H. Beck

Broker Investigation: H. Beck’s Advisor Michael Child

December 22, 2015 | by Staff Attorney

The investment lawyers of Gana Weinstein LLP are investigating customer complaints against broker Michael Child (Child). There are at least 2 customer complaints against Child. In addition, there is one regulatory complaint and three employment separations disclosed. The customer complaints against Child allege a number of securities law violations including that the broker made unsuitable investments, misrepresentations, negligence, and unauthorized trading among other claims. One of the claims involves allegations around the recommendation of a variable annuity.

The regulatory action was initiated by the state of Utah in March 2012 and alleged that certain information on a suitability form was not current resulting in a fine and a 12 month probation. In 2008, Child’s brokerage firm, GunnAllen Financial, Inc. alleged that Child allowed a statutorily disqualified person to represent himself as being associated with the branch office.

Child entered the securities industry in March 1998. Since March 2008, Child has been registered with H. Beck, Inc. out of the firm’s Salt Lake City, Utah office location.

H. Beck, LaSalle, and J.P. Turner Sanctioned for Inadequate Supervision of Consolidated Reports

May 12, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned three firms, H. Beck, Inc. (H. Beck), LaSalle St. Securities, LLC (LaSalle), and J.P. Turner & Company, LLC (JP Turner) – with fines of $425,000, $175,000 and $100,000, respectively concerning inadequate supervision of consolidated reports provided to customers.

As a background, a consolidated report is a single document that combines information regarding a customer’s financial holdings. Consolidated reports are used to supplement, but do not replace, official account statements disseminated by brokerage firms and market makers. FINRA released a regulatory notice reminding firms that consolidated reports must be clear, accurate and not misleading. Because these reports are not official reports FINRA is concerned that if consolidated report making is not rigorously supervised there is the potential for communications to be inaccurate, confusing, or misleading to customers. Consolidated reports can also be used for fraudulent or unethical purposes.

In the agency’s findings, FINRA determined that numerous registered representatives of the three firms prepared and disseminated consolidated reports to customers either without adequate review or any prior review by a principal. In particular, H. Beck and J.P. Turner did not have any written procedures specifically addressing the use and supervision of consolidated reports. In addition, while LaSalle had written procedures related to consolidated reports, it failed to enforce the procedures.

Atlas Energy Oil and Gas Investments: Risks Investors Should Know Part II

December 17, 2014 | by Staff Attorney

This article follows up on a recent article reported in Reuters concerning Atlas Energy LP’s private placement partnerships in oil and gas. Atlas Resources LLC, a subsidiary the energy group, has filed documents with the SEC for Atlas Resources Series 34-2014 LP stating that it seeks to raise as much as $300 million by Dec. 31 of 2014. The deal allows investors to participate in investments where advances in drilling technology have turned previously inaccessible reservoirs of oil into viable prospects. In addition, Atlas promises to invest up to $145 million of its own capital alongside investors.

In the last article we explored how the house seems more likely to win on these deals over investors. But beyond the inherent risks with speculating on oil and gas and unknown oil deposits most investors don’t realize the deals are often unfair to investors. In a normal speculative investment as the investment risk goes up the investor demands greater rewards to compensate for the additional risk. However, with oil and gas private placements the risks are sky high and the rewards simply don’t match up.

In order to counter this criticism, issuers say that the tax benefits of their deals where the investor can write off more than 90 percent of their initial outlay the year they make it helps defray the risk and increase the value proposition. First, the same tax advantage claims are often nominal compared to the principal risk of loss of the investment as seen by Puerto Rican investors in the UBS Bond Funds who have now seen their investments decline by 50% or more in some cases. Second, often times brokers sell oil and gas investments indiscriminately to the young and old who have lower incomes and cannot take advantage of the tax benefits.

Atlas Energy Oil and Gas Investments: A Risky Proposition Part I

December 16, 2014 | by Staff Attorney

As recently reported in Reuters, Atlas Energy LP has marketed itself to investors as a way to get into the U.S. energy boom. By contributing at least $25,000 in a private placement partnership that will drill for oil and gas in states such as Texas, Ohio, Oklahoma and Pennsylvania and share in revenues generated from the wells. Atlas Resources LLC, a subsidiary the energy group, has filed documents with the SEC for Atlas Resources Series 34-2014 LP stating that it seeks to raise as much as $300 million by Dec. 31 of 2014. The deal sounds good when pitched: participate in investments where advances in drilling technology have turned previously inaccessible reservoirs of fossil fuels into potentially viable prospects and to boot Atlas will invest up to $145 million of its own capital alongside investors. Through this method and similar deals, oil and gas projects have issued nearly 4,000 private placements since 2008 seeking to raise as much as $122 billion.

But before you take the plunge a review of the Atlas’s offering memorandum reveals some red flags and given Atlas’ past failure rate investors should think twice. First, up to $45 million of the money raised will be paid to Atlas affiliate Anthem Securities that will then be turned over to as commissions to broker-dealers who pitch the deal to investors. Up to $39 million more will be used to buy drilling leases from another affiliate. Think investors will get a fair price on the leases when Atlas controls both sides of the deal? More conflicts ahead as Atlas affiliated suppliers may also get up to $53 million for buying drilling and transport equipment. Next, an additional $8 million of Atlas’s investment is a 15 percent markup on estimated equipment costs. Finally, Atlas will pay itself nearly $52 million in various other fees and markups.

In sum, at least 40% of Atlas’s $145 million investment alongside mom and pop goes right back to the company. In addition, Atlas’ profits don’t stop there, when the venture starts generating revenue Atlas is entitled to 33% before accounting for those payments and markups. In the end, not much of a risk at all for Atlas.

Dennis Karasik Barred by FINRA Over Diversified Energy Group Sales

October 10, 2014 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) permanently barred broker Dennis Karasik (Karasik) concerning allegations that from December 2010, to March 2012, Karasik participated in private securities transactions, otherwise known as “selling away” without providing prior written notice to the two firms with which he was associated. Specifically, FINRA alleged that Karasik participated in the sale of bonds issued by Diversified Energy Group, Inc. (DEG), an energy company, and that the company paid him finder’s fees from on the sales made.

Karasik was employed by a number of brokerage firms from 1986 through February 2013. During the times relevant to FINRA’s allegations Karasik was registered with Multi-Financial Securities Corp. (Multi-Financial) until December 2011, and with H. Beck, Inc. (H. Beck) until February 2013. Karasik maintained an office in Parkton, Maryland. Karasik was terminated by H. Beck for the conduct alleged by FINRA. According to Karasik’s BrokerCheck, he has had six customer complaints filed against him and also has two tax liens. Karasik was also a partner of Carrio, Karasik, & Associates (CKA).

DEG is a Florida energy company that develops oil and gas reserves in the United States. It has raised funds through private placement offerings of corporate bonds to accredited investors. FINRA alleged that between January 2010, and March 2012, Karasik and his partner in CKA participated in the sale of more than $3.2 million of DEG bonds to at least 25 investors. According to FINRA, Karasik was compensated for his role in these sales through the payment of a finder’s fee.

Gana LLP Files Complaint Against H. Beck on Behalf of Client For Unsuitable Investment

April 4, 2014 | by Staff Attorney

The law offices of Gana Weinstein LLP recently filed a complaint against H. Beck, Inc., on behalf of a client accusing the investment advisory firm of making unsuitable recommendations and failing to properly supervise one of its representatives.

The Claimant in this case is a retired sixty-three year old from Hawaii, who sought to safely invest what was left of his retirement funds, after being hit hard in the down market of 2008. H. Beck, through one of its advisers, offered him high, risk-free returns, which the Hawaii native readily accepted. H. Beck, through one of its advisers, took nearly two-thirds of Claimant’s retirement savings and put them into the Inland American Real Estate Investment Trust (Inland) and the Lease Equipment Finance Fund 4 (LEAF).

LEAF is a limited partnership. Limited Partnerships are investment vehicles formed to acquire, operate, and sell assets for the benefit of the partners. Investors in Limited Partnerships, also known as limited partners, are entitled to receive distributions of operating cash flow as well as distributions from the sale or financing of assets as outlined in the partnership’s limited partnership agreement. Unlike stocks and bonds, Limited Partnerships are not listed on an exchange. They are illiquid assets with a relatively limited secondary market. Consequently, reliable pricing information is typically very difficult to obtain.

Behringer Harvard REIT Fund Investor Losses Continue to Mount

August 22, 2013 | by Staff Attorney

Investors continue to suffer substantial losses from recommended investments in the Behringer Harvard REIT Funds. The Behringer Harvard REIT Funds including the Behringer Harvard Mid-Term Value Enhancement I, Behringer Harvard Short-Term Opportunity Fund I, and the Behringer Harvard REIT I and II (Behringer REITs) have sometimes been sold to investors as safe, stable, income producing real estate investment trusts. While the Behringer REITs were initially sold to investors for $10 per share, currently some of these REITs trade as low as approximately $2.00 on the secondary market. Worse still, some of the funds no longer pay a dividend or investors receive only a fraction of what their advisor initially told their clients they could expect the investment to yield.

The Behringer REITs are speculative securities, non-traded, and offered only through a Regulation D private placement. Unlike traditional registered mutual funds or publicly traded REITs that have a published daily Net Asset Value (NAV) and trade on a national stock exchange, the Behringer REITs raised money through private placement offerings and are illiquid securities. In recent years, increased volatility in stocks has led to an increasing number of advisor recommendations to invest in non-traded REITs as a way to invest in a stable income producing investment. Some non-traded REITs have even claimed to offer stable returns while the real estate market has undergone extreme volatility. Brokers are often motivated to sell non-traded REITs to clients due to the large commissions that can be earned in the selling the Behringer REITs.

Investors are now bringing claims against the brokerage firms that sold them the Behringer REITs alleging that their advisor failed to disclose important risks of the REITs. Some common risks that customers have alleged were not disclosed include failing to explain that Behringer REITs may not be liquidated for up to 8 to 12 years or more, that the redemption policy can be eliminated at any time, and that investor returns may not come from funds generated through operations but can include a return of investor capital.