securities attorney

FINRA Files Complaint Against ARI Financial Services and William Candler Concerning Bridgeport Oaks Fund

July 16, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently filed a complaint against ARI Financial Services, Inc. (ARI) and William Candler (Candler), the firm’s President and former Chief Compliance Officer (CCO) alleging that that he facilitated at least ten private placement offerings from September 1, 2009, to December 31, 2012. The complaint found that the respondents failed to implement reasonable supervisory procedures in connection with the sales of the private placements.

ARI has been a FINRA member firm since 2005 and derives most of its revenue as a wholesaler of private placements that it marketed to retail broker-dealers who then sold those interests to retail investors. ARI’s main office was located in Kansas and during certain times had registered up to five branch offices and over 30 registered representatives located in six different states. ARI is currently owned by Candler and two other individuals. Candler is ARI’s majority owner.

Candler entered the securities industry in 1996. From March 2011, until November 2012, Candler was associated with Connor Capital Investments, LLC. Since April 2014, in addition to ARI, Candler is associated with JCC Advisors, LLC.

Broker Leonard Tanner Suspended By FINRA Over Unauthorized Trading

July 15, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) fined and suspended broker Leonard Tanner (Tanner) concerning allegations between October 2010, and January 2014, Tanner executed discretionary transactions in approximately 90 accounts of customers under a verbal authorization but without prior written authorization from those customers or approval of his brokerage firm City Securities Corporation (City Securities).

Tanner became a broker with a FINRA firm in 1969. From July 1995 until October 2010, Tanner was associated with PNC Investments. Since October 2010, Tanner has been registered with City Securities.

FINRA alleged that Tanner exercised discretion in executing transactions in the accounts of approximately 90 customers. FINRA found that Tanner received prior verbal authorization from his customers for these transactions for their investment strategies but exercised discretion in executing those transactions. FINRA determined that Tanner did not obtain written authorization from his customers and that City Securities did not approve these accounts for discretionary trading.

Broker Dealer Financial Services Corp. Sanctioned Over Non-Traditional ETF Practices

July 9, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) entered into an agreement whereby the regulatory fined Broker Dealer Financial Services Corp. (BDFS) concerning allegations that between March 2009 and April 2012, BDFS failed to establish and maintain a supervisory system, including written procedures, that was reasonably designed to ensure that the firm’s sales of leveraged or inverse exchange-traded funds (Non-Traditional ETFs) complied with the securities laws.

BDFS is a FINRA member firm since 1979 and headquartered in West Des Moines, Iowa. The firm employs about 270 registered representatives located in more than 130 branch offices throughout the country.

According to FINRA, from March 2009 to April 2012, BDFS failed to implement a supervisory system, including written procedures, reasonably designed to ensure the suitability of Non-Traditional ETF sales. For instance, FINRA issued guidance that specifically dealt with issues related to the sales and supervision of Non-Traditional ETFs. FINRA’s guidance requires a firm to have a reasonable basis for believing that a product is suitable for any customer before recommending any purchase of that product. Part of having a reasonable basis for making the recommendation includes understanding the terms and features of the Non-Traditional ETFs being offered including how they are designed to perform, how they achieve that objective, and the impact that market volatility, the ETF’s use of leverage, and the customer’s intended holding period.

Broker Lawrence LaBine Accused of Selling Unsuitable Alternative Investments

July 6, 2015 | by Staff Attorney

Gana Weinstein LLP, a securities law firm, is investigating customer complaints against Lawrence Labine, a broker located in Scottsdale, Arizona. Gana Weinstein LLP’s investigation is on the heels of regulatory investigations into LaBine’s conduct.

On April 28, 2015, the Department of Enforcement of Financial Industry Regulatory Authority filed a complaint against Mr. Lawrence LaBine. According to the Complaint, from April 2009 through August 2009, LaBine sold senior debentures (Series D) issued by Domin-8, a company that developed software for real estate management companies. During that period, LaBine was registered with DeWaay Financial Network, a FINRA regulated broker-dealer. The Complaint alleges the LaBine made fraudulent misrepresentations and omissions of material fact to five customers in connection with the sale of the Series D senior debentures.

At the time of those sales, LaBine was receiving regular updates about Domin-8’s poor financial condition from senior management at Domin-8 and the company’s lead investment banker, and had arranged to receive compensation and other valuable consideration from the company – such as a seat on Domin-8’s board of directors – for meeting Series D fundraising targets he had arranged with the company. The information about Domin-8’s financial condition and LaBine’s personal incentive to sell Series D was material to the investors, yet LaBine failed to disclose that information to his customers according to the Complaint.

Broker Investigation: Advisor Mark Gardner

July 1, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Mark Gardner (Gardner) has been the subject of at least nine customer complaints, one firm termination, and one regulatory action. Customers have filed complaints against Bell alleging a number of securities law violations including that the broker made unsuitable investments among other claims. Most of these claims involve recommendations in equities.

Gardner entered the securities industry in 1977. Since 2008, Gardner has been associated with Oppenheimer & Co. Inc. until November 2008. From December 2010 until July 2012, Gardner was associated with Lake Forest Securities LLC. Currently, Gardner is associated with J.H. Darbie & Co., Inc.

In the regulatory action that was brought against Gardner, FINRA alleged that on or about November 5, 2008, Gardner executed three equity securities purchase transactions to open an investment account on behalf of a corporation without that corporation’s knowledge. FINRA found that Gardner accepted the purchase orders from a person who did not have authorization to act on behalf of the corporation. In addition, FINRA found that Gardner failed to verify whether the individual who placed the purchase orders had been granted authorization by the corporation. The transactions in question totaled $2,203,020.

Broker Spotlight: Ellwood Jones’ Investment Recommendations

June 26, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Ellwood Jones (Jones) has been the subject of at least four customer complaints. Customers have filed complaints against Bell alleging a number of securities law violations including that the broker made unsuitable investments, misrepresentations and false statements, among other claims. Some of these claims involve recommendations in private placements such as hedge funds, insurance products, and direct participation programs (DPPs).

Since 1997 Jones was associated with NFP Advisor Services (NFP) until March 2011. According to Jones’ BrokerCheck records, Jones has a number of other disclosed outside businesses including Capital Region International, LLC, A.B.R.C., and Synergex International Corporation.

One customer complaint against Jones alleged damages of $10,000,000 resulting from negligence and misrepresentations concerning hedge funds. In another action, the customer alleged misrepresentations in relation to the customer’s participation in a welfare benefit plan. Finally, in a third customer complaint the customer alleged misrepresentations in connection with the sale of insurance and other financial transactions involving alternative investments and limited partnership interests.

Former Wells Fargo Broker Douglas Melzer Barred Over Private Securities Transactions

June 24, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently sanctioned and barred broker Douglas Melzer (Melzer) concerning allegations that between November 2011, and May 2012, while registered with Wells Fargo Advisors, LLC (Wells Fargo), Melzer solicited four customers to invest $2,000,000 in an outside investment without providing his firm notice. According to FINRA Melzer was compensated at least $26,500. Unapproved sales activities and transactions are referred to as “selling away” in the industry.

Melzer entered the securities industry in 2008 when he became registered with Wells Fargo. Wells Fargo terminated Melzer’s registration in January 2013 in connection with his unapproved sales activity. Melzer was registered with Park Avenue Securities LLC from March 2013, through January 2015.

The conduct alleged against Melzer is a “selling away” securities violations. In the industry the term selling away refers to when a financial advisor solicits investments in companies, promissory notes, or other securities that are not pre-approved by the broker’s affiliated firm. However, even though the brokerage firm claim ignorance of their advisor’s activities, under the FINRA rules, a brokerage firm owes a duty to properly monitor and supervise its employees in order to detect and prevent brokers from offering investments in this fashion. In order to properly supervise their brokers each firm is required to have procedures in order to monitor the activities of each advisor’s activities and interaction with the public. Selling away misconduct often occurs where brokerage firms either fail to put in place a reasonable supervisory system or fail to actually implement that system. Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including selling away.

JHS Capital Advisors Broker Mark Weindling Barred Over Forging Signatures in Deceased Customer’s Account

June 19, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently barred broker Mark Weindling (Weindling) concerning allegations that Weindling failed to respond to the regulator’s requests to provide information and documents concerning the an investigation into claims that Weindling effected transactions within the account of a deceased customer.

Weindling entered the securities industry in 1982. From October 2007 until April 2012, Weindling was associated with Paulson Investment Company, Inc. Thereafter, in April 2012, Weindling became registered with JHS Capital Advisors, LLC (JHS). On May 16, 2014, JHS filed a Form U5 that terminated Weindling’s registration with JHS.

On the form, JHS reported that Weindling effected transactions within the account of a deceased customer and that he was aware of journal requests containing the forged signature of the deceased customer. Thereafter, FINRA sought to investigate JHS’s statements by sending Weindling requests for information. On January 27, 2015, FINRA sent a letter to Weindling’s counsel requesting that Weindling provide documents and information. Despite, multiple requests for information, Weindling acknowledged receipt of FINRA’s requests but confirmed that he did not intend to provide the requested documents and information.

FINRA Alleges National Securities Corporation Misled Customers On Fees

June 18, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) entered into an agreement whereby the regulatory fined National Securities Corporation (NSC) while alleging that in 2013, NSC acted as the exclusive placement agent for two private placements of its parent company, National Holdings Corporation (National Holdings). The FINRA rules require that offerings of unregistered securities issued by a control entity of a member firm disclose to investors the selling compensation to be paid to the member in connection with the offering. FINRA found that while NSC generally disclosed to investors that it would receive compensation in connection with the sale of both private placements the firm failed to disclose in writing to investors the amount of selling compensation it would receive.

NSC has been registered with FINRA as a since 1947 and engages in a number of businesses, including retail brokerage, investment banking, and investment advisory. NSC has 760 registered representatives in 140 branch offices. Our law offices have been tracking a number of regulatory and customer complaints involving NSC and its brokers including:

National Securities Broker Vito Balsamo Under FINRA Investigation Over V.W. Industries Sales

First Allied Securities Broker Daniel Grieco Sanctioned Over Non-Traditional ETF Sales

June 15, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned broker Daniel Grieco (Grieco) concerning allegations that Grieco made recommendations of non-traditional exchange-traded funds (Non-Traditional ETFs) to various customers without having reasonable grounds to believe his recommendations were suitable.

Non-Traditional ETFs are behave drastically different and have different risk qualities from traditional ETFs. While traditional ETFs simply seek to mirror an index or benchmark, Non-Traditional ETFs use a combination of derivatives instruments and debt to multiply returns on underlining assets, often attempting to generate 2 to 3 times the return of the underlining asset class. Non-Traditional ETFs are also used to earn the inverse result of the return of the benchmark.

In addition, regular ETFs can be held for long term trading, but Non-Traditional ETFs are generally designed to be used only for short term trading. The use of leverage employed by these funds causes their long-term values to be dramatically different than the underlying benchmark over long periods of time. For example, between December 1, 2008, and April 30, 2009, the Dow Jones U.S. Oil & Gas Index gained two percent while the ProShares Ultra Oil and Gas, a fund seeking to deliver twice the index’s daily return fell six percent. In another example, the ProShares UltraShort Oil and Gas, seeks to deliver twice the inverse of the index’s daily return fell by 26 percent over the same period.