securities fraud attorney

Dennis Karasik Barred by FINRA Over Diversified Energy Group Sales

October 10, 2014 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) permanently barred broker Dennis Karasik (Karasik) concerning allegations that from December 2010, to March 2012, Karasik participated in private securities transactions, otherwise known as “selling away” without providing prior written notice to the two firms with which he was associated. Specifically, FINRA alleged that Karasik participated in the sale of bonds issued by Diversified Energy Group, Inc. (DEG), an energy company, and that the company paid him finder’s fees from on the sales made.

Karasik was employed by a number of brokerage firms from 1986 through February 2013. During the times relevant to FINRA’s allegations Karasik was registered with Multi-Financial Securities Corp. (Multi-Financial) until December 2011, and with H. Beck, Inc. (H. Beck) until February 2013. Karasik maintained an office in Parkton, Maryland. Karasik was terminated by H. Beck for the conduct alleged by FINRA. According to Karasik’s BrokerCheck, he has had six customer complaints filed against him and also has two tax liens. Karasik was also a partner of Carrio, Karasik, & Associates (CKA).

DEG is a Florida energy company that develops oil and gas reserves in the United States. It has raised funds through private placement offerings of corporate bonds to accredited investors. FINRA alleged that between January 2010, and March 2012, Karasik and his partner in CKA participated in the sale of more than $3.2 million of DEG bonds to at least 25 investors. According to FINRA, Karasik was compensated for his role in these sales through the payment of a finder’s fee.

Former First Allied Broker Herbert Kaye Suspended for Unauthorized Trading

October 8, 2014 | by Staff Attorney

On September 15, 2015 FINRA suspended former First Allied broker, Herbert Leonard Kaye, for four months and fined him $25,000 which includes the disgorgement of $11,000 in commissions. According to FINRA, Mr. Kaye entered over 2,000 discretionary trades in the account of a customer between June 2010 and April 2013 without the customer’s prior written authorization, in violation of FINRA Rule 2010 and 2510(b). FINRA Rule 2010 states that “A member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade.”

In June 2010, Mr. Kaye’s customer realized a significant loss on the unsolicited sale of equities that she had inherited from her deceased husband. Following that sale the customer requested that Kaye recommend investments and investment strategies that would limit her exposure to large market fluctuations. The customer, who’s information was not disclosed, gave Mr. Kaye verbal authority to use his discretion to enter trades in her account without contacting her.

According to FINRA, Mr. Kaye did not obtain written authority to trade in her account. Moreover, First Allied’s written policies and procedures prevented discretionary trading except in limited circumstances. Nonetheless, between June 2010 and April 2013, Mr. Kaye executed over 2,000 discretionary trades generating over $173,000 in commissions.

FINRA Alleges that Former Waddell & Reed Employee, Jeffrey Meyer, Engaged in 37 Private Placement Transactions without Proper Notice

September 24, 2014 | by Staff Attorney

On August 21, 2014, Richard A. March, Senior Regional Counsel of FINRA’s Department of Enforcement filed a complaint against Jeffrey Meyer, a financial advisor in Lake in the Hills Illinois who was formerly associated with Waddell & Reed, Inc. The complaint alleges that while employed at Waddell & Reed and WRP Investments, Inc. Mr. Meyer acted outside the scope of his employment with those firms by participating in 37 private securities transactions totaling more than $1.5 million, without providing prior written notice to the firms of his proposed roles in the transactions. FINRA alleges that as a result of the foregoing, Mr. Meyer violated FINRA Rule 2010. FINRA Rule 2010 states that “A member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade.”

Mr. Meyer entered the securities industry in January 2000 as an investment company products and variable contracts representative with Franklin Financial Services, Corp. In February 2001 he became a general securities representative with Focused Investments, LCC. According to FINRA, United Private Capital, Inc. was a corporate entity that was established as an investment vehicle for FOREX currency trading. Between November 2008 and September 2009, United Capital sold corporate guarantees totaling $1 million to 20 investors and Mr. Meyer participated in each of the private securities transactions. Mr. Meyer, in some instances collected checks from customers and assisted them in preparing documents to effectuate the transactions. Furthermore, on at least one occasion, Mr. Meyer presented sales material to an individual who subsequently invested at United Private Capital.

In addition, according to FINRA, Mr. Meyer participated in private securities transactions related to commercial loans through Strategic Lending Solutions, LLC as well. Those promissory notes totaled approximately $300,000 with 13 investors. Mr. Meyer received a 2% payment based on the amount of the promissory note.

B. C. Ziegler and Company Sanctioned Over Allegations of False and Misleading Advertising

September 11, 2014 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned brokerage firm B. C. Ziegler and Company (B. C. Ziegler) and ordering the brokerage firm to pay $150,000 in connection with allegations that from January 1, 2009, through May 30, 2012 B. C. Ziegler failed to implement a supervisory system reasonably designed to ensure that material economic information regarding Church Bonds, including information concerning delinquent sinking fund payments, was disclosed to the firm’s brokers, trading desk, and customers, and was factored into the pricing of Church Bonds sold to customers in secondary market transactions. In addition, it was alleged that B. C. Ziegler used Church Bond sales material with customers that was not fair and balanced. The sales material prominently promoted the yields associated with Church Bonds without balancing the presentations by disclosing the risks. FINRA also alleged that B. C. Ziegler distributed unbalanced internal-use-only Church Bond sales material to its registered representatives, causing the firm to violate NASD Rule 2211(d)(1) and FINRA Rule 2010.

B. C. Ziegler has been a registered broker-dealer since 1948 and is a full service brokerage firm headquartered in Chicago, Illinois. A primary business of the firm is the underwriting and sale of fixed income products, including debt issued by religious institutions known as “Church Bonds” and senior living facilities (Senior Living Bonds). The firm has approximately 22 branch offices and 200 registered representatives.

According to FINRA, B. C. Ziegler specializes in underwriting and selling Church Bonds for religious institutions. Church Bonds are generally issued by nonprofit religious entities and as such are exempt from registration as a security with the SEC. While there is no established secondary market for Church Bonds, FINRA found that B. C. Ziegler frequently facilitated secondary trading among its customers for Church Bonds it underwrote. A Church Bond sinking fund is a pool of money funded with periodic payments by an issuer for the purpose of accumulating money to make annual or semi-annual coupon payments due to investors of Church Bonds. A Church Bond issuer behind on its sinking fund payments is not in strict compliance with its trust indenture and may be a sign of an issuer’s financial distress.

FINRA Sanctions 79 Capital Securities Over GWG Debenture Sales

September 10, 2014 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned brokerage firm 79 Capital Securities, LLC (79 Capital) and broker Michael Ward (Ward) concerning allegations around June and July 2012, 79 Capital and Ward posted on the website of a business networking organization sales material regarding GWG Renewable Secured Debentures (GWG Debentures), an illiquid and high-risk alternative private placement investment that omitted material information concerning the debentures. Additionally, FINRA alleged that the firm and Ward failed to record basic suitability information and create new account forms for customers involved in two transactions for the purchase of debentures. Finally, FINRA found that respondents also permitted an employee whose FINRA registration had not been approved, to sell the GWG Debentures and in doing so failed to enforce the firm’s written procedures requiring the creation of new account forms and prohibiting unregistered persons from effecting securities transactions.

According to our investigation, 79 Capital is the third brokerage firm or broker to be sanctioned by FINRA in the past year concerning the improper sale of GWG Debentures. See Broker Sanctioned Over Unsuitable Sales of Private Placement Securities (FINRA sanctioned Karen Geiger); FINRA Sanctions Michael Wurdinger and Anil Vazirani Over GWG Debenture Sales (FINRA sanctioned brokers associated with Center Street Securities, Inc.).

As a background, GWG Holdings, Inc. purchases life insurance policies on the secondary market at a discount to the face value of the policies. Once purchased, GWG pays the policy premiums until the insured dies and then GWG collects the face value of the insurance hoping to earn returns by collecting more upon the maturity of the policies than it has paid to purchase the policy and service the premiums. FINRA found that the company has a limited operating history and has yet to be profitable.

James Applewhite Fined Over Allegations of Unauthorized Discretionary Trading

July 31, 2014 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned financial advisor James Applewhite (Applewhite) concerning allegations that from about January 2010, through October 2012, Applewhite exercised discretion by effecting approximately 171 transactions in eight customer accounts without obtaining prior written authorization from the customers and without having the accounts accepted as discretionary accounts as required by NASD Rule 2510(b). FINRA found that the discretion was generally exercised pursuant to a strategy previously agreed upon with the customers. Nonetheless, FINRA alleged the firm did not permit discretionary trading, except for managed accounts, with pre-approved written discretion. As a result FINRA found that Applewhite violated NASD Rule 2510(b) and FINRA Rule 2010.

Applewhite entered the securities industry in November 1983. During all periods mentioned in the FINRA finding he was associated with Wells Fargo Advisors, LLC. Applewhite’s employment with Wells Fargo ended on October 22, 2012. Thereafter, Applewhite became registered with BB&T Securities, L.L.C f/k/a Scott & Stringfellow, LLC.

The allegations made against Applewhite constitute unauthorized trading. Unauthorized trading occurs when a broker sells, buys, or exchanges, securities without the prior consent or authority from the investor. Unless an investor gives discretion to make trades, the broker must first discuss all trades with the investor before executing them. Even if the a customer verbally grants a broker discretion such an agreement is not valid under industry rules The SEC has found that unauthorized trading also constitutes securities fraud due to its fraudulent nature. No omission of information could be more material than the failure to inform the investor of his or her own purchases and sales.

Former Sterne Agee Broker Dean Mustaphalli Alleged to Have Wrongfully Run $6 Million Hedge Fund

July 15, 2014 | by Staff Attorney

The attorneys at Gana Weinstein LLP are investigating claims that former Sterne Agee Financial Services Inc. (Sterne Agee) broker Dean Mustaphalli (Mustaphalli) solicited millions of dollars from investors running to run a $6 million hedge fund on the side without formerly disclosing the activity to his brokerage firm. As reported by InvestmentNews, the Financial Industry Regulatory Authority (FINRA) charged Mustaphalli for founding and receiving commissions from a hedge fund he created called Mustaphalli Capital Partners in or about 2011 without informing his. Mustaphalli sold the investment through his registered investment advisory firm, Mustaphalli Advisory Group.

According to allegations made, Mustaphalli solicited money for the fund from at least 25 investors over six months during 2011. The fund invested in publicly traded equity and debt securities has since declined by approximately 90% according to investors. At least some of Mustaphalli’s clients were direct customers of Sterne Agee as well. According to FINRA, Mustaphalli was not cooperating with the agencies requests to provide account statements for the hedge fund. Typically in these cases if a broker does not cooperate with FINRA’s department of enforcement and the agency proves he withheld information the broker would be barred from the securities industry among other remedies that could be imposed.

Mustaphalli disclosed the existence of the Mustaphalli Advisory to Sterne Agee but did not disclose that he was managing the hedge fund through the firm according to FINRA. However, under the FINRA rules, brokers must fully disclose hedge funds for approval to their member firm and be supervised by the firm under Rule 3040.

How to Find An FINRA Securities Attorney to Assist in Your Investment/Broker Case

December 10, 2013 | by Staff Attorney

You’ve gone over your account statements and start to suspect that your broker hasn’t invested your assets appropriately. What should you do? The first step is to compile all of your documents and correspondence with your broker. You should collect your monthly account statements, opening account documents, and any written communication with your brokerage firm for starters. This will make it easier to assess your case.

Next, you should consult with an attorney. While not required, when you have securities claim, brokerage firms rarely settle claims with individuals without the assistance of an attorney. Most securities claims must be brought in arbitration before the Financial Industry Regulatory Authority (FINRA), the broker-dealer regulator. A securities attorney can represent you during the arbitration or mediation proceedings and provide direction and advice on how to present your claim. Even if you do not choose to hire an attorney, brokerage firms usually hire counsel to represent them. If you cannot afford an attorney, many law firms offer contingency fee arrangements.

The SEC provides the following advice on finding an attorney who specializes in resolving securities complaints. If you need help in finding a lawyer who specializes in resolving securities complaints, you may want to try the following: