Prospera Financial Services Tag Archives

Advisor Dudley Stephens Accused of Churning and Unapproved Product Sales

February 23, 2019 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Dudley Stephens (Stephens), formerly associated with Coastal Equities, Inc. (Coastal Equities), in September 2018, was san ctioned and barred from the securities industry by FINRA due to failures to provide documents and information requested by the regulator. In addition, Stephens has three customer complaints, one termination, and one additional regulatory complaint.

In July 2018 Stephens was terminated by Coastal Equities on grounds that he was being reviewed over suspicious letters of authorization for third party wires. Thereafter, FINRA barred Stephens.

In December 2018 a customer filed a complaint alleging that excessive and unauthorized commissions were charged of approximately $50,000 per year for 2.5 years in her advisory account. The client also alleged that $100,000 was invested in an unauthorized private securities transaction was a sham. The claim alleges $250,000 in damages and 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”.

Financial Advisor John Nelson Crook Receives Alleged Unauthorized Trading Complaints

July 17, 2017 | by Staff Attorney

Our firm is investigating customer disclosure claims concerning broker John Nelson Crook (Crook). Crook’s FINRA BrokerCheck record shows several disclosures of allegations concerning churning (excessive trading, unauthorized trading, unsuitability, and breach of fiduciary duty. His BrokerCheck records also show a disclosure concerning an employment separation after allegations.

In July 2015, Crook was discharged from Raymond James & Associates Inc due to the findings that that the financial advisor allegedly did not respond in a timely manner to a supervisory review of trading activity. In addition, Crook allegedly did not provide a legitimate explanation for the trading activity in a certain client’s account, which lead to his termination from the firm in July 2015.

The most recent customer complaint against Crook was received in November 2015.During the period between August 2006 and June 2015, Crook allegedly engaged in excessive and unauthorized trading. Crook allegedly also recommended unsuitable investment products to his client, fraudulently misrepresented, and breached his fiduciary duty. The alleged damages are worth over $4 Million and the case is currently pending.

Financial Advisor John Crook Subject to a $4.8 Million Customer Complaint

December 3, 2016 | by Staff Attorney

Our investment attorneys are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against financial advisor John Crook (Crook) currently registered with Prospera Financial Services, Inc. (Prospera), alleging unsuitable investments, fraud, breach of fiduciary duty, negligence, churning, and unauthorized trading among other claims. According to brokercheck records Crook has been subject to two customer complaints and one employment separation for cause.

In July 2015 Crook was discharged by Raymond James & Associates, Inc. (Raymond James) after the firm stated that it lost confidence in Crook after an internal review into a client compliant lead the firm to believe that Crook did not provide plausible explanations to the investigation.

In August 2016 a customer filed $4.8 million complaint involving Crook’s conduct and alleging violations of the securities law. The claim is still pending.

Prospera Financial’s Douglas Dannhardt Suspended Over Excessive Trading Claims

May 7, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) fined and suspended broker Douglas Dannhardt (Dannhardt) concerning allegations that between January 2010, and December 2011 Dannhardt engaged in several different violations of the industry’s rules including: 1( excessive and unsuitable trading in three IRA accounts (also known as churning); 2) improperly exercising discretion in these three accounts by executing transactions days and weeks after obtaining customer approval; 3) accepting trade orders for a customer’s account from a third party without written authorization.

Dannhardt became associated with a FINRA firm in 1984. From March 1995 through December 2013, Dannhardt was employed by Prospera Financial Services. Inc, (Prospera). The firm filed a Form U5 for Dannhardt as a result of his voluntary resignation from the firm.

Under the FINRA rules excessive trading occurs when: (1) a broker exercises control over a customer’s account: and (2) the amount of trading activity in that account is inconsistent with the customer’s investment objectives, financial situation, and needs. This conduct violates FINRA’s suitability standards. When making such a determination FINRA looks to see if the trading in an account can becomes so quantitatively unsuitable by unreasonably raising the costs associated with the investment strategy to the point where the additional risk in order to generate the return is not offset by those costs.

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.