Securities Arbitration

Gana LLP Files Customer Complaint Against JHS Capital Concerning Broker Joe Alijaj

August 11, 2014 | by Staff Attorney

The law office of Gana Weinstein LLP recently filed a securities arbitration on behalf of an investor against JHS Capital Advisors, LLC f/k/a Pointe Capital, Inc. (JHS Capital) concerning allegations that the broker recommended unsuitable investments, churned the account, and ultimately depleted the claimant’s assets.

The claimant is sixty-one years old and spent the majority of his career running seed companies. The claimant alleged that he had little understanding of the stock and bond markets. The complaint alleged that Enver Rahman “Joe” Alijaj (Alijaj), a broker with JHS Capital, cold called claimant and aggressively pursued the opportunity to manage claimant’s money. The complaint alleged that prior to opening his account with JHS, claimant never maintained a brokerage account. The claimant alleged that he explained to Alijaj that he wanted to focus on preservation of his capital.

In reliance on Alijaj’s assurances, the claimant alleged that he provided the broker with a substantial portion of his net worth. Rather than comply with the claimant’s investment needs, the complaint alleged that Alijaj took advantage of the claimant’s inexperience by investing the funds in unreasonably volatile stocks and excessively traded (churned, a type of securities fraud) his account to generate excessive commissions. According to the complaint, within days of opening the account, Alijaj leveraged the account and actively traded speculative small cap stocks in unsuitable investments including A-Power Energy Generation Systems Ltd. (APWR), Silicon Motion Technology Corp (SIMO), and Yingli Green Energy Holdings Co. (YGE).

Broker Douglas Cmelik Sanctioned by FINRA Over Soliciting Penny Stock Purchases

July 10, 2014 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) has sanctioned broker Douglas Cmelik(Cmelik) concerning allegations that Cmelik improperly marked order tickets for penny stock purchases as “unsolicited” when the purchases were solicited. Cmelik’s conduct allegedly violated NASD Conduct Rule 3110 and FINRA Rule 2010.

Penny stocks are securities that carry significant investment risks. A “penny stock” is defined by the Securities and Exchange Commission (SEC) as a security issued by a company with less than $100 million in market capitalization. Penny stocks are also often called “low-priced securities” because they typically trade at less than $5 per share. Many penny stocks are very thinly traded and consequently liquidity for the stock can vary day-to-day.

Penny stocks are typically not suitable for many retail investors and consequently many firms prohibit their advisors from soliciting investments in these issuers. First, penny stocks may trade infrequently or very thinly making it difficult to liquidate a penny stock holding. Consequently, penny stocks often fluctuate wildly day-to-day. Penny stocks are often the target of unscrupulous individuals for fraudulent purposes. One scheme employed is the “pump and dump” scheme. In a pump and dump scheme, an unfounded hype for a penny stock the pumper already owns is created to boost the stock price temporarily. The penny stock pumper then sells their shares for a profit causing intense downward pressure on the penny stock and the security quickly loses value. The defrauded investors suffer huge losses as a result of the scheme.

FINRA Sanctions Polar Investment Over Penny Stock Transactions

July 4, 2014 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) has sanctioned Polar Investment Counsel, Inc. (Polar Investment) concerning allegations from 2011 and 2012, a firm advisor of Polar recommended various low-priced securities (penny stocks) received a total of 14 purchase orders for those securities. FINRA alleged that the representative marked eight of the orders as “unsolicited,” meaning that the customer instructed the advisor to purchase the security without any prompting from the advisor. FINRA found that the unsolicited marking was incorrect given that the advisor had brought the securities to the customers’ attention. FINRA found that the mismarked orders caused the firm’s books and records to be inaccurate. In addition, FINRA determined that Polar Investments did not permit brokers to recommend penny stock transactions and mistakenly assumed that all 14 transactions were unsolicited and did not conduct a sufficient supervisory review of those transactions.

Polar Investment has been registered with FINRA since 1997, its main office is in Thief River Falls, Minnesota, and is also registered as an investment advisor with the SEC. Polar Investment has 18 registered representatives operating out of 12 branch locations.

FINRA alleged that throughout 2011 and 2012, Polar Investment’s written supervisory procedures prohibited representatives from recommending penny stocks to the firm’s customers. As a consequence, Polar Investments presumed that all penny stock transactions were unsolicited and the firm did not subject advisors to adequate supervisory review. Instead, FINRA found that the firm had the customer sign a penny-stock disclosure form. FINRA found that between June 2011 and April 2012, a Polar Investment advisor by the initials “MV” brought various penny stocks to the attention of some of his customers. The advisor’s actions, according to FINRA, resulted in at least 14 orders to buy those securities.