Stock Attorneys Blog

February 2012 FINRA Florida Disciplinary Actions

Fri, 02 Mar 2012 17:08:38 -0500

FINRA (Financial Industry Regulatory Authority) has taken disciplinary actions against the following individuals for violations of FINRA rules and federal securities laws, rules and regulations.

Jeffrey Scott Donner (Weston, Florida) was barred from association with any FINRA member in any capacity. The sanction was based on findings that Jeffrey Donner executed several unauthorized transactions in customers’ accounts at his member firm without their knowledge and consent. The findings also stated that Jeffrey Donner used his personal email account to send business-related emails to customers and admitted to FINRA that he used an unapproved, personal email account to send emails to and receive emails from his customers.

Olaf F. Gamlen (Palm Beach Gardens, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member for 10 business days. Olaf Gamlen consented to the described sanctions and to the entry of findings that he exercised discretion in a customer’s nondiscretionary advisory accounts. The findings stated that although the customer had given Olaf Gamlen oral authorization to use discretion in his accounts to effect securities transactions, Olaf Gamlen did not obtain the customer’s prior written authorization.

Paul Cragg Larsen (Naples, Florida) and Quentin Marius Silic (Naples, Florida) submitted a Letter of Acceptance, Waiver and Consent in which they were each barred from association with any FINRA member in any capacity. Paul Larsen and Quentin Silic consented to the described sanctions and to the entry of findings that they failed to respond to FINRA requests for information and documentation regarding possible undisclosed outside business activities and/or private securities transactions. The findings stated that through counsel, Paul Larsen and Quentin Silic advised FINRA that they would not provide the requested information and documentation.

Jordan Alan Linn (Hallandale, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $2,500 and suspended from association with any FINRA member for 30 days. Jordan Linn consented to the described sanctions and to the entry of findings that he failed to amend his Form U4 to disclose a material fact.

January 2012 FINRA Florida Disciplinary Actions

Tue, 14 Feb 2012 09:55:40 -0500

FINRA (Financial Industry Regulatory Authority) has taken disciplinary actions against the following individuals for violations of FINRA rules and federal securities laws, rules and regulations.

Jan D. Narrine (Winter Garden, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Jan Narrine consented to the described sanction and to the entry of findings that he misappropriated a total of $57,311.99 by transferring funds from customers’ accounts to his own, and in each instance, forged the customers’ signatures on LOAs, which falsely purported to authorize and instruct the transfers. The findings stated that the transfers were made without the customers’ knowledge or authorization.

Victor B. Azevedo (Miami, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $2,500 and suspended from association with any FINRA member for five business days. Victor Azevedo consented to the described sanctions and to the entry of findings that he knowingly made untrue statements while employed by his member firm’s bank affiliate.

Ricardo Blanco (Key Biscayne, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member. Ricardo Blanco consented to the described sanction and to the entry of findings that he sent documents that contained false and inflated account values to a customer and also sent the customer a false account statement, which indicated that the account’s value was approximately $3 million when, in fact, it was worth less than a dollar. The findings stated that Ricardo Blanco sent a false account statement with an inflated value to another customer; the false statement indicated that the value of the account was approximately $2 million when the account had, in fact, been closed.

Richard Paul Counts (Belleair, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member. Counts consented to the described sanction and to the entry of findings that he misappropriated approximately $18,000 from a customer’s checking account and approximately $73,500 from the same customer’s home equity line of credit; Counts converted these funds to his personal use.

Scott Silver of Blum & Silver, LLP Served on Panel of Securities Arbitration Masters

Tue, 17 Jan 2012 14:15:38 -0500

Today Scott Silver, Managing Partner of Blum & Silver, LLP, served on a panel of seasoned securities attorneys, presenting before members and guests of the Securities Committee of the South Palm Beach Bar Association in Boca Raton. Mr. Silver spoke on the topic of “The Secrets of Successfully Arbitrating a FINRA case from the Masters.” Mediator Jeffrey Grubman moderated the presentation, and Mr. Silver’s co-panelists were Richard Martens, Wes Holsten, and Scott Link.

Mr. Silver discussed, amongst other issues, his support for the all public FINRA arbitration panel. Mr. Silver commented afterwards that he was honored to speak to a large group of respected collegues and friends.

Blum & Silver, LLP is a nationally-recognized securities law firm dedicated to representing investors worldwide for their claims for losses due to stockbroker misconduct and brokerage firm negligence involving stocks, bonds, commodities and other products. Contact us for a free consultation.

Blum & Silver, LLP Attorneys Published in National Law Journal on the SEC Whistleblower Incentives under Dodd-Frank

Fri, 23 Dec 2011 14:09:13 -0500

Blum & Silver, LLP attorneys Scott Silver and Janine Arno co-authored an article “SEC Whistleblower Incentives under the Dodd-Frank Wall Street Reform Act.” Their article was published this month in PIABA Bar Journal, a national publication focusing on the practice of securities arbitration. For a copy of the article, click here.

Mr. Silver and Ms. Arno’s article provides the history of whistleblowers, the controversy surrounding the SEC’s whistleblower legislation, and protections afforded to whistleblowers under the act. The article also discusses the detailed requirements for meeting the SEC whistleblower rules requirements and the exacting procedures for filing a claim with the SEC, including ways for whistleblowers to report anonymously to the SEC and ways to potentially maximize their awards.

The SEC implemented its whistleblower legislation in August 2011, enabling the SEC to pay substantial awards to eligible whistleblowers who voluntarily provide the SEC original information about a violation of the federal securities laws that leads to the successful enforcement or related action resulting in monetary sanctions exceeding $1 million. Pursuant to the conditions of the regulations, which are described in detail in Mr. Silver and Ms. Arno’s article, whistleblowers are entitled to up to 30% of the SEC's monetary recovery in successful actions.

Blum & Silver, LLP Investigates Former Merrill Lynch Stockbroker Mark E. Imbertson

Tue, 11 Oct 2011 14:44:35 -0500

Blum & Silver, LLP has commenced an investigation into the activities of Mark E. Imbertson, a former stockbroker at Merrill Lynch. Mark E. Imbertson, who was based in West Palm Beach, Florida, was fired by Merrill Lynch in March 2011 for sales practice violations after receiving over 20 complaints from his customers while he was employed by the firm.

Chief among the complaints against Imbertson were allegations of unsuitable investments, failure to follow customer instructions, unauthorized trading, and misrepresentation. Imbertson, who began his career as a financial advisor at Merrill Lynch in 1998, created investment and business strategies that catered to affluent investors.

FINRA Issued Investor Alert on Public Non-Traded REITs

Wed, 05 Oct 2011 18:11:56 -0500

This week the Financial Industry Regulatory Authority (FINRA) issued a new Investor Alert called Public Non-Traded REITs-Perform a Careful Review Before Investing to help investors understand the benefits, risks, features and fees of these investments. While investors may find non-traded REITs appealing due to the potential opportunity for capital appreciation and the allure of a robust distribution, investors should also realize that the periodic distributions that help make non-traded REITs so appealing can, in some cases, be heavily subsidized by borrowed funds and include a return of investor principal. Additionally, early redemption of shares is often very limited, and fees associated with the sale of these products can be high and erode total return.

"Confronted with a volatile stock market and an extended period of low interest rates, many investors are looking for products that offer higher returns in turbulent times. However, investors should be wary of sales pitches that might play up non-traded REITs' high yields and stability, while glossing over the lack of liquidity, fees and other risks," said Gerri Walsh, FINRA's Vice President for Investor Education.

Real estate investment trusts (REITs) pool the capital of numerous investors to purchase a portfolio of properties—from office buildings to hotels and apartments, even timber-producing land—which the typical investor might not otherwise be able to purchase individually. There are two types of public REITs: those that trade on a national securities exchange and those that do not. FINRA's alert focuses on publicly registered non-exchange traded, or simply non-traded REITs.

Public Non-Traded REITs outlines the features, complexities, risks and costs associated with non-traded REITs.
• Distributions are not guaranteed and may exceed operating cash flow. In newer programs, distributions may be funded in part or entirely by cash from investor capital or borrowings. Distributions can also be suspended for a period of time or halted altogether.
• Lack of a public trading market creates illiquidity and valuation complexities. Most non-traded REITs are structured as a "finite life investment," meaning that at the end of a given timeframe, the REIT is required either to list on a national securities exchange or liquidate. Many factors affect the valuation of non-traded REITs, including the portfolio of real estate assets owned, strength of the trust's balance sheet, overhead expenses and cost of capital.
• Early redemption is often restrictive and may be expensive. Most non-traded REITs place limits on the amount of shares that can be redeemed prior to liquidation. These limits can be as restrictive as 5—or even 3—percent of the weighted average number of shares outstanding during the previous year. Additionally, the redemption price is generally lower than the purchase price, sometimes by as much as 10 percent.
• Non-traded REITs can be expensive. State and FINRA guidelines limit front-end fees to 15 percent, but a 15-percent front-end fee on a $10,000 investment means that only $8,500 is going to work for an investor.

Blum & Silver, LLP Files Securities Class Action Against Regions Bank Alleging Regions Aided and Abetted the Sale of Securities by an Unregistered Dealer

Mon, 03 Oct 2011 18:15:42 -0500

Blum & Silver, LLP has filed a class action lawsuit against Regions Bank (“Regions”), a banking subsidiary of Regions Financial Corporation (NYSE: RF). The securities class action filed in the United States Southern District of Florida alleges claims for violation of the Florida Securities and Investor Protection Act. The basis for the lawsuit is that Regions personally participated or aided in the sale of securities by dealers that were not registered with the State of Florida.

Specifically, U.S. Pension Trust Corp. ("USPTC") and U.S. College Trust Corp. ("USCTC") (collectively, "USPT") sold securities from offices located in the State of Florida without registering as a broker-dealer with the Securities and Exchange Commission ("SEC"). The class is defined as all persons and entities who contributed money to the investment plans sold by USPT between September 21, 2006 and August 31, 2009, inclusive.

A U.S. District Judge in the Southern District of Florida already has ruled that USPT violated federal law by failing to register as a broker-dealer, and another federal court judge entered a final judgment against Regions for aiding and abetting USPT's violations of federal registration laws. Regions agreed to pay a $1 million penalty to settle those charges.

USPT also failed to register as a dealer with the State of Florida, which the class action lawsuit alleges USPT was required to do pursuant to the Florida Securities and Investor Protection Act. The class action lawsuit seeks to hold Regions liable under Florida law for personally participating or aiding in USPT's sales of securities when USPT was not registered as a dealer with the State of Florida.

FINRA Fined Raymond James for Charging Unfair Commissions and Ordered Restitution

Sat, 01 Oct 2011 18:08:51 -0500

The Financial Industry Regulatory Authority (FINRA) ordered Raymond James & Associates, Inc. (RJA) and Raymond James Financial Services, Inc. (RJFS) to pay restitution of $1.69 million to more than 15,500 investors who were charged unfair and unreasonable commissions on securities transactions. FINRA also fined RJA $225,000 and RJFS $200,000.

FINRA said it found that from Jan. 1, 2006 to Oct. 31, 2010, the investment and financial planning firm and its subsidiary used automated commission schedules for equity transactions that charged more than15,500 customers nearly $1.69 million in excessive commissions on over 27,000 transactions involving, in most instances, low-priced securities. FINRA found that the firms’ supervisory systems were inadequate because the firms established inflated schedules and rates without proper consideration of the factors necessary to determine the fairness of the commissions, including the type of security and the size of the transaction.

"Raymond James failed to adequately monitor its supervisory systems," said Brad Bennett, FINRA executive vice president. "Broker-dealers must ensure that their automated systems set commission charges that are fair to investors."

Blum & Silver, LLP Files Claims on Behalf of McGinn Smith Investors Against National Financial Services, LLC

Wed, 28 Sep 2011 15:28:49 -0500

Blum & Silver, LLP is pursuing claims against National Financial Services, LLC (“NFS”) for investors who lost money investing over $100 million in more than 20 unregistered debt offerings sold by McGinn, Smith & Co., Inc., (“McGinn Smith”) and other entities under its ownership or control. McGinn Smith was a New York based securities broker-dealer with its principal place of business in Albany, NY. The firm also had many clients in Pennsylvania.

Chief among the investments sold by McGinn Smith were notes issued by four limited liability companies: First Independent Income Notes, LLC., First Equity Income Notes, LLC, First Albany Income Notes, LLC., and Third Albany Income Notes, LLC ( collectively, “Income Notes”). Each of these companies was wholly-owned by an extension of McGinn Smith.

McGinn Smith began using NFS, a Fidelity company, as its clearing firm in or about 2005. Many McGinn Smith clients were required to maintain an account with NFS which provided significant clearing and back office operations for McGinn Smith.

The claims allege, in part, that NFS was negligent in its pricing of the notes and breached duties it owed to the investors in negligently clearing for McGinn Smith.

In April 2010, both the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) filed lawsuits against McGinn Smith and its principals, alleging that from 2003 through April 2010, McGinn Smith committed an ongoing fraud against over 900 investors.

Lehman Investor Alert: Continued Findings that UBS Misled Lehman Structured Notes Investors

Thu, 22 Sep 2011 18:08:37 -0500

Lehman Brothers filed for bankruptcy three years ago, leaving investors in Lehman Brothers structured notes with essentially worthless notes. In the last three years, arbitration panels, courts and securities regulators have all recognized that UBS down played the risks associated with Lehman structured notes, including principals protected notes sold to its customers.

In 2009, the New Hampshire Bureau of Securities Regulation filed a cease and desist and order and sought other relief against UBS, alleging unfair sales practice relating to its sale and recommendation of Lehman structured products to New Hampshire investors. Last month UBS settled this matter with the State of New Hampshire, agreeing to pay a fine, investigation costs and an administrative payment.

In 2011, the Financial Industry Regulatory Authority (FINRA) fined UBS $2.5 million and ordered $8.25 million in restitution for UBS’s misconduct in selling Lehman so-called Principal Protected notes. FINRA's settlement with UBS reveals UBS’ improper sales tactics relating to Lehman structured products. Although sanctioning UBS almost $11 million, it provides restitution for only a limited number of customers and specifically holds that investors are free to pursue their claims directly against UBS.

Most recently, a federal judge in New York ruled in a UBS-Lehman class action case that the offering documents that described Lehman’s purported “principal protection” notes were false and misleading. The Court did not accept UBS’s defense that the offering materials contained risk disclosures. The Court ruled that “a misleading statement displayed prominently and in numerous places may not be cured by inconspicuous and scattered warnings.” The court found that the principal protection statements were displayed more prominently and frequently than the warning statements.

FINRA Fines Pointe Capital, Inc. (n/k/a JHS Capital Advisors, Inc.) for Excessive Commissions

Tue, 20 Sep 2011 16:02:53 -0500

The Financial Industry Regulatory Authority (FINRA) recently announced it has fined Pointe Capital, Inc. (“Pointe”) of Boca Raton, Florida, $300,000.00 for mischaracterizing a portion of the commission charges as fees for handling services. The fines also include additional violations for inadequate supervisory procedures relating to private placements. Specifically, Pointe charged customers a handling fee as high as $95.00 per trade in addition to a commission.

FINRA has sanctioned other firms for similar misconduct relating to understating commissions:

• John Thomas Financial (“John Thomas”) of New York, New York was fined $275,000.00. John Thomas charged its customers a handling fee as high as $75.00 per trade in addition to a commission; and

• First Midwest Securities, Inc. (“First MidWest) of Bloomington, Illinois was fined $150,000.00. First Midwest charged customers a handling fee as high as $99.00 per trade in addition to a commission.

FINRA’s resolution of these matters does not include full restitution for investors charged these handling fees.

Recovering Investment Losses in Desert Capital REIT

Wed, 24 Aug 2011 13:13:41 -0500

In June 2011, Desert Capital REIT was forced into an involuntary bankruptcy. Creditors with claims of over $43 million filed the petition to force the company into bankruptcy.

According to its website, Desert Capital was founded in 2003 and organized as a REIT with a goal to deliver attractive dividend income to investors through the acquisition of real estate loans and mortgage-backed securities.

Desert Capital REITs lost $21 million in 2007, $11 million in 2009, and another $26 million in the third quarter of 2010 alone. Desert Capital published a press release announcing it has "doubt as to ability to continue" and may have to be liquidated. In 2010, the Securities and Exchange Commission issued a subpoena to Desert Capital "pertaining to payments and transactions with related party, CM Capital." CM Capital and CM Securities are brokers that marketed the REIT and were operated by the same CEO as Desert Capital, Todd Parriott.

Blum & Silver, LLP Announces its Investigation of the Laeroc Funds

Wed, 24 Aug 2011 13:11:36 -0500

The Law Offices of Blum & Silver, LLP is currently investigating the LaeRoc Funds, including the Laeroc 2002 Income Fund LP, Laeroc 2004-2005 Income Fund LP, Laeroc 2005-2006 Income Fund LP, Laeroc Edge Fund LP and Laeroc Income Fund 007, LP.

The Laeroc funds are real estate private placements (under Regulation D) that were sold by brokerage firms like LPL Financial LLC and Commonwealth Financial Network. According to its website, Laeroc Funds is a real estate investment firm managing over $650 million in assets in the last 23 years and has created 14 funds. The Company focuses on income producing properties in the western US with a concentration in southern California.

Many of the Laeroc funds have suffered substantial declines in value. Laeroc 2002 Income Fund, L.P. recently announced the dissolution of the fund to its investors. While the Laeroc 2005-2006 Income Fund LP is currently attempting to raise another $11 million to $14.5 million to pay off at least $49 million of debt. This fund recently issued a cash call to investors, asking investors to contribute additional money for preferred partnership status.

Investors in Lehman Structured Notes Awarded the Return of the Their Entire Investment from Neuberger Berman

Fri, 19 Aug 2011 13:02:11 -0500

A FINRA arbitration ordered Neuberger Berman, an asset management firm, to pay three investors $5.5 million for damages related to the sale of failed Lehman structured products.

Neuberger was a unit of Lehman until 2009. It was found responsible for recouping the initial investments of the clients, plus interest and legal fees, after selling the Lehman-backed notes between June and August 2008. Lehman Brothers filed for bankruptcy a month later, leaving the investors with essentially worthless investments. The investors complained that the Neuberger failed to adequately disclose that the investments were actually Lehman debt instruments, not investments in the underlying indices.

This Panel’s award is similar to recent awards entered into by FINRA arbitration panels across the country related to Lehman structured notes, including principal protected notes. Claims that broker-dealers failed to disclose the specific material terms of the Lehman Brothers notes and obscured the risks inherent to the Lehman Brothers notes, namely that the principal was only protected by Lehman Brothers, continue to gain traction with FINRA arbitration panels. As recently as June, in a similar ruling, a FINRA arbitration panel awarded $2 million to NBA Philadelphia 76ers President Pat Croce against UBS Financial Services for an investment he made in a Lehman Brothers principal protected notes.

Broker-Dealers Charging Excessive “Postage and Handling” Fees

Thu, 04 Aug 2011 18:06:15 -0500

FINRA (Financial Industry Regulatory Authority) recently raised an issue concerning excessive postage and handling fees being charged by a number of small and mid-sized broker-dealers. In his speech to the attendees of FINRA's Annual Conference, FINRA Chairman and CEO Richard Ketchum said this:

"We are taking a close look at excess charges for routine services, which some firms appear to be treating as an additional de facto commission. Such charges include postage and handling charges for particular trades. You can expect to see some enforcement activity in this area with respect to particularly egregious examples."

Postage and handling fees charged by broker-dealers can range from a few dollars to $100 per transaction. There has been an increase in postage and handling fees by many broker-dealers since the market collapse in 2008 which left firms desperate for profits.