including that the broker made unsuitable investments, unauthorized trading, and churning (excessive trading) among other claims.

In December 2014, the State of Massachusetts required Cowans brokerage firm, Arthur W. Wood Company, Inc. (Arthur W. Wood), to agree to a heightened supervision plan for Cowans in light of the fact that Cowans “has been the subject of twelve customer complaints…alleging…making excessive trades…”

The most recent complaint was filed in December 2015 alleging that Cowans engaged in excessive trading from March 2011 until December 2013 causing $600,000. The complaint is still pending.

Woodstock Financial Group Broker John Tinnelly Subject to Churning Complaints

September 13, 2016 | by Staff Attorney

The securities fraud lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker John Tinnelly (Tinnelly). According to BrokerCheck records Tinnelly has been the subject of at least ten customer complaints and one regulatory action. The customer complaints against Tinnelly allege a number of securities law violations including that the broker made unsuitable investments, unauthorized trading, and churning (excessive trading) among other claims.

The most recent complaint was filed in April 2015 and alleged churning, unsuitable investments, unauthorized trading, breach of contract from July 2010 until November 2012 causing $168,924 in damages. The complaint settled with no contribution by the broker. In March 2015, another customer complaint alleged churning, unsuitable investments, unauthorized trading, breach of contract from February 2010 until March 2011 causing $118,375 in damages. The complaint is currently pending.

When brokers engage in excessive trading, sometimes referred to as churning, the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time. Often times the account will completely “turnover” every month with different securities. This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades. Churning is considered a species of securities fraud. The elements of the claim are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions. A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements. Certain commonly used measures and ratios used to determine churning help evaluate a churning claim. These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.

Broker Steven Shmulewitz Subject to Customer Churning Complaints

September 13, 2016 | by Staff Attorney

The securities fraud lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Steven Shmulewitz (Shmulewitz). According to BrokerCheck records Shmulewitz has been the subject of at least nine customer complaints. The customer complaints against Shmulewitz allege a number of securities law violations including that the broker made unsuitable investments, unauthorized trading, and churning (excessive trading) among other claims.

The most recent complaint was filed in May 2016 and alleged unauthorized use of margin in the customer’s account from 2011 through March 2014 causing $250,000. Thee complaint settled for $52,800. In May 2015, another customer alleged excessive commissions, mishandling of the account and misrepresentations leading to $21,000 in damages. The complaint settled for $20,000.

When brokers engage in excessive trading, sometimes referred to as churning, the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time. Often times the account will completely “turnover” every month with different securities. This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades. Churning is considered a species of securities fraud. The elements of the claim are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions. A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements. Certain commonly used measures and ratios used to determine churning help evaluate a churning claim. These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.

Broker Craig Hayward Subject to Customer Complaints Over Non-Traded REITs and Alternative Investments

September 9, 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 Craig Hayward (Hayward). According to BrokerCheck records Hayward has been subject to at least six customer complaints. The customer complaints against Hayward alleges 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 oil and gas partnerships, 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.

Worden Capital Broker Sean McCabe Subject to Churning Complaints

September 9, 2016 | by Staff Attorney

The securities fraud lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Sean McCabe (McCabe). According to BrokerCheck records McCabe has been the subject of at least four customer complaints. The customer complaints against McCabe allege a number of securities law violations including that the broker made unsuitable investments, unauthorized trading, and churning (excessive trading) among other claims.

The most recent complaint was filed in March 2016 and alleged breach of fiduciary duty, negligence, misrepresentation, and negligence causing $550,000 in damages. The complaint is currently pending. Also in March 2016 another investor filed a similar complaint and alleged breach of fiduciary duty, negligence, misrepresentation, and negligence causing $150,000 in damages. The complaint is currently pending

When brokers engage in excessive trading, sometimes referred to as churning, the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time. Often times the account will completely “turnover” every month with different securities. This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades. Churning is considered a species of securities fraud. The elements of the claim are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions. A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements. Certain commonly used measures and ratios used to determine churning help evaluate a churning claim. These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.

Broker Larry Wolfe Discharged By Herbert J. Sims Over Unauthorized Trading

September 8, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Larry Wolfe (Wolfe). According to BrokerCheck records, Reda has been subject to nine disclosures including eight customer complaints and one employment termination for cause. The customer complaints against Wolfe allege a number of securities law violations including that the broker made unsuitable investments, fraud, unauthorized trading, and omissions of material information among other claims.

In December 2015, brokerage firm Herbert J. Sims & Co. Inc. (Herbert J. Sims) terminated Wolfe for cause alleging that the broker exercised discretion, in a non-discretionary account, in making trades for an account without speaking with client before trades in violation of firm policies among other causes for the broker’s termination.

The most recent customer complaint was filed In May 2016 claims $1,500,000 in damages and alleges seriously-egregious broker and broker/dealer misconduct upon the client including unauthorized trading, unsuitable investment recommendations, fraudulent misrepresentations and omissions of material information, violation H.J Sims policies and procedures.