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In a March 23, 2011, article in InvestmentNews.com by Liz Skinner, she writes that a retired American Airlines pilot from Maryland won a $2.7 million judgment from a Finra arbitration panel in a dispute over how his savings were invested.

Finra, the Financial Industry Regulatory Authority Inc. panel, after a five day hearing, agreed that Andrew Michalak’s retirement money should not have been concentrated in two non-public mortgage funds.

The Finra panel decided that American Investors Co. and adviser Sewell Frey Sr., should pay $1.32 million in damages, interest and fees. Fund manager Dunham & Associates Investment Counsel, Inc. was told to pay $1.37 million in damages to Mr. Michalak, who was ordered to transfer ownership of his shares with the Dunham & Associates Daily Mortgage Fund back to Dunham.

In the InvestmentNews article it was noted that Mr. Michalak invested more than $2 million — essentially the entirety of his savings after working more than 30 years — in the pair of Dunham mortgage funds on the advise of Mr. Frey.

“I don’t’ think he ever appreciated the difference between public and private funds,” Mr. Costello said. “He woke up one day and didn’t have any access to his money.”

Ms. Skinner writes that the pair of mortgage funds suspended redemptions in early 2009, thus preventing Mr. Michalak from being able to draw from his retirement accounts to pay his and his wife’s daily expenses, Mr. Costello said. Mr. Michalak is in his seventies. Another Dunham entity, along with two officers named in the arbitration, “were completely dismissed and expungement recommendations were made for one of the officers,” said Dunham’s chief sales and marketing officer Salvatore M. Capizzi.

It was noted that calls to American Investors weren’t returned.

Meanwhile, Mr. Costello said the Finra award goes a long way in helping the Michalaks “get back to where they should be.”

If you feel you have also been an alleged victim of  Sewell Frey, Sr.,  American Investors Co., or Dunham & Associates Investment Counsel, Inc., please call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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In an article on InvestmentNews.com, written by Lavonne Kukendal, March 23, 2011, she writes that James J. Konaxis, a former broker, has been charged with defrauding the widow of a victim of the Sept. 11, 2001, attack on the Pentagon of much of her victim compensation settlement money.

Ms. Kukendal writes that the (SEC) Securities and Exchange Commission said today that it charged the Beverly, Mass.-based rep with churning the victim’s accounts, which fell to about $1.6 million in value from $3.7 million between April 2008 and last May. During that time, Mr. Konaxis earned about $550,000 in commissions on the accounts of the victim, who was identified only as “S.T.”

The SEC said that it is conducting separate administrative proceedings against Mr. Konaxis in which he has consented to be barred from association with any broker-dealer, investment adviser, municipal-securities dealer or transfer agent. At the time of the fraud, Konaxis worked as a registered representative at broker-dealer Sentinel Securities Inc.

James J. Konaxis has consented to a partial judgment barring him from participating in any penny stock offering. The SEC also will seek disgorgement of the ill-gotten gains plus prejudgment interest and a monetary penalty.

According to the InvestmentNews article the phone calls to Sentinel Securities and to a phone number listed under James Konaxis in Beverly seeking comment weren’t immediately returned.

If you feel you have been an alleged victim of a fraudulent investment by James J. Konaxis, or Sentinel Securities, Inc., call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Washington, D.C. – In an article from the SEC’s website, it says that the Securities and Exchange Commission yesterday charged three firms and four individuals involved in a boiler room scheme operating out of Los Angeles that defrauded investors who they persuaded to buy purportedly profitable trading systems.

Representatives of Spyglass Equity Systems Inc., the SEC alleges, cold-called investors and made false and misleading statements to help raise more than $2.15 million from nearly 200 investors nationwide for two related investment companies – Flatiron Capital Partners LLC (FCP) and Flatiron Systems LLC (FS). However, only a little more than half of that money was actually used for the advertised trading purposes, and much of the trading that did occur failed to use the purported trading systems. FCP and FS wound up losing about $1 million in investor funds. The managing member of the two firms – David E. Howard II – misused almost $500,000 of investor money for unauthorized business expenses as well as personal expenses including travel, entertainment, and gifts for his girlfriend.

The SEC’s Website article goes on to say that along with Howard, FCP and FS, Spyglass and its owners – Richard L. Carter, Preston L. Sjoblom and Tyson D. Elliott – also are charged with fraud in connection with the unregistered securities offerings.

“This operation pressured elderly and unsophisticated investors to entrust their money to purportedly can’t-miss trading systems that were not only unsuccessful, but in many instances unused,” said Donald M. Hoerl, Director of the SEC’s Denver Regional Office. “They kept delivering false claim after false claim until the money dissipated.”

Howard conspired with Spyglass to sell the securities, according to the SEC’s complaint filed in federal court in the Central District of California, and Spyglass earned an estimated $1 million in the deal. The trading systems pitched to investors by Spyglass representatives could only be used if the investor also funded a brokerage account at FCP. However, FCP was not a broker-dealer and thus could not offer brokerage services to customers.

The SEC’s complaint alleges that Howard and FCP provided each investor with instructions on how to fund their “account” with FCP, but included in the instruction packet a copy of the FCP Operating Agreement that indicated the investor was actually purchasing a membership interest in FCP. Many of the investors recruited by Spyglass were elderly and unsophisticated investors who did not understand that they were purchasing a security interest in FCP.

The SEC alleges that Spyglass representatives falsely touted a successful performance history and level of automation of the trading systems, and misled investors to believe that FCP had a positive reputation and solid affiliations in the brokerage industry. To seal the deal, Spyglass offered investors a money-back guarantee if the system did not generate a profit within the first 180 days of trading. However it was only after an investor paid Spyglass a license fee of about $6,000 that Spyglass put the investor in contact with Flatiron, ostensibly to open a brokerage account.

According to the SEC’s complaint, FCP pooled investor funds so Howard and others could trade the funds using various trading techniques. When the trading was not successful and it became clear that Spyglass would have to pay refunds to its clients, Howard provided Spyglass with another trading system and organized FS to purportedly operate the new system. Using false and misleading claims of prior success of this new trading system and Spyglass’s relationship with FS and Howard, FCP investors were persuaded to transfer their investments from FCP to FS. Under the direction of Sjoblom and Carter, Spyglass then began selling the FS trading system to new investors using a sales pitch similar to the one it used to sell the FCP. Investors were again misled to believe they would be opening brokerage accounts, this time with FS. They were later provided with an FS Operating Agreement indicating they were actually purchasing a membership interest in FS. Howard used FS investor funds to trade in equities, futures and off-market securities.

It was noted that when FS ran out of funds in December 2008, the SEC alleges that Howard took steps to conceal the fraudulent scheme by telling members that he had ceased all trading in order to conduct an audit of the trading accounts. However, Flatiron never hired an auditor and no audit was ever performed.

The article states that the SEC’s complaint charges Spyglass, Sjoblom, Carter, Elliott, FS, FCP and Howard with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; FS, FCP and Howard with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933; Spyglass, Sjoblom, Carter and Elliott with violation of Section 15(a) of the Exchange Act; FS and FCP of violations of Section 7(a) of the Investment Company Act of 1940; Howard with violations of Section 206(1), (2) and (4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder; and Spyglass, Carter, Sjoblom and Elliott with aiding abetting Howard’s violations of Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder. The SEC seeks permanent injunctions, disgorgement plus prejudgment and post-judgment interest, and financial penalties.

The SEC acknowledges the assistance of the Commodity Futures Trading Commission (CFTC), which charged Carter and his company The Trade Tech Institute Inc. in a related enforcement action filed in federal court in the Central District of California.

If you feel you have been a victim of the alleged fraudulent schemes of  Spyglass Equity Stystems, Inc., Flatiron Capital Partners, LLC, (FCP), Flatiron Systems, LLC, (FS), or any of the Broker-Dealers listed or anyone allegedly representing them, call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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SII Investments, Inc. operates as a broker/dealer. It offers its services through representatives. The company was formerly known as Secura Investments, Inc. and changed its name to SII Investments, Inc. in June, 1997. SII Investments, Inc. began in 1968 when Secura Insurance Company added a securities channel to its existing business. Secura Investments, Inc., gave property and casualty insurance agents the flexibility to sell securities to their clients.The company is headquartered in Appleton, Wisconsin. SII Investments, Inc. operates as a subsidiary Jackson National Life Insurance Company.

 In 1990 Secura Investments, Inc. was repositioned as an independent broker/dealer. In June of 1997, two of Secura’s brokers and one employee of the broker/dealer purchased Secura Investments, Inc. from Secura Insurance Company and changed the name to SII Investments, Inc. One year later, Jackson National Life Insurance Company acquired SII Investments. The network resources available from this new parent company enabled SII to bring new technology and expanded offerings to representatives and clients.

Additional Information:

SII Investments, Inc. Ordered to Pay Customer $105,000
A FINRA arbitration panel ordered SII Investments to pay an investor $105,000 to compensate him for damages that he suffered as a result of SII Investment’s alledged misconduct. The investor accused SII Investments of negligence, failure to supervise, and violation of Florida’s investor protection statute in relation to recommendations and sales of American Skandia variable annuities.

It has come to our attention that there have been some alleged bad investments made through subordinate notes, in a retirement community called ”Santa Barbara Villa Rose, LLC”  which were purchased through SII Investments.  We are currently investigating those claims.

If you feel you have been an alleged victim of a fraudulent investment by SII Investments, call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority

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In an article for InvestmentNews.com, Dan Jamieson writes that broker-dealers should get ready because your back-office operations are now officially on Finra’s front burner.

Finra, the Financial Industry Regulatory Authority Inc., has decided to move ahead with a controversial plan to require registration of a large number of back-office personnel. In the past, registration has been limited to individuals working in sales or trading. Finra this month filed the proposal with the Securities and Exchange Commission, which posted the rule for comment last week.

This proposal was roundly by industry participants when Finra floated the idea last summer. In response, Finra made some minor changes, offering some clarity on exactly who would be required to obtain the registration. But the the new program remains the same: creating an operations professional license, with its own qualification exam and continuing-education requirements. It marks a substantial and potentially onerous expansion of registration requirements — one that could force many lower-level employees and outsourcers to register.

“I expect that a receptionist [at a small firm] … would be covered” by the registration requirement, said Lisa Roth, chief executive of Keystone Capital Corp. and a member of Finra’s Small Firm Advisory Board.

The administrative employees at smaller firms fill many roles, including entering trades and compiling financial data, Ms. Roth said. Also, many introducing firms share operational functions with their clearing firms. Industry participants fear confusion in deciding which employees will be covered under the rule.

“We didn’t get any additional clarity out of Finra about shared functions,” said David Bellaire, general counsel of the Financial Services Institute Inc.

Jamieson writes that in its filing, Finra noted that the operations professional registration would be restricted to senior managers, supervisors or anyone with significant control over a broker-dealer’s finances and engaged in a variety of back-office functions. These functions include new accounts and transfers, collections, receipt and delivery of assets, settlement, account statements, trading systems and security-related technology functions. Finra also added supplementary material in its most recent filing to clarify that individuals performing clerical or auditing functions wouldn’t be required to register.

The InvestmentNews article added that Finra is downplaying the potential burden.

“The impact of the proposed rule change is expected to be minimal, as the majority of the [functions requiring an operations professional license] are generally performed by the carrying and clearing firm,” Finra said in its filing.

It isn’t known how many industry participants would be affected. Those who already hold a Series 6 or 7 license, or have a supervisory license, would be exempt from taking the exam but would have to register separately as operations professionals if their job functions were covered under the new requirement. Finra said that it would not assess a separate registration fee for those already holding a securities license. Operations professionals also would be subject to Finra’s continuing-education requirements, including firm-element training.

In a comment letter last summer, the Securities Industry and Financial Markets Association said that the rule would subject “thousands of member firm personnel to a securities-licensing regime for the first time.”

It was noted in the article that Andrew DeSouza, a spokesman for SIFMA, declined to comment further, other than to say that the Wall Street trade group will be filing another comment letter, this one with the Securities and Exchange Commission.

Given its earlier letter, it doesn’t seem likely that SIFMA will endorse the revised plan wholeheartedly. And Brian Smith, chief executive of RiverStone Wealth Management Inc., questions whether there is even a need for a new registration category.

“Currently, anyone doing operational work is required to be supervised by registered personnel,” he said.

Additional observers remain fearful that the new licensing requirement could become a wide-reaching entanglement for people who really don’t need to be registered.

“Where [broker-dealers will] be hit hardest is in the IT department,” Mr. Bellaire said. “Those are not typically people who’ve been registered in the past.”

Nancy Kay, chief compliance officer at Wall Street Financial Group Inc., echoed that concern.

“In a small shop like mine, my IT guy comes to me and we talk about compliance,” she said. A qualifying exam for such a person would not impart knowledge of regulations, Ms. Kay said. “It would just be a test for the sake of a test,” she said.

The Jamieson article goes on to say that Finra will allow individuals 12 months from the rule’s effective date to pass the qualifying examination. But the FSI last summer urged Finra to drop the exam entirely and address the supervision of operations professionals through written procedures and mandatory firm-element training.

It was noted in the article that Finra didn’t go for that idea. Under existing guidance, outsourced consultants and others who do work that requires registration are considered to be registered representatives of the broker-dealer — and have to be supervised by the broker-dealer.

Ms. Roth pointed out that a wider registration net — one including technology providers — would present a sizable challenge for firms.

“It’s very difficult to enforce policies and procedures if someone doesn’t work for you,” Ms. Roth said.

Call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Another article from Bruce Kelly of InvestmentNews.com, March 21st., 2011, says that Ameriprise Financial Inc. is taking preliminary steps to help its beleaguered independent broker-dealer subsidiary, Securities America, Inc.

This past Friday, Securities America’s chief financial officer, Kelly Windorski, testified in a federal court in Dallas that the firm could go bust if a federal judge did not approve a $21 million class action settlement. The judge rejected the settlement later in the day.

This class action is part of a litigation that Securities America is facing after its brokers sold $400 million in private placements from 2003 to 2009 that are now in default. The firm has almost $9 million in excess net capital on hand.

Kelly goes on in his article that it’s been widely debated in the industry whether Securities America’s corporate parent, Ameriprise, will step in and infuse the firm with cash. At the moment, the brokerage has dwindling resources, is spending $2 million a month on lawyers and could be in danger of violating its net-capital requirement if it suddenly loses a handful of arbitration claims investors have brought against the firm over allegedly bad private placements. Securities America’s statement gave no specifics about how much money Ameriprise would be willing to contribute to the firm, but a Securities America spokeswoman said the parent company has reached out to the beleaguered firm.

“Ameriprise has reached out to us to determine whether it can help the parties find a reasonable resolution for all constituents,” wrote Janine Wertheim, a spokeswoman for the broker-dealer, which has about 1,800 reps and advisers. “We hope to develop a process in the coming days that would facilitate exploration of such a resolution and to have a good sense by the end of the week.”

“While Ameriprise Financial has no obligation to participate in Securities America’s settlement discussions, we have reached out to Securities America to determine if we can help the parties find a reasonable resolution to all constituents,” Ameriprise said in a statement published on its investor relations website.

 Ameriprise said in its annual report that it was setting aside $40 million in reserves due to legal actions stemming from brokers at Securities America selling private placements of Medical Capital Holdings Inc. and Provident Royalties LLC. These were sold by dozens of independent broker-dealers in the last decade, the two series of private placements went into default in 2009 and the sponsor companies were later charged with fraud by the SEC. Securities America was by far the largest seller of Medical Capital notes, with brokers selling about $700 million of the product.

The InvestmentNews article said that Ameriprise previously had reached a proposed $28 million settlement with the class action plaintiffs suing Securities America. That proposed settlement is a separate fund from Securities America’s.

Federal Judge W. Royal Furgeson Jr. temporarily halted three arbitration claims from investors suing Securities America in order to weigh Securities America’s $21 million proposed settlement last month. Under the terms of that deal, the arbitration claims would have been rolled into the class action. Mr. Furgeson’s decision pushes one of two class actions, Billitteri v Securities America, et al., back to where it originated in U.S. District Court in the Central District of California. The case was moved to Dallas and landed before Mr. Furgeson this winter because he is overseeing the class action claim against Securities America and other broker-dealers that sold Provident Royalties investments.

If you feel you have been a victim of the alleged broker-dealer private placement  schemes of  Securities America Financial, Inc., Ameriprise Financial Inc ., Medical Capital Holdings, Inc., or any other broker-dealer, call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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In a March 18th., 2011, article in InvestmentNews by Bruce Kelly, he writes that Securities America Financial Inc. could go out of business if a $21 million lawsuit against the brokerage firm isn’t settled at an agreed-on amount.

The article states that according to Kelly Windorski, the independent broker-dealer’s chief financial officer, the firm could go bust if a federal judge does not approve the class action settlement. Mr. Windorski made the statement while testifying in federal court in Dallas this morning.

The CFO, Mr. Windorski, told U.S. District Court Judge W. Royal Furgeson Jr. that if the judge does not approve the settlement, it could mean the end of the firm, according to three attorneys who represented individual investors suing Securities America.

Janine Wertheim, a Securities America spokeswoman, did not return calls seeking comment from InvestmentNews.

The article goes on to say that from 2003 to 2008, Securities America sold $400 million of private placements that are in default. The firm sold nearly $18 million of Provident Royalties, for example, according to court filings. Dozens of investors have subsequently sued the firm seeking damages.

“‘End of the firm’ was the sum and substance of” Mr. Windorski’s testimony, said John Chapman, a plaintiff’s attorney who represents 70 Securities America investors with claims for losses totaling about $25 million.

Mr. Windorski said that, if a settlement was not approved, the firm would go out of business soon, due to defense costs and arbitration awards.

Today’s hearing in U.S. District Court in Dallas was part of a process of determining whether Securities America clients who lost money on soured Reg D offerings could continue their individual lawsuits against the firm or be required to drop those claims and become part of a class action. That class action also involves Ameriprise Financial, Securities America’s parent. Ameriprise said recently it had reached a $28 million preliminary settlement with the class plaintiffs.

Kelly goes on to say that the firm had 1,923 reps, as of Sept. 30, 2010, and generated over $400 million in annual revenue in 2009. The firm ranks as the 17th largest independent broker-dealer, according to the InvestmentNews B-D Data Center.

If you feel you have been a victim of the alleged broker-dealer private placement  schemes of  Securities America Financial, Inc., Ameriprise Financial Inc ., or any other broker-dealer, call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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In a March 11, 2011, article for the InvestmentNews, Dan Jamieson writes that the SEC needs to beef up its oversight of Finra, according to an analysis of the former’s internal operations released yesterday.

The article said that the Boston Consulting Group Inc. completed the six-month review, which was required under the Dodd-Frank law, this month.

The Securities and Exchange Commission ‘s (SEC) relationship with self-regulatory organizations was just one aspect studied. Because the Financial Industry Regulatory Authority Inc. now provides market surveillance services for approximately 80% of U.S. equity trading, the SEC’s oversight of Finra is particularly important, the report stated.

Focusing on Finra’s market regulation function, BCG said the SEC should pay more attention to Finra’s member regulation and enforcement units by assigning dedicated inspectors to oversee these departments and work with other SEC staff members who handle Finra rule filings and conduct exams of the SRO.

The InvestmentNews article goes on to say that the SEC’s Office of Compliance Inspections and Examinations has the equivalent of about 50 full-time employees dedicated to inspecting 12 SROs. But the SEC has limited information about these private regulators. SROS “are not currently required to regularly disclose information to the SEC regarding their regulatory operations,” the report said.

The study recommended that the disclosure of data by SROs to the SEC be formalized.

The SEC’s Division of Trading and Markets has more than 100 staff attorneys reviewing SRO rule filings, the report said. But that unit’s staff “could benefit from a deeper understanding of how the markets and market participants operate,” the consulting group found.

According to the article, the number of SRO rule proposals jumped 40% from 2005 to 2010, straining the SEC’s ability to review the filings.

The analysis “confirms the concerns I have been expressing — that the SEC does not have the resources to perform all the activities expected of us,” SEC Chairman Mary Schapiro said in a statement. She said the SEC will be forming a series of working groups to address each of the report’s recommendations.

Call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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In an article from InvestmentNews, Darla Mercado writes that an SEC task force recommended that life settlements be defined as ‘securities,’ thus making such transactions subject to federal securities laws.

The article states that bringing life settlements under the definition of security would require market intermediaries, including settlement brokers and providers, to register with the Securities and Exchange Commission and the Financial Industry Regulatory Authority Inc., according to a report by the task force.

This task force, which has been studying the issue since September, found that while there are two regulatory frameworks addressing life settlements — one from the National Association of Insurance Commissioners and the other from the National Conference of Insurance Legislators — there are numerous variations in how the states actually adopt those rules.

Forty-eight states treat life settlements as securities under state laws, but some states exclude the original sale from the insured person or the sale from the policy owner to the provider.

The Financial Industry Regulatory Authority or “Finra,” currently oversees life settlements involving variable life insurance, but federal courts have reached different conclusions as to whether fractional interests in life settlements are indeed securities, according to the SEC report.

The article goes on to say that the task force recommended that SEC staff members ensure that settlement brokers and providers are sticking to legal standards of conduct, and that the staff watches for the development of a life settlement securitization market. Thus far, no securitizations have been registered with the SEC and offered to the public.

The task force also called upon Congress and state legislators to weigh applying stronger regulation to life expectancy underwriters and asked the SEC to consider issuing an investor bulletin on investments in life settlements. Another report released by the Government Accountability Office also criticized the patchwork of life settlement regulation in the states. Disclosure requirements can vary across jurisdictions, and policy owners could sell their policy without knowing whether they received a fair price or how much their brokers made, the GAO said.

Inconsistent laws have also hampered industry participants, as some brokers and providers have had to deal with the cost of complying with different rules in multiple states, the GAO said. The organization called for consistent legal protection for similar products and services, including disclosures, sales practice standards and suitability requirements.

Call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority

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