LPL Financial

LPL Financial Terminates Christopher Russell Over Private Securities Transactions

May 31, 2017 | by Staff Attorney

The investment lawyers of Gana Weinstein LLP are investigating the LPL Financial LLC’s (LPL) termination of former broker Christopher Russell (Russell) working out of the Huntsville, Alabama office. LPL terminated Russell in November 2016. According to the firm’s Financial Industry Regulatory Authority (FINRA) BrokerCheck filing the firm stated that Russell was in “Violation of Firm policy regarding private securities transactions.” No other disclosure concerning the extent and nature of the activity is disclosed. However, Russell has disclosed several outside business activities including his d/b/a Cadence Investment Services. Russell has also disclosed Cadence Bank described as a private bank. Russell has also disclosed involvement with the Huntsville Chamber of Commerce and the Community Foundation of Huntsville.

The providing of loans, selling of promissory notes, or recommending investments outside of the firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”. Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, real estate agents, or insurance agents to clients of those side practices.

Russell entered the securities industry in 2005. From May 2008 until March 2013, Russell was associated with Wells Fargo Advisors, LLC. Then, from May 2014 until November 2016 Russell was associated with LPL out of the firm’s Huntsville, Alabama office location.

Former LPL Financial Advisor Paul Dorion Terminated For Unauthorized Trading

May 27, 2017 | by Staff Attorney

Our firm is investigating claims made by regulators and brokerage firms including LPL Financial LLC (LPL Financial) concerning broker Paul Dorion (Dorion). Dorion is currently not associated with any brokerage firm due to his bar by The Financial Industry Regulatory Authority’s (FINRA) in October 2016 for failing to response to the regulator’s request for information.

FINRA’s investigation likely revolves around the disclosures concerning Dorion’s termination from LPL Financial in October 2015. At that time Dorion was terminated for cause alleging that the broker engaged in unauthorized trading, violation of firm’s document signature policy, and concerns regarding concentrated equity positions in client accounts. Doriaon was also alleged to have failed to respond to inquiries from the firm’s compliance department. Subsequently, in October 2016 a customer filed a complaint alleging that Dorion had excessively traded her account which contained funds from a home mortgage. The complaint is currently pending. Dorion also has several tax liens dating from 2010 through 2015.

Dorion entered the securities industry in 1983. From November 1992 until October 2015, Dorion was associated with LPL Financial out of the firm’s Killington, Vermont office location. Dorion also does business as Dorion Associates.

FINRA Bars Advisor Michael Babyak Over the Sale of Unapproved Investments

May 13, 2017 | by Staff Attorney

Our firm is investigating claims made by The Financial Industry Regulatory Authority (FINRA) against broker Michael Babyak (Babyak), formerly associated with brokerage firms LPL Financial LLC (LPL) and Leigh Baldwin & Co., LLC (Leigh Baldwin). According to brokercheck, Babyak consented to the sanction that he participated in private securities transactions involving customers of a member firm without first providing the firm written or oral notice of his activities. FINRA findings stated that Babyak had the customers invest a total of $4,250,000 into a limited liability company that he had created.

Babyak is then alleged to have assisted in wiring funds from the firm’s accounts to the borrower and the limited liability company’s bank account and signed the loan agreement and related security agreement on behalf of the company he created. FINRA alleged that Babyak then caused the company to loan the $4.25 million to a third party for the benefit of his customers. FINRA also discovered that Babyak arranged for the company to use funds repaid from the $4.25 million loan to extend loans on behalf of the customers to two additional borrowers.

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”. Often times brokers who engage in this practice use outside businesses in order to market their securities.

Massachusetts Fines LPL Financial and Roger Zullo $3.7 Million Over Annuity Sales

May 13, 2017 | by Staff Attorney

Our firm’s investment attorneys are investigating a complaint filed by the Commonwealth of Massachusetts Securities Division (Massachusetts) against LPL Financial LLC (LPL) and the firm’s broker Roger Zullo (Zullo) Zullo alleging that Zullo fabricated the financial suitability profiles of numerous LPL clients, selling them scores of large, illiquid, unsuitable, high-commission variable annuities, at substantial upfront profits to himself and LPL.

The State of Massachusetts alleged that over the course of three years Zullo and LPL received more than $1,825,000 in variable annuity commissions alone and 98% of that amount represented commissions from the sale of the same annuity product – the Polaris Platinum III (B Shares) variable annuity. The State found that Zullo bypassed LPL’s paper-thin compliance review process for these sales by fabricating client financial suitability information, such as age and liquid net worth. Further, LPL apparently rewarded Zullo’s fraudulent practices with the honor of being included in LPL’s “Chairman’s Club” for top annuity production.

According to the State LPL was aware that Zullo repeatedly and openly sold only one product, with the same features and the same justifications, to almost every annuity client, and did nothing to stop it. LPL was also alleged to have been aware that Zullo’s clients repeatedly incurring surrender charges and being charged high commission. According to one email from Zullo’s supervisor “It did very much seem to me that he had a pattern of switching everybody out of their annuities every 6 or 7 years and that he was getting commissions over and over again from the same clients.” Massachusetts found that any concerns concerning Zullo’s practices were ignored.

FINRA Bars Broker Dominic DeBruin Over Private Securities Activity

February 6, 2017 | by Staff Attorney

Our firm is investigating claims made by The Financial Industry Regulatory Authority (FINRA) against broker Dominic DeBruin (DeBruin), formerly associated with LPL Financial, LLC (LPL Financial). According to brokercheck, FINRA found that DeBruin refused to provide information and documents and to appear for on-the-record testimony as requested by FINRA concerning a member firm’s Form U5 reporting that he was under internal review for depositing client’s funds related to potential private securities transactions undisclosed to the firm into a bank account DeBruin controlled.

At this time it is unclear the total scope and extent of these outside business activities and private transactions. However, according to DeBruin’s disclosures he is affiliated with the following entities: 1) Capricorn Partners, LLC – DeBruin’s securities d/b/a; 2) Out of Order LLC – an entertainment boking agency; 3) Goodlife Financial Group – an investment d/b/a; 4) Top 5 Entertainment. 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”. Often times brokers who engage in this practice use outside businesses in order to market their securities.

DeBruin entered the securities industry in 1996. From October 2005 until October 2012 DeBruin was associated with Waddell & Reed, Inc. Finally, from October 2012 until October 2016 DeBruin was associated with LPL Financial out of the firm’s Mesa, Arizona office location.

FINRA Bars Joseph Likens Over Private Securities Sales

January 30, 2017 | by Staff Attorney

Our firm is investigating claims made by The Financial Industry Regulatory Authority (FINRA) against broker Joseph Likens (Likens). According to brokercheck, in Likens failed to respond to FINRA’s requests for information resulting in a bar. FINRA stated that Likens refused to appear for on-the-record testimony related an investigation into allegations that he may have engaged in private securities transactions. At this time the scope of Likens activities and the specific investments are not reported. However, Likens disclosed outside business activities involving PWA Network.

The FINRA investigation followed Likens’ termination from his previous employer LPL Financial LLC (LPL) in May 2016. Likens worked out of a d/b/a Cornerstone Wealth Management. At that time, Likens was terminated after allegations were made that he engaged in trading away from the firm. In November 2016, a customer alleged that Likens sold away from the firm an investment made in 2011 causing $120,000 in damages. The claim is currently pending.

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”. Often times brokers who engage in this practice use outside businesses in order to market their securities.

Ken Balser Barred by FINRA Over Allegations of Private Securities Transactions

January 16, 2017 | by Staff Attorney

Our firm is investigating claims made by The Financial Industry Regulatory Authority (FINRA) when the regulator barred broker Ken Balser (Balser). According to FINRA settlement, Balser consented to sanctions that he refused to appear for testimony and provide documents and information to FINRA concerning allegations that he engaged in private securities transactions.

In July 2016, Cetera Advisors LLC (Cetera) discharged Balser for cause alleging that Balser engaged in private securities transactions.

According to Balser’s brokercheck records Balser has at least three disclosed outside business activities. These activities include a d/b/a Secure Wealth Management. In addition, Balser disclosed a fixed insurance business and Dave Ramsey Radio Show Sponsor. 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”. Often times brokers who engage in this practice use outside businesses in order to market their securities.

FINRA Sanctions Financial Advisor Michael Barranco Over Private Securities Transactions

November 15, 2016 | by Staff Attorney

Our firm is investigating claims made by The Financial Industry Regulatory Authority (FINRA) against broker Michael Barranco (Barranco). According to BrokerCheck records Barranco is subject to one regulator complaint, one employment separation for cause, and one financial disclosure. The FINRA regulatory matter concerns an investigation surrounding alleged sales of private securities transactions. (FINRA No. 2015048273301).

According to FINRA, between 2010 and 2015, Barranco was involved in almost 40 private securities transactions with three different issuers. In 2010, Barranco requested and received permission from LPL to act as a consultant and provide business planning advice to an entity (TMG) founded by two of his customers. FINRA found that Barranco also participated in the solicitation of investments by firm customers and others in 13% Senior Notes issued by TMG,

FINRA found that between November 2010 and February 2011, Barranco participated in 35 transactions through which 27 individuals invested at least $2,087,000 in the TMG notes. In addition, FINRA also found that in 2014, the founders of TMG purchased a distressed real estate development (IBH) and issued 12% Senior Notes which Barranco recommended to two of his customers who invested $750,000. 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”.

Kevin Kuhlow Barred Over Private Securities Transactions

October 31, 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 LPL Financial LLC (LPL) involving broker Kevin Kuhlow (Kuhlow) out of the firm’s Los Gatos, California office. According to BrokerCheck records Kuhlow has been subject to seven customer complaints and two financial disclosures.

According to LPL, the firm terminated Aguilar in February 2016 after alleging his conduct included unapproved investments in violation of firm policy. 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”.

Subsequently, in March 2016, FINRA brought a regulatory action and barred Kuhlow from the industry. (FINRA No. 2016048430801). FINRA alleged that Kuhlow consented to the sanction that he refused to produce documents and information requested by FINRA in connection with its investigation into the allegations that he had violated LPL’s policies by directing clients to an unapproved investment.

FINRA Bars Brian Smit Over Private Securities Transactions

June 13, 2016 | by Staff Attorney

The investment lawyers of Gana Weinstein LLP are investigating the regulatory action brought by the Financial Industry Regulatory Authority (FINRA) against Brian Smit (Smit) formerly working out of the Sioux Falls, South Dakota office of LPL Financial LLC (LPL). LPL terminated Smit in August 2015 stating that the broker engaged in unapproved investments. Thereafter, in March 2016, FINRA barred Smit stating that Smit consented to the sanction and to the entry of findings that he refused to appear for on-the-record testimony requested by FINRA related to the alleged participation in unapproved private securities transaction.

The providing of loans or selling of promissory 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 Smit’s outside business activities and private securities transactions. However, according to Smit’s public records his outside business activities include Pinnacle Wealth Management and Smit Holdings, LLC – a rental real estate business. Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, real estate agents, or insurance agents to clients of those side practices.

Smit entered the securities industry in 2010. From Aprill 2010 until August 2015, Smit was associated with LPL.