Securities Fraud Blog | Find out if your broker is liable for your losses

CAT | FINRA

Jun/13

5

JP Turner Atlanta and Brokers Facing Churning Allegations

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The Securities and Exchange Commission (SEC) charged former JP Turner and Company, LLC, of Atlanta,  broker Jason Konner for churning client accounts.  Konner’s churning was said to have disregarded the customers’ conservative investment objectives and low risk tolerances that caused severe losses for clients, while he collected hefty fees. Jason Konner was a JP Turner registered representative from September, 2006 until December, 2011, and  is currently a registered representative at DPEC Capital, Inc.

The SEC said the affected accounts had annual turnover rates that were so high during the two-year period that investment returns would have had to have been 73.3% for the accounts to break even. The SEC alleged that between January, 2008 and December, 2009,  Konner churned two client accounts, for losses of $134,000.00.  Konner split commissions, fees, and margin interest totaling $845,000.00 with two other brokers accused by the SEC for churning client accounts at JP Turner.

The associate director of the SEC’s Atlanta office said, “Broker-dealers’ supervisory systems must provide customers with reasonable protection from churning and similar abuses. JP Turner’s supervisory systems failed to do that.”

If you were a client of Jason Konner and/or JP Turner in Atlanta and experienced churning in your account, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552.

 

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Jun/13

4

Did You Invest in John Thomas Bridge and Opportunity Fund LP I and II?

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According to the SEC’s order instituting administrative proceedings against Jarkesy, Belesis, and their firms, Jarkesy launched the two hedge funds in 2007 and 2009, and they were called John Thomas Bridge and Opportunity Fund LP I and John Thomas Bridge and Opportunity Fund LP II. The funds invested in three asset classes: bridge loans to start-up companies, equity investments principally in microcap companies, and life settlement policies. Jarkesy mispriced certain holdings to increase the net asset values of the funds, which were the basis for calculating the management and incentive fees that Jarkesy deducted from the funds for himself. Jarkesy also falsely claimed that prominent service providers such as KPMG and Deutsche Bank worked with the funds.
The following is excerpts from an article on the SEC’s website:
 ”The Securities and Exchange Commission announced charges against a Houston-based hedge fund manager and his firm accused of defrauding investors in two hedge funds and steering bloated fees to a brokerage firm CEO who also is charged in the SEC’s case.
An investigation by the SEC’s Enforcement Division found that George R. Jarkesy Jr., worked closely with Thomas Belesis to launch two hedge funds that raised $30 million from investors.  Jarkesy and his firm John Thomas Capital Management (since renamed Patriot28 LLC) inflated valuations of the funds’ assets, causing the value of investors’ shares to be overstated and his management and incentive fees to be increased.  Jarkesy, a frequent media commentator and radio talk show host, also lied to investors about the identity of the funds’ auditor and prime broker.  Meanwhile, although they shared the same “John Thomas” brand name, Jarkesy’s firm and Belesis’ firm John Thomas Financial were portrayed as wholly independent.  Jarkesy led investors to believe that as manager of the funds, he was solely responsible for all investment decisions.  However, Belesis sometimes supplanted Jarkesy as the decision maker and directed some investments from the hedge funds into a company in which his firm was heavily invested.  Belesis also bullied Jarkesy into showering excessive fees on John Thomas Financial even in instances where the firm had done virtually nothing to earn them.

“Jarkesy disregarded the basic standards to which all fund managers are held,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. “Not only did he falsify valuations and deceive investors about the value of their holdings, but he bent over backwards to enrich Belesis at the funds’ expense.  Belesis in turn exploited the supposed independence of the funds to surreptitiously pull the strings on key decisions.”

According to the SEC’s order instituting administrative proceedings against Jarkesy, Belesis, and their firms, Jarkesy launched the two hedge funds in 2007 and 2009, and they were called John Thomas Bridge and Opportunity Fund LP I and John Thomas Bridge and Opportunity Fund LP II.  The funds invested in three asset classes: bridge loans to start-up companies, equity investments principally in microcap companies, and life settlement policies.  Jarkesy mispriced certain holdings to increase the net asset values of the funds, which were the basis for calculating the management and incentive fees that Jarkesy deducted from the funds for himself.  Jarkesy also falsely claimed that prominent service providers such as KPMG and Deutsche Bank worked with the funds.

Jarkesy used fund assets to hire multiple stock promoters in 2010 and 2011 to create an artificial and unsustainable spike in the price of two microcap stocks in which the funds were heavily invested.  As a result of these efforts, the funds recorded temporary gains in the value of the microcap stocks that Jarkesy used to mask the write-down of other more illiquid holdings of the funds.

Jarkesy violated his fiduciary duties to the funds in multiple instances by providing excessive compensation to Belesis and John Thomas Financial.  This only incited further demands by Belesis.  For example, in February 2009, Belesis angrily complained via e-mail that Jarkesy was not steering enough money to John Thomas Financial, and Jarkesy responded that “we will always try to get you as much as possible, Everytime [sic] without exception!” On another occasion, Jarkesy reassured Belesis that “[n]obody gets access to Tommy until they make us money!!!!!”

This ends the SEC article.

If you were a client of Thomas “Tommy” Belesis, George R. Jarkesy, Jr., John Thomas Financial (JTF), or John Thomas Capital Management (since renamed Patriot28 LLC),   you may have a potential claim for recovery. Call Soreide Law Group for a free consultation with an attorney: 888-760-6552.

 

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May/13

22

FINRA Fines LPL Financial $7.5 Million; Largest Fine FINRA Has Ever Imposed in E-Mail Cases

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The Financial Industry Regulatory Authority Inc., also known as FINRA, announced that on May 21, 2013, it fined LPL $7.5 million for 35 separate  e-mail system failures.

Also of note, LPL Financial, LLC, allegedly made misstatements to FINRA during its investigation of the failures. LPL also was ordered to create a $1.5 million fund to compensate brokerage customers potentially affected by its failure to produce e-mail.

“This is the largest fine FINRA has imposed for an e-mail case,” said FINRA spokeswoman Michelle Ong.

The LPL e-mail review and retention problems occurred from 2007 to 2013, and its systems failed at least 35 times, according to FINRA. The firm was unable to meet its obligations to capture e-mail, supervise its reps and respond to requests from regulators.

According to FINRA, over a four-year period, LPL failed to supervise 28 million “doing business as” e-mails sent and received by thousands of reps who were working as independent contractors.

This is the second time this year that LPL has faced significant charges. In February, LPL had paid a $500,000 fine and set aside $2 million in restitution to Massachusetts investors who bought non-traded real estate investment trusts (REITs) from LPL brokers.

FINRA said in a statement, “As LPL rapidly grew its business, the firm failed to devote sufficient resources to update its e-mail system, which became increasingly complex and unwieldy for LPL to manage and monitor effectively.” “The firm was well-aware of its e-mail systems’ failures and the overwhelming complexity of its systems.”

Reuters reported that LPL was overhauling its compliance procedures. The firm has added 137 people to its compliance staff over the past two years, according to the report.

If you or a family member have experienced losses through LPL Financial, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses at 888-760-6552.

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May/13

8

Did You Invest in the Phil Scott Group?

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Soreide Law Group is currently investigating the Phil Scott Group, and Phil Scott  a/k/a Walter Schlaepfer. The Phil Scott Group operated out of Merrill  Lynch’s Bellevue, Washington office. According to FINRA’s BrokerCheck, Scott/Schlaepfer has been the subject of  many customer complaints since 2008. Some of the claims alleged that Scott/Schlaepfer made  unsuitable investment recommendations and misrepresentations.  So far FINRA Arbitration Panels have awarded customers aprox. $3.7  million as a result of these complaints.

The following appeared on FINRA’s BrokerCheck:
WALTER SCHLAEPFER CRD# 1306585
Currently employed by and registered with the following FINRA Firm(s):
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED601 108 AVE NE BELLEVUE, WA  98004  CRD# 7691Registered with this firm since: 10/26/1984

If you have sustained losses with the Phil Scott Group and Merrill  Lynch, call for a free consultation on how to potentially recover your losses. To speak with an attorney call Soreide Law Group at 888-760-6552.

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May/13

8

Did You Invest in Airlink?

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Airlink is a pre-paid nationwide wireless products and service provider.  These private placements were sold to clients by their broker/dealers. Private placements, or private offerings, are securities issued by a corporation to investors outside the public markets.  Most private placements are exempt from SEC registration.

For those investors who were recommended the private placement, Airlink, by a broker or financial advisor, and suffered losses, you may have a claim for recovery. Please contact us to discuss your rights. For a free consultation with an attorney call: 888-760-6552.

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Mar/13

22

FINRA Fines for Advertising On the Rise, Although Fines Are Down

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The Financial Industry Regulatory Authority, or FINRA’s, disciplinary actions related to advertising violations continued to climb last year, rising from 45 in 2011 to 50 last year. However, fines from those cases dropped sharply, from $21.1 million in 2011 to $10.4 million in 2012 according to an article in onwallstreet.com.

Advertising violations generated the fourth-largest amount of fines for FINRA in 2012, which was the first year since 2009 that advertising was not ranked first. Suitability, due diligence, and research cases all brought in more fines during 2012. The total number of advertising enforcement actions that FINRA has reported has climbed from 8 in 2006 to 50 last year.

Two cases accounted for a combined $3.2 million in fines, about 30% of the total. FINRA ordered a firm to pay a $2.3 million fine and $12 million in restitution for the sales of a real estate investment trust (REITs) and collateralized mortgage obligations (CMOs).  The firm, the sole distributor of the REIT, used allegedly misleading advertisements in offerings to investors, many of whom were unsophisticated and elderly.  Although FINRA told the firm to stop using those slides, it continued to do so.

In another case, FINRA alleged that a firm made inaccurate representations about the firm’s services, rather than improper advertisements about a particular security. Even after FINRA notified the firm about these advertisements, the firm continued to use them. These alleged violations not only led to a $900,000 fine by FINRA, but the New York Stock Exchange, NASDAQ, BATS Exchange, and the Securities and Exchange Commission also ordered the payment of $5 million in additional fines and disgorgement.

In both of these cases, firms persisted in questionable actions after being put on notice by FINRA.

If you sustained investment losses due to your stock broker or financial advisor’s recommendations, call for a free consultation on how to potentially recover your losses, 888-760-6552.

 

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Mar/13

21

Leveraged ETFs Are Highly Speculative and Complex Investments

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The Financial Industry Regulatory Authority, or FINRA, has been warning broker/dealers about the dangers of selling ETFs (Exchange Traded Funds) to their investors. FINRA has said that leveraged ETFs are unsuitable for investors who plan to hold them longer than one trading session, especially in the volatile markets. FINRA also said that the purpose of a leveraged ETF is to have investment results for a single day only and it is to be monitored extremely actively.  Many brokers do not understand these complex and highly speculative investments.  When ETFs are held for weeks or months it can cause greater losses due to the investments’ use of leverage.  Often the broker does not adequately explain the potential risks and ultimately loss of investments.

Investors are bringing litigation over leveraged ETFs countrywide. For example, in February a FINRA arbitration panel awarded investors 100% of their requested damages, plus punitive damages, against Delphi Wealth Advisors for the sale of Direxion leveraged ETFs.

We remind investors that many obscure ETFs like Direxion,  can be hazardous to investors who aren’t careful. These leveraged funds are designed for day-traders and backed by derivatives.  Many investors miss the ‘fine print’ or are not given adequate information by their broker/dealers.

If you have invested in ETFs and lost your investment, call a Securities Arbitration Lawyer at Soreide Law Group for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552.

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Mar/13

18

Did You Invest in Hennessey Financial Monthly Income Fund?

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Soreide Law Group has begun and investigation into NFP Securities, Inc., for investors who were sold the Hennessey Financial Monthly Income Fund, LP, also known as Capital Solutions (Hennessey Fund).  The Hennessey Fund was sold by Andrew Rosenberg and Stuart Horowitz, of Andrew Stuart Asset Management, Coral Springs, Florida.  There may have been other brokerages/financial advisors who sold the Hennessey Fund to their clients.  Investors were allegedly told they would be receiving 12% annual return, when in fact, the Hennessey Fund was a high risk and unsuitable investment for many conservative clients.

The SEC,  in September 2010, charged Minneapolis attorney, Todd A. Duckson,, and  Michael W. Bozora and Timothy R. Redpath, with defrauding investors in the real estate lending fund.

If you invested with NFP Securities in the Hennessey Fund call Soreide Law Group for a free consultation with an attorney: 888-760-6552.

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Mar/13

18

FINRA Barred Ellen Erenstein Permanently Due to TIC Sales

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Soreide Law Group has file a FINRA arbitration on behalf of an investor who was sold the NNN St. Charles 6, LLC, Tenant in Common Investment along with an investment in a private placement called Commonwealth Capital Corp.’s income and Growth Fund V. These investments were sold by Ellen Erenstein.

Ellen Erenstein, from South Florida, registered as a representative with Investors Capital Corp. (f/k/a Eastern Point Advisors, Inc.), August 2003 to October 2006, and between October 2006 and July 2010, with Workman Securities Corporation, both registered with FINRA, was permanently barred from the securities industry in September, 2012.  Erenstein  sold many Tenant in Common (“TIC”) investments, Doral Court and Shoreview Corporate Center, to name a few.  Erenstein marketed these TIC investments allegedly to retirees and other investors not looking for risky or unsuitable investments to add to their otherwise conservative portfolios.  Due to the real estate market, many TIC investors have lost their entire investment.  TIC investments have often proven to be more profitable to the brokers, due to the high commissions, who sell them, than they are to the clients who buy them.

If you were a client of Ellen Erenstein,  you may have a potential claim for recovery. Call Soreide Law Group for a free consultation with an attorney: 888-760-6552.

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Mar/13

11

Jeffrey Arthur Cashmore Suspended and Fined by FINRA

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It was reported in FINRA’s BrokerCheck that October, 2012, FINRA fined and temporarily barred Jeffrey Arthur Cashmore, CRD# 1928725.

The $5000 fine and one month suspension was the result of Cashmore allegedly providing his clients and potential clients with misleading information regarding investments. FINRA found that the materials provided to the clients failed to give them a fair basis for evaluating the investments. Cashmore also allegedly provided his customers with information pertaining to class A mutual fund shares, when in fact most of what he was recommending and selling were class C shares, which have different structures, costs, and rates of return.

According to FINRA’s BrokerCheck, this broker was previously registered with FINRA at the following brokerage:

LPL FINANCIAL LLC
CRD# 6413
WILLIAMSVILLE, NY
11/1994 - 10/2012

If you were a client of Jeffrey Arthur Cashmore, and/or his firm, LPL Financial,  you may have a potential claim for recovery. Call Soreide Law Group for a free consultation with an attorney: 888-760-6552.

 

 

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