Stock Broker Fraud Blog

Two Men Sentenced in Texas Securities Case Involving $30 Million Promissory Note Fraud that Bilked Investors Via Ponzi Scam

Tue, 14 May 2013 16:46:22 -0600

In Harris County state District Court, two men have received prison terms of a decade each for running a Texas Ponzi scam that involved life insurance policy death benefits. Gregory F. Jablonski and Howard Glen Judah are accused of orchestrating a nearly $30M scam involving their National Life Settlements LLC, which sold securities that weren’t registered and which they falsely claimed were benefits-backed. Both of them pleaded guilty to selling an unregistered security and securities fraud.

Investors with National Life Settlements were paid using the money of new investors. The company made false promises, causing customers that they would get an 8-10% yearly return through the promissory notes. Active and retired state employees were among those targeted, and millions of dollars were taken from retirement plans and invested through the firm.

The National Life Settlements used insurance agents, many of whom did not have securities dealer licenses, as it sellers. The agents would go on to make $4M commissions.

The state says that Judah and Jablonski did not get the life insurance policies they needed so they could investors. They two of them also falsely told investors that the Federal Reserve had given their firm billions of dollars. After an undercover probe led to the placing of National Life Settlements into receivership, investors got 69% of their money back.

Texas Securities Fraud
Our Houston securities lawyers represent investors that have been the victims of Texas financial fraud. Contact Shepherd Smith Edwards and Kantas, LTD LLP today. Your no obligation, initial case assessment is free.

PROMOTERS OF DEATH BENEFITS FRAUD SENTENCED TO 10 YEARS IN PRISON, Texas State Securities Board, February 20, 2013

More Blog Posts:
Texas Securities Criminal Case Against Oil and Gas Company Executive Can Proceed, Rules Fifth Circuit, Stockbroker Fraud Blog, February 6, 2013

Investor Files Securities Case Against Fidelity Over Float Income Investments Involving 401(K)s, Institutional Investor Securities Blog, May 6, 2013

Wells Fargo Settles Securities Lawsuit Over Medical Capital Holdings Ponzi Scam for $105M

Sat, 11 May 2013 12:54:00 -0600

Wells Fargo & Co. (WFC) has consented to pay $105M to investors of the now failed Medical Capital Holdings Inc. The bank had served as trustee for Medical Capital securities.

The medical receivables financing company got about $2.2 billion from thousands of investors between 2001 and 2009 via the private placement offerings that were promissory notes. The private placement was a high commission financial instrument that promised annual returns of 8.5% to 10.5%. Per court filings, investors paid Medical Capital nearly $325 million in administrative fees. Dozens of independent brokerage firms sold the notes.

It was in 2009 that the SEC accused affiliates of Medical Capital of committing securities fraud against investors. The financial scam was quickly shut down and the company soon entered receivership but investors got back just half their money. Many of them would go on to file a securities lawsuit against trustees Bank of New York Mellon Corp. (BK) and Wells Fargo accusing the financial firms of failing to fulfill their role as trustees by neglecting to detect the fraud. Meantime, many of the brokerage firms that sold the MedCap notes are no longer in business because they sank from the securities arbitration payments and legal costs that followed as a result.

Even as Wells Fargo is settling this MedCapital securities case, the bank maintains that it did nothing wrong and that the one to blame is Medical Capital. This settlement comes a few months after Bank of New York Mellon resolved similar claims against it for $114M.

In that class action securities case, investors are sharing a $90.68M payment, with $13.6M going to legal fees and another $1.8M to expenses. Bank of New York Mellon also denied any wrongdoing.

Wells Fargo Settles Medical Capital Investor Suit for $105 Million, Wall Street Journal, April 30, 2013

Wells Fargo agrees to pay $105M to end MedCap suit, Investment News, May 1, 2013

Bank of NY Mellon to pay $114 million in Medical Capital accord, Reuters, February 22, 2013

More Blog Posts:
Medical Capital Fraud Lawsuit Against Wells Fargo Must Proceed, Institutional Investor Securities Blog, April 10, 2013

FINRA Bars Former Wells Fargo Advisors Broker that Bilked Child with Cerebral Palsy, Stockbroker Fraud Blog, April 26, 2012

$500M MBS Settlement Reached Between Countrywide and Investors

Fri, 10 May 2013 20:16:57 -0600

Class action securities plaintiffs, led by the Iowa Public Employees' Retirement System, have settled their mortgage-backed securities lawsuit against Countrywide for $500 million. This is the largest federal class action MBS securities case in the US that has been resolved to date, even exceeding the $315 million settlement reached with Bank of America’s (BAC) Merrill Lynch (MER) last year.

Per the investors, Countryside, which was acquired by BofA, sold them billions of dollars in MBS certificates that were backed by defective loans. Toward the end of 2008, nearly all of the certificates were relegated to junk bond status.

The plaintiffs allege that offering documents for the mortgage-backed bonds failed to disclose that Countrywide was ignoring its own guidelines regarding home loan originating. In their consolidated class action securities case, investors sought over $351 billion of the Countrywide MBS that had been downgraded after the subprime collapse in 2007. (A district judge would go on to narrow the mortgage-backed securities lawsuit to $2.6 billion in bonds and Bank of America was dismissed as a defendant.)

According to Bank of America, this securities settlement resolves approximately 80% of the principal balance of RMBS that were issued by Countrywide and has not yet been paid. However, now there is news that American International Group can go ahead and file its RMBS lawsuit against Countywide. A judge said that the insurer could pursue claims accusing the latter of making false representations in offering documents that it had abided by underwriting guidelines. It was just earlier this week that Bank of America settled with bond insurance company MBIA Inc. over Countrywide for $1.6 billion.

BofA’s Countrywide Agrees to $500 Million MBS Settlement, Bloomberg, April 17, 2013

AIG may pursue fraud case versus BofA over Countrywide, Chicago Tribune, May 7, 2013

Merrill Lynch $315 Million Settlement Approved by U.S. Judge, Bloomberg, May 8, 2012

More Blog Posts:
Bank of America and Countrywide Financial Sued by Allstate over $700M in Bad Mortgaged-Backed Securities, Stockbroker Fraud Blog, December 29, 2010

Bank of New York Mellon Corp. Must Contend with Pension Fund Claims Over Countrywide Mortgage-Backed Securities, Institutional Investor Securities Blog, April 10, 2012

Merrill Lynch Settles New Jersey Securities Fraud Lawsuit over State’s Stock Purchase for $45 Million

Thu, 09 May 2013 18:28:32 -0600

Bank of America Corp's (BAC) Merrill Lynch & Co. (MER) will pay the state of New Jersey $45 million to settle securities charges that it committed misconduct related to a stock purchase that the latter made in 2008. The investment bank is accused of breaching a contract provision that determined how the state was to exchange Merrill Lynch preferred stock for common stock.

New Jersey’s Division of Investments had purchased $300 million in preferred Merrill Lynch stock (Merrill Series 1 9% Mandatory Convertible Preferred Shares) in 2008. In 2009, the state’s attorney general at that time filed a NJ securities case against the financial firm contending that it had given “better terms” to at least another investor over the conversion of shares and issued misleading information about its financial state. By settling, Merrill Lynch is not denying or admitting to committing any wrongdoing.

If you think you may have been the victim of securities fraud, contact our Shepherd Smith Edwards and Kantas, LTD, LLP right right away. SSEK represents both individuals and institutions with arbitration claims and lawsuits against financial firms, brokers, investment advisers, and others.

Division of Investment, New Jersey

Attorney General Chiesa: Merrill Lynch Will Pay $45 Million to Resolve State Lawsuit Over Pension Fund Investment Losses, NJ.gov, April 19, 2013

Merrill Lynch to pay N.J. $45 million over pension fund losses, New Jersey.com, April 19, 2013

More Blog Posts:
Former Merrill Lynch, Oppenheimer, Deutsche Bank Broker is Ordered by FINRA To Pay Investor $11M Over Alleged Securities Fraud, Stockbroker Fraud Blog, April 19, 2013

2nd Circuit Affirms Dismissal of $18.5M Auction-Rate Securities Lawsuit Against Merrill Lynch Filed by Anschutz Corp., Institutional Investor Securities Blog, August 23, 2012

Gemstar Capital Group Owner Sued for Texas Securities Fraud in $40 Ponzi Scam He Ran with Ex-Dallas Cowboy Football Player Gets 10-Year Prison Sentence

Wed, 08 May 2013 19:25:43 -0600

Gemstar Capital Group owner Jeffrey J. Sykes has been handed a 10-year federal prison sentence for the $40 million Ponzi scam he ran with ex-Dallas Cowboy Michael Kiselak. Although the former NFL player has not been criminal charged, he was found liable for more than $20 million in 2009 over his involvement in the Texas securities fraud portion of the scheme. Now, the federal government is confirming that Kiselak defrauded investors of at least $24 million dollars in the financial scam run by Sykes.

In 2007, Sykes and Kiselak set up Kiselak Capital Group to pursue investors. According to the US Attorney’s Office, Kiselak used information given to him by Sykes to get investors to put in over $20 million. The ex-pro football player took out fees for himself and then gave the money to Sykes even though both Gemstar and Kiselak didn’t engage in Treasury note trading, which is what they told investors they were doing.

Instead, contend prosecutors, the two men used some of the funds for personal spending and in ventures that investors didn’t know about. While some of the funds did go back to investors, in certain instances, Sykes made false claims that the money was profit from T-Bill trading programs or their capital returned.

In the SEC’s securities fraud case against Kiselak, Sykes, and Gemstar, the regulator claimed that Kiselak promised 2.25% monthly returns to investors, falsified documents, dumped 95% of their funds in Gemstar, and failed to disclose that a 35% performance fee was levied on Gemstar profits.

Since Sykes put most of investors’ money in money market accounts, the latter were able to get back some of the funds, which they invested between 2007 and 2009. However, they lost approximately $12.9 million.

"Our firm has represented a number of high-profile athletes with securities fraud claims and we have also taken action against former athletes and the financial firms they represent,” said Shepherd Smith Edwards and Kantas founder and Texas securities fraud attorney William Shepherd. “I have been asked whether an unusually high number of former athletes become involved in such scandals. It is true that when an athlete's career ends their income can fall precipitously. It is also true that many enter sales, including securities sales because of their ability to reach high net worth clients. But I do not believe former athletes are more likely than others to commit harmful acts. I do believe that when they become involved in problem situations these are far more heavily publicized."

Owner of California private equity company pleads guilty in more than $40 million Ponzi scheme involving Texas investors, Dallas News, January 11, 2013

Securities Fraudster Gets 10 Years in Prison, Courthouse News, May 6, 2013

More Blog Posts:
Texas Senator’s Bill Would Make Plaintiffs’ Attorneys in Private Securities Cases Disclose Possible Conflicts Of Interest That Might Have Affected Client Retention, Stockbroker Fraud Blog, April 5, 2013

Texas Securities Criminal Case Against Oil and Gas Company Executive Can Proceed, Rules Fifth Circuit, Stockbroker Fraud Blog, February 6, 2013

Investor Files Securities Case Against Fidelity Over Float Income Investments Involving 401(K)s, Institutional Investor Securities Blog, May 6, 2013

FINRA Notifies Brokerage Firms About Non-traded REIT Information that Can Mislead Investors

Mon, 06 May 2013 16:54:17 -0600

The Financial Industry Regulatory Authority is alerting broker-dealers that the way they market certain non-traded real estate investment trusts could be misleading investors. The regulator said its recent reviews of brokerage firm communications with the public about these investments showed “deficiencies.” The SRO has been trying to improve the sales practices related to illiquid REITs and increase their transparency.

Among the identified information shortcomings:
• Inaccurate and misleading statements about the benefits of investing
• Failure to adequately explain the risks involved
• Describing a real estate security as a “yield,” which can incorrectly suggest that it is a bond

FINRA said it is necessary for brokerage firms to provide “fair and balanced” distribution rates, while explaining that distribution payments are not a given. The regulator observed that some broker-dealers are prone to highlight these payments, which are given to investors as soon as the nontraded REITs are sold, but fails to inform that some distributions are the return of their principal or borrowed money. FINRA reminded broker-dealers that they have to wait until an REIT has paid distributions for six months before it can make claims about the instrument’s yearly return rate.

The SRO noted that data about related or affiliated REITs should be as prominently visible as other information, and past performance information about REITs involving the current investment being promoted cannot be cherry picked.

REITs and Non-traded REITs
REITs invest in commercial real estate, which gives investors a chance to benefit from the increase in property values, and they are publicly traded. Non-traded REITs, which don’t trade on securities exchange, can be tough to sell in secondary markets or illiquid. Investors usually have to pay higher fees for them.

FINRA has been targeting the improper-sale of non-traded REITs for some time now. This latest notification to brokerage firms doesn’t mention how many broker-dealers it looked at (or which ones) to reach its conclusions.

Our REIT lawyers represent investors throughout the US. For over two decades, Shepherd Smith Edwards and Kantas, LTD LLP has helped thousands of investors recoup their investment losses by going through arbitration via FINRA, NYSE, NASD, and AAA, as well as through the state and federal courts.

FINRA Provides Guidance on Communications With the Public Concerning Unlisted Real Estate Investment Programs, FINRA.org (PDF)

FINRA warns about misleading investors in non-traded REITs, Reuters, May 3, 2013

Public Non-Traded REITs—Perform a Careful Review Before Investing, FINRA

More Blog Posts:
Majority of Non-Traded REITs Underperform Compared to Benchmarks, Reports New Study, Stockbroker Fraud Blog, August 25, 2012

Private REITs: The Need for Tougher Oversight?, Institutional Investor Securities Blog, June 28, 2011

Apple REIT Arbitration: FINRA Rules Against David Lerner Associates in First of Hundreds of Cases, Stockbroker Fraud Blog, May 26, 2012

Congress Regulates the Securities Regulators

Tue, 30 Apr 2013 12:40:24 -0600

At a hearing in the US House of Representatives about putting the Jumpstart Our Business Startups Act into effect, Rep. Patrick McHenry (R-N.C.) expressed worry that the Securities and Exchange Commission has lost the power to enforce the private offerings general solicitation ban because the rulemaking for the statutory deadline has come and gone. Per the JOBS Act’s Title II, the SEC could write rules to lift the ban for offerings that take place under Rule 144A and Regulation D Rule 506.

The SEC, which put out a proposal, has yet to make a final rule. SEC Chairman Elisse Walter defended the agency’s actions, noting that a comment period is normal. The Commission has been criticized by Republicans and industry members, who contend that its decision to vote on a proposal instead of interim final rules is a way of kowtowing to investor groups. Walter maintains that she has always favored notice and comment rulemaking to put a provision into effect (per the Administrative Procedure Act).

Meantime, Rep. Maxine Waters (D-Calif.), a ranking member of the House Financial Services Committee, once again introduced a bill that would use industry user fees to fund the SEC’s investment adviser examinations. HR 1627 would make advisers under the Commission’s oversight pay fees to cover the “funding gap” in the oversight program. A similar bill that she previously had presented did not move forward, in part because it was competing with former Committee Chairman Spencer Bachus (R-Ala.)’s legislation to place investment advisers under the oversight of a regulator. That bill, too, did not progress.

There has been a lot of disagreement over investment adviser oversight. Per a Dodd-Frank Wall Street Reform and Consumer Protection Act-mandated study in 2011, SEC staff made that recommendation that advisers either be brought under SRO oversight or the agency should be allowed to use user fees to improve its program. The North American Securities Administrators Association and The Investment Adviser Association have both expressed a preference for the user fee option. They oppose the SRO oversight alternative.

Although Walter isn’t pushing for one option or the other, in the interest of investors, she said a solution must be chosen. SEC Chairman Walter believes that Congress needs to take action to fund its investment adviser examination program so that the choice could be effective one. Currently, the SEC examines only about 8% of registered investment advisers each year, while the regulator or the Financial Industry Regulatory Authority examine about 50% of brokerage firms.

Walter is concerned that this will become a bigger problem unless something is done because more new entities, including municipal advisors, will also be subject to the SEC’s examination program. Speaking at the North American Securities Administrators Association Public Policy Conference on April 16, Walter said that unless significant modifications are made, the SEC cannot fulfill its mandate to examine investment advisers.

Shepherd Smith Edwards Kantas, LTD, LLP is a securities fraud law firm that represents investors throughout the US.

McHenry Questions SEC's Authority To Enforce General Solicitation Ban, Bloomberg/BNA, April 18, 2013

Examining Investment Advisers: The Challenge Continues, SEC, April 16, 2013

HR 1627 Investment Adviser Examination Improvement Act of 2013

More Blog Posts:
SEC Commissioner Aguilar Calls For the Abolishment of Mandatory Arbitration Agreements, Stockbroker Fraud Blog, April 21, 2013

Federal Reserve Board Establishes Key Rule That Will Let Regulator Identify Systemically Important Nonbank Financial Institutions, Institutional Investor Securities Fraud Blog, April 19, 2013

UBS Loses Appeal to Have FHFA’s $6.4 Billion MBS Fraud Lawsuit Dismissed, Institutional Investor Securities Blog, April 18, 2013

Controversial Democratic Appointee Pushes SEC for Less Talk About Investor and Securities Market Protections and More Action

Sun, 28 Apr 2013 16:04:45 -0600

According to Securities and Exchange Commissioner Luis Aguilar, the growing number of registered investment advisers, the increasing complexity of the financial instruments they use, and the recent trends in securities examinations show that there is a need for the regulator to up the vigorousness of its investment adviser examinations and enforcement activities. He noted that even as the SEC is working to give the regulated community best practices and guidance to enhance compliance, it also intends to increase its scrutiny of advisers, including more exams (especially for private fund advisers). Alternative investment managers will also get more attention.

Aguilar pointed out that with the number SEC registered investment advisers having gone up about 50% to over 10,000 last year, the value of the assets that they manage also increasing from about $22 trillion in 2002 to approximately $44 trillion in 2011, as well as a rise in the number of complex financial instruments that advisers use, there are more chances for “mischief” to happen. Hence, there is the need for more robust enforcement.

Also, as our securities fraud law firm mentioned in a previous blog post, the SEC commissioner wants there to be an end to mandatory arbitration agreements. Per the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC now can prohibit or limit pre-dispute arbitration agreements, which have become standard fare for brokerage firms. Aguilar is concerned that they are also becoming routine for investment advisory firms. He wants the government to ponder the possibility of adopting rules that would stop or limit broker-dealers and investment advisers from mandating that customers sign clauses in their agreements with one another that prevents them from filing securities fraud lawsuits and instead only resolve their disputes via arbitration.

Regarding retail investors, Commissioner Aguilar doesn’t believe they are getting the same degree of protections in both the corporate bond and municipal securities markets. While corporate bonds that the investing public can buy have to be registered with the SEC, no statutory authority exists that requires the same of municipal securities. Also, before municipal securities offering documents are made available to the public, the SEC does not get or even look at these documents. Aguilar says investor protections in this arena are mainly through the regulation of municipal securities dealers and brokerage firms.

Further scrutinizing the SEC, Commissioner Aguilar recently said that the regulator is still missing the mark on certain important initiatives involving investor protection, including the lack of regard he says it exhibited for regulators and investor’ suggestions about the lifting of the ban on private offering-related general advertising. Per the Jumpstart Our Business Startups Act, the Commission has to amend the 1933 Securities Act’s Rule 506 to get rid of the existing ban on general advertising in specific situations. However, the ban’s removal has led to fear that offerings that are mass-marketed under the rule will place investors at even more risk of abuse and financial fraud.

Aguilar Says SEC Will Ramp Up Examinations To Deal With Increases in Violative Behavior, Bloomberg/BNA, April 19, 2013

Aguilar Speech: Outmanned and Outgunned: Fighting on Behalf of Investors Despite Efforts to Weaken Investor Protections, SEC, April 16, 2013

Aguilar Speech: Keeping a Retail Investor Focus in Overseeing the Fixed Income Market, SEC, April 16, 2013

More Blog Posts:
SEC Commissioner Aguilar Calls For the Abolishment of Mandatory Arbitration Agreements, Stockbroker Fraud Blog, April 21, 2013

Court Upholds Ex-NBA Star Horace Grant $1.46M FINRA Arbitration Award from Morgan Keegan & Co. Over Mortgage-Backed Bond Losses, Stockbroker Fraud Blog, October 30, 2012

US Supreme Court Once Again Upholds Enforcement of Arbitration Agreements, Institutional Investor Securities Blog, February 17, 2013

Investors Duped in $150M Investment Scam Offering US Citizenship Prospect To Recoup Funds, Says SEC

Thu, 25 Apr 2013 16:52:19 -0600

The SEC says that investors who were bilked in a $150 million financial scam that offered foreigners a possible path to becoming an American will get back their money from the bogus securities offering. This news comes after the SEC filed civil charges against Anshoo R. Sethi.

Sethi is accused of creating Intercontinental Regional Center Trust of Chicago and A Chicago Convention Center in an alleged scheme to sell over $147M in securities that were supposed to go toward financing the building of a conference center and hotel close to Chicago’s O’Hare airport. Instead, contends the SEC, Sethi and his companies deceived Chinese investors, who were made to believe investing could up their chances of obtaining legal residency in this country via the EB-5 Immigrant Investor Pilot Program, which gives foreign investors a way to obtain this through their involvement in projects in this country that will help preserve or create a certain amount of jobs for our workers. Foreign investors may be able to get a green card if they put in $1 million (or $500,000 if in a “Targeted Employment Area” that has an unemployment rate that is high).

The Commission says that although Sethi and the companies had promised that the over $11M administrative fees paid by investors would revert back to them if their applications for visas didn’t go through, the three of them have already actually spent over 90% of this money. Also, approximately $2.5M purportedly ended up in Sethi’s personal account.

If you are an investor that lost money in a securities scheme, contact our stockbroker fraud law firm right away.

Investors to Receive Their Entire Investments Back After SEC Halted Scheme Exploiting Immigration Program, SEC, April 23, 2013

Read the Court Order (PDF)

EB-5 Immigrant Investor Pilot Program (PDF)

More Blog Posts:
Three Cedar Brook Financial Partners Brokers’ Licenses Are Suspended Over Allegedly False & Misleading Statements About Subprime Mortgage-Backed Security IMH Fund and Medical Capital Holdings Inc., Stockbroker Fraud BLog, April 24, 2013

Police Retirement System of St. Louis Also Suing JPMorgan Chase Executives Over “London Whale” Scandal, Institutional Investor Securities Blog, April 25, 2013

Three Cedar Brook Financial Partners Brokers’ Licenses Are Suspended Over Allegedly False & Misleading Statements About Subprime Mortgage-Backed Security IMH Fund and Medical Capital Holdings Inc.

Wed, 24 Apr 2013 16:07:42 -0600

Regulators have suspended the securities licenses of Cedar Brook Financial Partners brokers Howard Slater and Michael Perlmuter and firm executive Azim Nakhooda in the wake of allegations that they issued false statements about Medical Capital Holdings Inc. and the IMH Fund, a subprime mortgage-backed security. The sanctions are part of the settlements they reached with the Financial Industry Regulatory Authority.

According to the SRO, Slater, Perlmuter, and Nakhooda also allegedly modified three customer accounts to show false net worth information. Inflating the account balances on paper made the areas of the clients’ portfolios that were in risky funds drop below Cedar Brook’s guidelines that such investments are not to go up over 20% of a person’s holdings. Inaccurate statements were purportedly made via email.

All three men agreed to settle the FINRA allegations without denying or admitting the allegations. As part of their agreements, Perlmutter will pay a $40,000 fine and serve an eight-month suspension. Slater is suspended for five months and will pay $30,000.
Meantime, Nakhooda must pay $50,000 and is suspended for 9 months. (According to FINRA records, Perlmutter has 18 resolved customer complaints with five others still pending, Slater has 11 resolved with fived still pending, and Nakhooda has resolved seven cases with no others pending.)

Another Cedar Brook founder, (and CEO) William Glubiak, has said that the financial firm is taking responsibility for what happened. He admits that an insufficient job was done of clarifying the risks involved with these financial instruments. It was 2009, Cedar Brook was involved in a Ponzi scam involving gas and oil fund Provident Royalties that caused losses for about 50 of its customers that invested about $9 million.

Three Cedar Brook brokers have licenses suspended over 'false and misleading statements on high-risk investments, Cleveland, April 12, 2013

More Blog Posts:
Morgan Keegan Settles Subprime Mortgage-Backed Securities Charges for $200M, Stockbroker Fraud Blog, June 29, 2011

RMBS Lawsuit Against Deutsche Bank Can Proceed, Says District Court, Institutional Investor Securities Blog, April 4, 2013

New Hampshire Regulators Accuse Edward Jones of “Questionable Marketing” to Recruit Customers

Tue, 23 Apr 2013 15:56:49 -0600

The New Hampshire Bureau of Securities Regulation says Edward Jones & Co. employed “questionable marketing” to bring in customers. Seeking up to $3 million, the brokerage firm is accused of making 20,000 calls to residents that were on NH’s National Do Not Call Registry.

According to regulators, no other broker-dealer has been named in as many complaints about unsolicited phone calls. A spokesperson for Edward Jones, however, disputes this contention.

With over 12,000 financial advisers and approximately 11,400 offices throughout the US—mostly there is just one broker per locale—the brokerage firm tries to work around telemarketing rules by getting brokers to go door-to-door. Training materials talk about how when a potential customer asks to be added to the do-not call list, the broker is supposed to respond by saying he/she respects the former’s decision but that another visit may be likely if something that could be of possible interest to the prospective client arises.

The Federal Trade Commission established the do-not-call list so that consumers could stop getting telemarketing calls at home. 1.1 million of NH’s 1.3 million residents are on the list. (That state already has fined Spartan Capital Securities LLC over unsolicited calls.)

To get on the registry, go to donotcall.gov. You can also call, toll-free (888)-382-1222.
Your name stays on the list for five years so remember to register again at that time.

However, you should know that this registry doesn’t block all telemarketing calls. Per FINRA rules, if you have an established business relationship with a financial firm, that company can call you. A securities representative can also call you if you contacted his/her firm to inquire about a service or product.

If you do get cold calls soliciting investments, watch out for:

• High-pressure sales tactics
• Once-in-a-lifetime pitches
• Unsupervised and unregistered brokers
• The absence of any written information

If you suspect that you might be the victim of securities fraud, contact our FINRA arbitration law firm today.

Edward Jones Accused of Making ‘Questionable’ Sales Calls, Bloomberg Businessweek, April 11, 2013

National Do Not Call Registry

More Blog Posts:
Edward Jones and Merrill Lynch Brokers Like Where They Work, While UBS Representatives are the Least Happy, Stockbroker Fraud Blog, December 11, 2009

The 11th Circuit Revives SEC Fraud Lawsuit Against Morgan Keegan Over Auction-Rate Securities, Institutional Investor Securities Blog, May 8, 2012

NBA, NFL Players Among Alleged Promissory Note Fraud Victims of Success Trade Securities, Says FINRA

Mon, 22 Apr 2013 14:28:57 -0600

The Financial Industry Regulatory Authority has issued temporary cease-and-desist order against Fuad Ahmed, the president and CEO of Success Trade Securities, Inc., to stop his alleged financial fraud activities. It also put out a complaint against him and the online brokerage firm, charging them with promissory note fraud. The notes were issued by Success Trade, Inc. Ahmed is one of its majority owners. Success Trade Securities runs LowTrades and Just2Trades.

FINRA issued the TCDO over concerns that if it didn’t, investors’ assets and funds would continue to be misused. The SRO contends that the brokerage firm, its financial representatives, and Ahmed sold over $18M in promissory notes to nearly five dozen investors, including ex- and current NBA and NFL Athletes, while omitting or misrepresenting material facts, such as how they were raising $5 million via the selling of the notes or that the sales went over 300% above the original offering.

The majority of notes promised a 12.5-26% yearly interest rate payment monthly over three years. Also, Success Trade Securities and Ahmed allegedly did not disclose both how much the brokerage firm owed investors and that it couldn’t keep paying interest payments unless it brought it new investor money. The SRO believes that note sale proceeds went to unsecured loans to Ahmed, past investor payments, and firm operations.

FINRA says that beginning the end of last year, Success Trade tried to get note holders to roll over notes that were maturing at higher rates or invest in Success Trade. Per the order, Success Trade has consented to stop selling the notes.

In the US, please contact our promissory note fraud law firm to schedule your free, no obligation consultation.

FINRA Files Temporary Cease-and-Desist Order Against Success Trade Securities and CEO Fuad Ahmed to Halt Fraud, FINRA, April 11, 2013

More Blog Posts:
Texas Securities Fraud: SEC Charges Talk Radio “MoneyMan” Over Promissory Note Offerings, Stockbroker Fraud Blog, April 4, 2011
In the US, please contact our promissory note fraud law firm to schedule your free, no obligation consultation.

FINRA Files Temporary Cease-and-Desist Order Against Success Trade Securities and CEO Fuad Ahmed to Halt Fraud, FINRA, April 11, 2013

More Blog Posts:
Texas Securities Fraud: SEC Charges Talk Radio “MoneyMan” Over Promissory Note Offerings, Stockbroker Fraud Blog, April 4, 2011

Two Oppenheimer Investment Advisers Settle for Over $2.8M SEC Fraud Charges Over Private Equity Fund, Institutional Investor Securities Blog, March 14, 2013

SEC Commissioner Aguilar Calls For the Abolishment of Mandatory Arbitration Agreements

Sun, 21 Apr 2013 14:57:45 -0600

U.S. Securities and Exchange Commission member Luis Aguilar is pressing the government to think about adopting rules that would limit or bar investment advisers and brokers from making customers sign away their right to file a securities fraud case. He made his statements in front of the he North America Securities Administrators Association’s yearly conference.

Aguilar spoke about how it was important to advocate for investor choice. He said that by giving investors the chance to choose how they wish to protect their legal rights and file their legal claims, the government would be enhancing federal securities laws while creating better investor protections.

The 2010 Dodd-Frank Act gives the Commission new powers to strengthen investor protections, including the authority to restrict pre-dispute arbitration agreements, which brokers routinely use. The agreements bar an investor from being able to sue the financial firm should a disagreement arise. Meantime, corporations generally remain in favor of arbitration as a venue for resolution because they believe this is less costly.

A few months back, Massachusetts Secretary of the Commonwealth William F. Galvin made a similar request, this time to the SEC. Galvin asked that investment advisers be prevented from including pre-dispute mandatory arbitration clauses in contracts. He said that nearly 50% of investment advisers surveyed that are registered in his state admitted to using these agreements.

At Shepherd Smith Edwards and Kantas, LTD, LLP our FINRA arbitration lawyers and securities fraud attorneys represent institutional and individual investors in both arbitration and the courts. Contact us today and ask for your free case assessment.

Read SEC Commissioner Aguilar's Speech at the North American Securities Administrators Association's Annual Conference in DC, April 16, 2013

More Blog Posts:
OmniVision Technologies Investors’ Securities Lawsuit Can Proceed, Says District Court, Stockbroker Fraud Blog, April 20, 2013

Federal Reserve Board Establishes Key Rule That Will Let Regulator Identify Systemically Important Nonbank Financial Institutions, Institutional Investor Securities Fraud Blog, April 19, 2013

OmniVision Technologies Investors’ Securities Lawsuit Can Proceed, Says District Court

Sat, 20 Apr 2013 14:42:28 -0600

The U.S. District Court for the Northern District of California says that OmniVision Technologies investors can move forward with their securities fraud lawsuit as to two challenged statements that were made by one of the company’s senior officials. The statements pertain to the smart phone sensor maker’s alleged competition with Sony to provide Apple smart phones with image sensors.

The defendants In re OmniVision Technologies Inc. Securities Litigation are senior company officials. The court says that OmniVision was successful in getting its sensors in Apple’s ’09 and ’10 iPhone products. Yet, although OmniVision was contracted by Apple to not disclose their working relationship, the former allegedly was able to let the markets know.

The plaintiffs argued that such statements caused the market to think that OmniVision was Apple’s only image sensor supplier when actually it was Sony that was its dominant supplier. Rumors eventually surfaced that OmniVision had lost business to its rival. This information, along with less than favorable financial results, are what they believe caused OmniVision’s stock price to go down.

Per the district court, it saw two statements that might be “potentially actionable.” The court said that although the remarks don’t mention Apple, they might be viewed as “false or misleading” if Apple had already chosen Sony as its image sensor provider for the iPhone 4S.

The court also said that the securities lawsuit alleges details about Sony that could suggest that OmniVision was losing ground to Sony. It determined that there were allegations that “at least establish an inference” that sometime during the Class Period Apple was seriously considering going with Sony instead of OmniVision for certain parts it wanted to buy. The court denied the defendants’ motion to dismiss.

In re OmniVision Technologies Inc. Securities Litigation (PDF)

More Blog Posts:
Former Merrill Lynch, Oppenheimer, Deutsche Bank Broker is Ordered by FINRA To Pay Investor $11M Over Alleged Securities Fraud, Stockbroker Fraud Blog, April 19, 2013

RMBS Lawsuit Against Deutsche Bank Can Proceed, Says District Court, Institutional Investor Securities Blog, April 4, 2013

Former Merrill Lynch, Oppenheimer, Deutsche Bank Broker is Ordered by FINRA To Pay Investor $11M Over Alleged Securities Fraud

Fri, 19 Apr 2013 12:15:23 -0600

A FINRA arbitration panel is ordering ex-broker Karl Hahn, who previously worked with Bank of America Corp's (BAC) Merrill Lynch (MER), Oppenheimer & Co. (OPY), and Deutsche Bank AG’s (DB) Deutsche Bank Securities, to pay investor Chase Bailey $11 million because he sustained about $6 million in losses allegedly caused by securities fraud. Bailey contends that Hahn made excessive trades and misrepresented securities related to transactions involving a number of investments, including a variable annuity, approximately $2.3 million in fraudulent real estate financing involving East Coast properties, and covered calls.

In the filmmaker/Internet entrepreneur’s securities arbitration claim, Bailey named the three financial firms where Hahn previously worked. It is during this period that Bailey was allegedly defrauded. (He had moved his funds from one brokerage firm to the other each time Hahn was hired by that employer.) Bailey settled his case with Merrill for $700,000, while claims against Deutsche Bank and Oppenheimer were tossed out.

Per the FINRA arbitration ruling, Bailey is awarded $6.4 million in punitive damages and $4.1 million in compensatory damage. Ordering brokers to pay punitive damages is uncommon.

In February, Deutsche Bank & Hahn were ordered to pay $934,000 to Susan and Michael Myers. The couple, who had sued on their behalf and for a number of trusts, had claimed civil fraud, while contending that financial firm had negligently supervised Hahn, who worked in its private wealth management division between 2008 and 2009.

The Myerses had bought high-risk life insurance in which policyholders use loans usually tied to variable interest rates to finance premiums. Hahn, who advised the couple via Deutsche Bank, allegedly failed to tell them that his dad would get a “significant” commission from that life insurance policy. They said that this might have been the reason he recommended that they invest in the policy. (Brokers are not supposed to make investment recommendations that will benefit them or those that they know.) The Myerses claimed substantial losses.

Hahn has been involved in other securities cases. He was charged with wire fraud involving an alleged $1.1 million real estate scam in 2010. He also was involved in a $2.55 million federal court judgment that Deutsche Bank obtained in 2012. That lawsuit involved the unpaid balance of a $2.8 million bonus he got when he joined the financial firm.

Contact Our Securities Fraud Law Firm
If you believe that you too were the victim of securities fraud involving Mr. Hahn or another broker, please contact Shepherd Smith Edwards and Kantas, LTD LLP today to request your free case evaluation. You may have reason to file your own stockbroker fraud claim.

Ex-Merrill, Deutsche Bank Broker Ordered to Pay Client $11 Million, Fox, April 5, 2013

U.S. panel orders Deutsche Bank, ex-adviser to pay $934,000, Reuters, February 14, 2013

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UBS Loses Appeal to Have FHFA’s $6.4 Billion MBS Fraud Lawsuit Dismissed, Institutional Investor Securities Blog, April 18, 2013