securities attorney

FINRA Bars Broker Robert Potter Over Failure to Respond to Regulatory Requests Concerning Comingled Funds

October 27, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) barred broker Robert Potter (Potter) (FINRA No. 2014041579901) alleging on August 10, 2015, the agency investigated allegations that Potter commingled customer funds with his personal funds and sent Potter a letter requesting that he provide documents and information by August 17, 2015. According to FINRA Potter’s counsel requested an extension of time but that later Potter’s counsel informed staff that Potter would not provide the requested documents and information. Potter failure to provide the requested documents and information resulted in an automatic bar from the industry.

Recently, the National Futures Association (NFA) also brought action against Potter alleging that there is reason to believe that NFA Requirements are being violated in that Potter is alleged to have solicited a customer to trade futures and instructed the customer to wire funds to Potter’s personal bank account. The NFA stated that Potter’s prior firm supervisor provided NFA with copies of text messages between Potter and the customer discussing the customer’s purported investment in a futures trading account. The NFA alleges that Potter acted as an unregistered futures commission merchant by having the customer wire funds to Potter’s personal bank account, that Potter converted the customer’s funds, and that Potter lied to the customer about the value of the customer’s supposed investment.

Potter entered the securities industry in June 1983. From December 2005, until August 2011, Potter was registered with Wells Fargo Advisors, LLC. Thereafter, from August 2011, until August 2015, Potter was a registered representative with Cambria Capital, LLC out of the firm’s Salt Lake City, Utah office location.

Broker Investigation: St. Bernard Financial Broker Joseph Miles

October 19, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Joseph Miles (Miles) has been the subject of at least 3 customer complaints, 3 judgements or liens, and one bankruptcy discharge. Customers have filed complaints against Miles alleging securities law violations including poor investment performance, unsuitable investments, securities fraud, and breach of fiduciary duty among other claims. Most of the claims against Miles relate to bonds or other debt obligations that caused losses. For instance, the latest complaint alleged damages of $169,865 as a result of bonds that lost value in 2013. In addition, Miles has had difficulty managing his own finances having been through a bankruptcy in 2005. Thereafter, Miles has had three judgments filed against him for taxes in the amounts of $5,499, $27,241, and $7,900.

Miles entered the securities industry in 1983. Since May 2004, Miles has been associated with St. Bernard Financial Services, Inc. out of the Russellville, Arizona office location.

All advisers have a fundamental responsibility to deal fairly with investors including making suitable investment recommendations. In order to make suitable recommendations the broker must have a reasonable basis for recommending the product or security based upon the broker’s investigation of the investments properties including its benefits, risks, tax consequences, and other relevant factors. In addition, the broker must also understand the customer’s specific investment objectives to determine whether or not the specific product or security being recommended is appropriate for the customer based upon their needs.

Customers File Complaints Against Francis Velten Over Variable Annuity Practices

October 12, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Francis Velten (Velten) has been the subject of at least eight customer complaints and one regulatory investigation over the course of his career. Customers have filed complaints against Velten alleging securities law violations including that the broker made unsuitable investments relating primarily to the sale of variable annuities.

Velten entered the securities industry in 1993. Since August 2006, Velten has been a registered representative of Summit Brokerage Services, Inc. out of the firm’s New Port Richey, Florida office location.

As a background, variable annuities are complex products that combine aspects of investing and insurance. The Securities and Exchange Commission (SEC) has released a publication entitled: Variable Annuities: What You Should Know encouraging investors to ask questions about the variable annuity before investing. Essentially, a variable annuity is a contract with an insurance company under which the insurer agrees to make periodic payments to you. The investor chooses the investments made in the annuity and value of your variable annuity will vary depending on the performance of the investment options chosen. The primary benefits of variable annuities are the death benefit and tax deferment of investment gains.

FINRA Suspends Former LPL Financial Broker Walter Chao Over Private Securities Transactions

October 8, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned and suspended for two year broker Walter Chao (Chao) (FINRA No. 2012034046301) alleging that between February and May 2012, while registered with LPL Financial LLC (LPL Financial), Chao participated in nine private securities transactions totaling $1.27 million without LPL’s approval. According to FINRA, Chao attempted to conceal his participation in the private securities transactions by using an unapproved email address and providing false and misleading answers in a compliance questionnaire. In addition, FINRA claimed that Chao also provided false and misleading statements to FINRA regarding his involvement in the private securities transactions. In addition, FINRA found that Chao was also a branch manager and failed to adequately supervise certain conduct such as being aware that staff under his supervision were using blank signed forms and unapproved email addresses.

Chao entered the securities industry in June 2003. In August 2007, Chao joined LPL Financial. LPL Financial terminated Chao’s registration in September 2012 for violating firm policies and procedures relative to participation in private securities transactions away from the firm without firm authorization. From October 2012 to January 2015, Chao was registered with Purshe Kaplan Sterling Investments.

FINRA alleged that in late 2011, Chao learned that a firm had created a special purpose vehicle (SPV) to purchase pre-initial public offering (IPO) shares of Facebook. By using the SPV investors could purchase ownership interests in the SPV in order to participate in the Facebook IPO. FINRA found that Chao wanted to solicit his customers to purchase interests in the Facebook SPV but knew that he was required to get approval from LPL Financial before doing so. Chao requested approval but LPL Financial denied his request.

FINRA Sanctions Ronald Benevento Over Unsuitable Mutual Fund Switching

October 4, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) brought and enforcement action against broker Ronald Benevento (Benevento) (FINRA No. 20130353695) alleging that between September 2011 through April 2013 Benevento engaged in unsuitable mutual fund switching activity in three customer accounts in violation of the FINRA Rules. In addition, FINRA alleged that during this time Respondent mismarked 15 order tickets as “unsolicited” causing the books and records of his employer, American Portfolios Financial Services, Inc. (American Portfolios) to become inaccurate.

Benevento first became associated with a FINRA member in 1997. From 1997 until February 2010, Benevento was a registered representative of AXA Advisors, LLC. Thereafter, from March 2010, until March 2015, Benevento was associated with American Portfolios.

FINRA alleged that, Benevento recommended 29 mutual fund switch transactions in three customer accounts without having reasonable grounds for believing that the transactions were suitable for the those customers due to the frequency of the transactions and the costs incurred due to the switches. In these transactions, FINRA alleged that Benevento recommended that the customers sell Class A mutual fund shares within as little as two to three months after recommending the purchase of them. These purchases were made in different mutual fund families than the previous purchase.

Florida Office of Financial Regulation Sanctions JP Turner Over Broker John McGriskin’s Churning Activity

October 1, 2015 | by Staff Attorney

According to the records kept by the State of Florida, Office of Financial Regulation brokerage firm J.P. Turner & Company, L.L.C., (JP Turner) was sanctioned (Administrative Proceeding: 0757-S-12/13) concerning allegations that the firm’s broker, John McGriskin (McGriskin) engaged in mutual fund switching, a form of churning, in client accounts.

From December 2002, until May 9, 2013, McGriskin was an associated person of JP Turner and worked out of the branch located in Palm Coast, Florida, in his home. According to Florida, McGriskin typically purchased Class A shares for his clients. Class A shares of mutual funds come with high front-end sales charges. Florida found that McGriskin sold Class A shares of one mutual fund company and used the proceeds to purchase Class A shares of another mutual fund company resulting in McGriskin’s clients being subject to additional front-end sales charges on those transactions.

In addition, many mutual fund families offer “breakpoint” discounts for total investment amounts equaling certain minimum thresholds across multiple funds with the same fund family. However, Florida found that McGriskin made six mutual fund switching transactions which were not in the same mutual fund family or issuer from August through December of 2010, thirty-six mutual fund switching transactions which were not in the same mutual fund family or issuer in 2011, thirty-seven mutual fund switching transactions which were not in the same mutual fund family or issuer in 2012, and thirty-six mutual fund switching transactions which were not in the same mutual fund family or issuer from January through May of 2013.

FINRA Bars Former Merrill Lynch Broker Michael Highfill Over Outside Business Activities

September 28, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) brought and enforcement action against broker Michael Highfill (Highfill) (FINRA No. 2015045652501) resulting in a bar from the securities industry alleging that Highfill failed to provide FINRA staff with information and documents requested. The failure to provide those documents and information to FINRA resulted in an automatic bar from the industry. FINRA’s document requests related to the regulators investigation into claims the Highfill solicited and accepted a loan from an elderly customer and that he also failed to disclose an outside business activity to his member firm.

FINRA’s investigation appears to stem from Highfill’s termination from Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill Lynch) in May 2015. At that time Merrill Lynch filed a Form U5 termination notice with FINRA stating in part that the firm discharged Highfill under circumstances where there was allegations that Highfill solicited a loan from a client and failed to disclose outside business activities. It is unclear the nature of the outside business activities from publicly available information at this time.

Highfill entered the securities industry in 1999. From August 2005 until August 2008, Highfill was associated with Morgan Stanley & Co. Incorporated. Thereafter, from July, 2008, until May 2015, Highfill was associated as a registered representative with Merrill Lynch out of the firm’s Ridgeland, Mississippi office.

FINRA Sanctions Broker James Madden Over Unauthorized Trades

September 16, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned broker James Madden (Madden) (Case No. 2014040336501) alleging that from March 2010, to February 2014, Madden exercised discretion in executing transactions in the accounts of l5 customers. FINRA found that Madden had received prior verbal authorization from his customers for the transactions but exercised his discretion in executing those transactions on future dates. FINRA found that Madden did not obtain written authorization from his customers to exercise discretion in their accounts and his brokerage firm, Raymond James & Associates, Inc. (Raymond James) did not approve the accounts for discretionary trading.

According to the BrokerCheck records kept by FINRA Madden has been the subject of at least three customer complaints, one regulatory action, and one employment termination for cause. Customers have filed complaints against Madden alleging securities law violations including that the broker made unsuitable investments and unauthorized trades among other claims.

Madden entered the securities industry in 1983. From 1993, until April 2009, Madden was associated with Citigroup Global Markets Inc. Thereafter, from March 2009, until February 2014, Madden was a registered representative with Raymond James. In February 2014, Raymond James filed a Form U5 stating that Madden’s termination was for cause and due to allegations of unauthorized trading. Finally, since February 2014, Madden has been associated with Thurston, Springer, Miller, Herd & Titak, Inc.

FINRA Bars Thomas Hogle Over Investigation Into Unsuitable Trades in a 101 Year Old’s Account

September 13, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) barred (Case No. 20150443048) broker Thomas Hogle (Hogle) after the broker failed to respond to a letter from the regulator requesting information. While the BrokerCheck records kept by FINRA do not disclose all the facts being investigated by the regulatory inquiry, FINRA sent Hogle a request for documents in connection with their investigation that unsuitable investment recommendations were made in an account of a 101 year-old customer. On April 15, 2015, Hogle acknowledged FINRA’s requests but refused to produce documents or information resulting in the bar from the securities industry.

According to the BrokerCheck records Hogle has been the subject of at least one customer complaint and three financial matters and liens. The customer complaints against Hogle allege a number of securities law violations including that the broker made unsuitable investments, unauthorized trading, and churning (excessive trading) among other claims.

Hogle entered the securities industry in 1998. From April 2008, until September 2011, Hogle was associated with Nelsonreid, Inc. Thereafter, from October 2011, until May 2015, Hogle was a registered representative of B.B. Graham & Company, Inc.

Broker Spotlight: Customer Complaints Against Francine Frechter

September 10, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Francine Frechter (Frechter) has been the subject of two customer complaints and one employment separation. The customer complaints against Frechter allege a number of securities law violations including that the broker made unsuitable investments, misrepresentations, and failure to follow instructions among other claims.

Frechter entered the securities industry in 1984. Since 2000 Frechter was associated with Citigroup Global Markers Inc. From June 2009, until January 2014, Frechter was a registered representative with Wells Fargo Advisors, LLC. In December 2013, Frechter was discharged from Wells Fargo concerning allegations that Frechter recommended a lending product to three clients that was contrary to the firm’s policies. Currently, Frechter is associated with Stifel, Nicolaus & Company, Incorporated.

Advisers have an obligation to deal fairly with investors and that obligation includes making suitable investment recommendations. In order to make suitable recommendations the broker must have a reasonable basis for recommending the product or security based upon the broker’s investigation of the investments properties including its costs, benefits, risks, tax consequences, and other relevant factors. In addition, the broker must also understand the customer’s specific investment objectives to determine whether or not the specific product or security being recommended is appropriate for the customer based upon their needs.