Citigroup

Former LPL Financial Broker Robert Tricarico Accused of Stealing Customer Funds

June 25, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently barred broker Robert Tricarico (Tricarico) concerning allegations that Tricarico failed to respond to the regulator’s requests to provide information and documents concerning the an investigation into claims that Tricarico may have stolen money from clients.

Tricarico entered the securities industry in 1986. From June 2003, until April 2009, Tricarico was associated with Citigroup Global Markets Inc. Thereafter, from March 2009, to May 2011, Tricarico became registered with Wells Fargo Advisors Financial Network, LLC (Wells Fargo). Finally, from May 2011, until January 2015, Tricarico was associated with LPL Financial LLC (LPL).

On a Form U5, LPL terminated Tricarico alleging that the broker was the subject of a lawsuit by the executrix of a deceased client that alleged misappropriation of funds. Thereafter, FINRA sought to investigate LPL’s statements by sending Tricarico requests for information. On January 22, 2015, FINRA sent a letter to Tricarico requesting that Tricarico provide documents and information including his personal bank account records. Despite, multiple requests for information and some additional correspondence with Tricarico and his counsel the broker did not provide sufficient documents and information to cover FINRA’s requests. Accordingly, FINRA imposed a bar from the securities industry.

FINRA Fines 10 Brokerage Firms $43.5 Million For Conflicts of Interests in Toys “R” Us IPO

January 16, 2015 | by Staff Attorney

The merry go-round of Wall Street fraud continues. After the housing crisis where Wall Street sold terrible home loans to investors we’ve arrived back to dot.com era frauds of selling favorable research. Enter the recent fine imposed by The Financial Industry Regulatory Authority (FINRA) that 10 of the largest brokerage firms were fined a total of $43.5 million for allowing their equity research analysts to solicit investment banking business by offering favorable research coverage in connection with the 2010 planned initial public offering of Toys “R” Us.

FINRA fines are as follows:

Barclays Capital Inc. – $5 million

Former Sterne Agee Broker Dean Mustaphalli Alleged to Have Wrongfully Run $6 Million Hedge Fund

July 15, 2014 | by Staff Attorney

The attorneys at Gana Weinstein LLP are investigating claims that former Sterne Agee Financial Services Inc. (Sterne Agee) broker Dean Mustaphalli (Mustaphalli) solicited millions of dollars from investors running to run a $6 million hedge fund on the side without formerly disclosing the activity to his brokerage firm. As reported by InvestmentNews, the Financial Industry Regulatory Authority (FINRA) charged Mustaphalli for founding and receiving commissions from a hedge fund he created called Mustaphalli Capital Partners in or about 2011 without informing his. Mustaphalli sold the investment through his registered investment advisory firm, Mustaphalli Advisory Group.

According to allegations made, Mustaphalli solicited money for the fund from at least 25 investors over six months during 2011. The fund invested in publicly traded equity and debt securities has since declined by approximately 90% according to investors. At least some of Mustaphalli’s clients were direct customers of Sterne Agee as well. According to FINRA, Mustaphalli was not cooperating with the agencies requests to provide account statements for the hedge fund. Typically in these cases if a broker does not cooperate with FINRA’s department of enforcement and the agency proves he withheld information the broker would be barred from the securities industry among other remedies that could be imposed.

Mustaphalli disclosed the existence of the Mustaphalli Advisory to Sterne Agee but did not disclose that he was managing the hedge fund through the firm according to FINRA. However, under the FINRA rules, brokers must fully disclose hedge funds for approval to their member firm and be supervised by the firm under Rule 3040.

Claus Foerster Barred Over Allegations Concerning Fictitious “S.G. Investments”

July 8, 2014 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) has sanctioned and barred broker Claus Foerster (Foerster) concerning allegations that Foerster solicited firm customers to invest in a fictitious fund “S.G. Investments” and converted approximately $3 million in funds from 13 customers for his personal use. FINRA rules provide that no person associated with a member shall make improper use of a customer’s securities or funds.

Foerster entered the securities industry in 1988 when he associated with J.C. Bradford & Co. Between 1997 and 2008, Foerster was associated with Citigroup Global Markets, Inc. (Citigroup). From 2008 until February 2013, Foerster was associated with Morgan Keegan & Co. Inc. Thereafter, and until June 2014, Foerster was last associated with Raymond James & Associates, Inc., (Raymond James) when his registration was terminated based on the conduct described by FINRA in the AWC.

FINRA alleged that beginning in 2000, Foerster solicited securities customers to invest in an entity called S.G. Investments. S.G. Investments was marketed by Foerster to investors as an income-oriented investment. As part of Foerster’s scheme, FINRA alleged that he instructed customers to move funds from their brokerage accounts to their personal bank accounts via wire or electronic funds transfer. After that, FINRA found that Foerster would then instruct the customers to write checks from their personal bank accounts payable to “S.G. Investments.” FINRA determined that S.G. Investments was not an investment fund but instead a bank account owned and controlled by Foerster. According to FINRA, Foerster hid his scheme by providing customers with fictitious account statements. In addition, FINRA found that in at least two instances Foerster provided customers with purported dividend payments on a monthly basis in typical Ponzi Scheme fashion. Through these actions, FINRA found that Foerster converted approximately $3 million from 13 customers.

Senator Warren proposes 21st Century Glass-Steagall Act

November 27, 2013 | by Staff Attorney

On November 12, 2013, Senator Elizabeth Warren warned that the “too big to fail” problem has only worsened since the 2008 financial crisis. JP Morgan Chase & Co., Bank of America Corp., Citigroup Inc., and Well Fargo & Co. each hold more than half of the total banking assets in the country. As large concentrations of wealth reside with a small number of banks, the possibility of another financial crisis looms unless certain reforms are implemented.

While the big banks become more concentrated and more complex, the Dodd-Frank Act’s implementation struggles. The agencies implementing the Dodd-Frank Act have missed more than 60% of the deadlines even though regulators continue to meet with various banks. Not only are regulators dragging their feet, but also the House recently passed two bills to delay provisions of the Dodd-Frank Acts. The Retail Investor Protection Act (RIPA) prevents the Department of Labor from defining circumstances under which an individual is considered a fiduciary. The Swaps Regulatory Improvement Act (SRIA) amends the swaps push-out requirement. The two bills passed by the House compound the delays of the regulatory implementation.

Although the House continues to hinder the Dodd-Frank Act, Senator Warren believes Congress needs to step in order to prevent another financial crisis. Senator Warren along with Senators John McCain, Maria Cantwell and Angus King urges the passage of the “21^st Century Glass-Steagall Act.” As Senator Warren stated, the new Glass-Steagall Act, “would reduce failures of the big banks by making banking boring, protecting deposits, and providing stability to the system even in bad times.”

FINRA Arbitration Panel Awards Investors $3.1 Million Against Citigroup Due to Failure to Supervise Selling Away Activities

September 18, 2013 | by Staff Attorney

A Financial Industry Regulatory Authority (FINRA) arbitration panel ruled that Citigroup Inc. (Citigroup) must pay $3.1 million to a Florida couple who alleged that their financial advisor, Scott King (King), solicited them to invest in real estate developments. The case was filed by Dr. Nasirdin Madhany and his wife, Zeenat Madhany, alleging negligent supervision, breach of fiduciary duty, fraud, and breach of contract. The panel’s decision represents an important win for consumers and refutation of common arguments employed by the industry to avoid responsibility for their employee’s wrongful conduct.

The case involved a typical, and all too common, “selling away” scenario. Selling away occurs where a broker sells securities to customers that are not approved by the brokerage firm. Selling away investments represent a substantial risk to the investing public because brokerage firms do not record the transactions on their books and records and do not supervise the activity to ensure that the investment is appropriate for the customer.

Brokerage firms usually defend selling away cases by arguing that they were not aware of the securities transactions and therefore cannot be found liable. Firms also argue that they do not know the broker’s customer because in many cases the investor does not have a brokerage account with the firm. Therefore, the firm argues that it cannot be responsible for investment losses occurring to investors they do not know and away from the firm.