SEC News
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- SEC Names Keith F. Higgins as Director of Division of Corporation Finance May 15, 2013FOR IMMEDIATE RELEASE2013-89 Washington, D.C., May 15, 2013 — The Securities and Exchange Commission today named Keith F. Higgins as the new director of the agency’s Division of Corporation Finance. Mr. Higgins comes to the SEC from the law firm of Ropes & Gray LLP where he is a partner in its Boston office with 30 years of experience advising public com […]
- SEC Names Lona Nallengara as Chief of Staff May 15, 2013FOR IMMEDIATE RELEASE2013-88 Washington, D.C., May 15, 2013 — The Securities and Exchange Commission today announced that Lona Nallengara has been named the agency’s chief of staff. Mr. Nallengara came to the SEC in March 2011 and served as deputy director for legal and regulatory policy in the Division of Corporation Finance until he was appointed in Decemb […]
- SEC Charges China-Based Executives in Scheme to Overstate Revenues and Divert Money for Personal Use May 15, 2013FOR IMMEDIATE RELEASE2013-87 Washington, D.C., May 15, 2013 — The Securities and Exchange Commission today charged husband-and-wife executives at a China-based company with engaging in a scheme to overstate the company’s revenues and divert proceeds from a securities offering for their personal use. Additional Materials SEC Complaint The SEC alleges that RIN […]
- SEC, FINRA Issue Investor Alert On Pension or Settlement Income Streams May 9, 2013FOR IMMEDIATE RELEASE2013-86 Washington, D.C., May 9, 2013 — The Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA) today issued an investor alert entitled Pension or Settlement Income Streams – What You Need to Know Before Buying or Selling Them. The investor alert informs investors about the risks involved when selli […]
TAG | broker-dealer private placement fraud
submitted a Letter of Acceptance Waiver and Consent in which the firm was expelled from FINRA membership and Erickson and Brewer were barred from association with any FINRA member in any capacity. Without admitting or denying the findings, the firm, Erickson and Brewer consented to the described sanctions and to the entry of findings that the firm, acting through Erickson and Brewer, sold the private placement offerings of a company formed exclusively to acquire and provide growth to its parent company and a limited liability company for which Brewer was a director, without disclosing to the investors material facts that the parent company had defaulted on a $2.5 million loan, had reported an operating loss of $1,622,912 for one calendar year and an approximate operating loss of $4.5 million for another calendar year, and had defaulted on interest payments to note-holders. The findings stated that the firm, acting through Erickson and Brewer, continued to sell the limited liability company’s private placement offering to new investors, knowing that it had defaulted on its interest payments to existing investors and without disclosing that material fact to new investors. The findings also stated that the firm sold the private placement offerings to non-accredited investors without providing them with the financial statements required under Securities and Exchange Commission (SEC) Rule 506. The findings also included that the failure to comply with the requirements of Rule 506 resulted in the loss of exemption from the registration requirements of Section 5 of the Securities Act of 1933; given no registration statement was in effect for the offerings and the registration exemption was ineffective, the firm sold these securities in contravention of Section 5 of the Securities Act of 1933.
FINRA found that the firm, acting through Erickson, conducted inadequate due diligence related to its sale of the offerings in that it failed to ensure the issuers had retained a custodian to handle certain investors’ qualified funds prior to accepting investment of Individual Retirement Account (IRA) funds into the offerings. FINRA also found that the firm, acting through Erickson and Brewer, offered to sell and sold the company’s private placement offering by distributing to the public a private placement memorandum (PPM) containing unbalanced, unjustified, unwarranted or otherwise misleading statements; among other things, the PPM implied that the parent company was not experiencing financial difficulty and failed to disclose that it reported a significant loss one year.
In addition, FINRA determined that investors in the company’s notes were not provided with financial statements for either the company or the parent company. Moreover, FINRA found that the PPM was misleading in that it failed to state clearly how offering proceeds would be used, lacked clarity regarding the relationship between the issuer and its affiliates, and failed to provide the basis for claims made regarding the performance expectations of the issuer or its affiliates. Furthermore, FINRA found that the firm failed to establish adequate written supervisory procedures related to its sales of private placement offerings, in that the firm’s procedures failed to require that financial statements be provided to investors when private placement offerings are sold to non-accredited investors, pursuant to SEC Rule 506.TM) reports.
The findings also stated that the firm allowed Brewer to be actively engaged in managing the firm’s securities business without being registered as a principal and a representative although Brewer signed and submitted an attestation to FINRA stating he would not be actively engaged in the management of the firm’s securities business until he completed registration as a representative and principal. The findings also included that, among other things, Brewer reviewed and revised the firm’s recruitment brochure, approved offer letters to prospective firm registered representatives, dictated the structure of new representatives’ compensation, including the level of commissions and loan repayment terms, and instructed firm personnel to send private placement offering documents to prospective investors.
FINRA found that the firm maintained the registrations for individuals who were not active in the firm’s investment banking or securities business or were no longer functioning as registered representatives. FINRA also found that the firm conducted a securities business on a number of days even though it had negative net capital on each of those dates. In addition, FINRA determined that the firm’s net capital deficiencies were caused by its failure to classify contributions from the parent company as liabilities after the firm returned the contributions to the parent company within a one-year period of having received them, and improperly treating its assets as allowable even though all of its assets had been encumbered as security for a loan agreement the parent company executed.
Moreover, FINRA found that the firm had inaccurate general ledgers, trial balances and net capital computations, and filed inaccurate Financial and Operational Uniform Single (FOCUS
(FINRA Case #2010023252701)
This information was obtained on FINRA’s website in the May, 2011, Disciplanary Reports.
If you feel you have been an alleged victim of Brewer Financial Services, LLC, Steven Brewer, or Adam Erickson, or other broker-dealers and were sold private placements, call a Securities Arbitration Lawyer for a free consultation on how to potentially 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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Wells Fargo, BNY Mellon Corp., Sue Securities America, & other B-Ds over Medical Capital Holdings, Inc.
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In a May 26th., 2011, article from InvestmentNews.com, Bruce Kelly writes, that adding to the cascade of legal troubles for broker-dealers that sold private placements for Medical Capital Holdings Inc., two banks have now sued several independent B-Ds that hawked the failed offerings.
It was reported that the Bank of New York Mellon Corp. and Wells Fargo Bank NA, were trustees for Medical Capital. In fact, both were sued in a class action in 2009 in U.S. District Court for the Central District of California after the Securities and Exchange Commission charged Medical Capital with fraud. But Bank of New York Mellon and Wells Fargo want the broker-dealers to pay up money if they are found liable in those class actions.
On April 29, the two banks filed separate lawsuits against the broker-dealers, including struggling Securities America Inc., claiming that the broker-dealers “breached their obligation to MedCap investors” by selling the product to investors for whom it was not a suitable investment, and failing to make proper disclosure of the notes’ risks. Bank of New York Mellon has sued 13 broker-dealers, seven of which are no longer in business. Wells Fargo has sued six firms, as well as Ameriprise Financial Inc., which owns Securities America, the biggest seller of Medical Capital notes. Not all broker-dealers that sold the product were included in the suit. “We believe the banks’ actions are unwarranted and baseless,” said Janine Wertheim, a spokeswoman for Securities America. “The wrongdoing in this case lies with the principals of Medical Capital, who have been accused of fraud by the SEC.”
Kelly writes that the plaintiffs in the class action against the two banks claimed in a 2010 amended complaint that the two trustees signed off on a request by Medical Capital executives to take $325 million in fees — despite documents for the Medical Capital notes stating that fees were not supposed to come from investor funds. From 2003 to 2008, dozens of independent broker-dealers sold notes of Medical Capital, which raised $2.2. billion. Securities America sold about $700 million of the product and last month agreed to settle with investors who sued the firm in a class action. Investors have lost more than $1 billion in principal, and regulators and the Medical Capital bankruptcy trustees have said the operation was a Ponzi scheme.
The banks’ suits against the B-Ds is at least the third time in the past year that broker-dealers that sold failed private placements or real estate deals have been sued by outside parties such as a trustee or receiver. Last June, the trustee overseeing the receivership of another failed series of private placements, Provident Royalties LLC, sued almost 50 broker-dealers seeking to claw back $285 million, including commissions.
And in November, the bankruptcy trustee for DBSI Inc., which packaged real estate deals and went bust in 2008, sued almost 100 broker-dealers looking to get back about $49 million from the firms.
If you or a family member have become a victim of the alleged fraudulent sale of private placements for Medical Capital Holdings, Inc. by your broker-dealer, call a Securities Arbitration Lawyer for a free consultation on how you could potentially 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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20
List of the Broker-Dealers that Sold Provident Royalties Private Placements
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The following is a list of the Broker-dealers that sold Provident Royalties private placements.
| Firm name | Total sales | Total commission paid to BD |
|---|---|---|
| Advisory Group Equity Services Ltd. | $110,000 | $70,650 |
| AFA Financial Group LLC | $2,455,000 | $456,150 |
| American Portfolios Financial Services Inc. | $585,000 | $66,650 |
| Asset Management Strategies LLC | $220,000 | $2,250 |
| Ausdal Financial Partners Inc. | $100,000 | $2,250 |
| Barron Moore Inc. | $250,000 | $96,750 |
| Boogie Investment Group Inc. | $410,000 | $110,150 |
| Brookstone Securities Inc. | $460,000 | $76,500 |
| Callaway Financial Services Inc. | - | $22,500 |
| Calton & Associates Inc. | $300,000 | $40,750 |
| Capital Financial Services Inc. | $33,655,000 | $5,510,725 |
| CapWest Securities Inc. | $21,745,000 | $3,058,700 |
| Chester Harris & Co. | $340,000 | $297,500 |
| Community Bankers Securities LLC | $2,780,000 | $355,950 |
| Crescent Securities Group | - | $9,375 |
| David Harris & Co. Inc. | $850,000 | $94,000 |
| DeWaay Financial Network LLC | $850,000 | $134,525 |
| Eagle One Investments LLC | $360,000 | $42,500 |
| Empire Financial Group Inc. | $2,750,000 | $234,200 |
| Empire Securities Corp. | $205,000 | - |
| E-Planning.com Securities Inc. | $3,765,000 | $483,925 |
| First Allied Securities Inc. | $380,000 | $11,250 |
| Gk Securities LLC | $50,000 | - |
| Grant Bettingen Inc. | $215,000 | $19,350 |
| GunnAllen Financial Inc. | $22,255,000 | - |
| Harrison Douglas Inc. | $1,830,000 | $569,900 |
| Independent Financial Group | $495,000 | - |
| INVEST Financial Corp. | $100,000 | - |
| Investlinc Securities LLC | $2,095,000 | $183,275 |
| Investors Capital Corp. | $3,400,000 | $427,975 |
| J.P. Turner & Co. LLC | $11,600,000 | - |
| Jesup & Lamont Securities Corp. | $100,000 | $13,500 |
| Kaiser & Co. | $100,000 | $160,650 |
| Lighthouse Capital Corp. | $250,000 | $33,750 |
| Main Street Securities LLC | $205,000 | $45,450 |
| Matheson Securities LLC | $100,000 | $37,800 |
| Milkie Ferguson Investments Inc. | $4,145,000 | $480,350 |
| Morrow Wealth Management | $30,000 | - |
| National Securities Corp. | $3,665,000 | $437,250 |
| Newbridge Securities Corp. | $25,000 | $15,750 |
| NEXT Financial Group Inc. | $33,485,000 | $3,190,200 |
| Okoboji Financial Services Inc, | $21,910,000 | $2,261,225 |
| Private Asset Group Inc. | $2,015,000 | $204,150 |
| Provident Asset Management | $50,000 | - |
| QA3 Financial Corp. | $32,585,000 | $6,974,450 |
| Questar Capital Corp. | $250,000 | $24,125 |
| Securian Financial Services Inc. | $50,000 | - |
| Securities America Inc. | $17,995,000 | $3,723,475 |
| Securities Network LLC | $215,000 | $89,550 |
| SII Investments Inc. | $100,000 | - |
| Sterling Enterprises Group Inc. | $100,000 | $13,000 |
| Summit Brokerage Services Inc. | $560,000 | $81,000 |
| Unaffiliated Broker-Dealer | $150,000 | - |
| United Equity Securities LLC | $660,000 | $173,200 |
| United Securities Alliance Inc. | $550,000 | $401,850 |
| Waterford Investor Services Inc. | - | $2,250 |
| Wedbush Morgan Securities Inc. | $325,000 | - |
| WestPark Capital Inc. | $785,000 | $114,250 |
| WFP Securities Corp. | $6,755,000 | $1,286,775 |
| Williams Financial Group Inc. | $175,000 | - |
| Workman Securities Corp. | $9,045,000 | $1,239,025 |
| $250,990,000 | $33,380,775 |
Source: U.S. Bankruptcy court filings, Northern District of Texas, case # 09-33886
If you feel you have been an alleged victim of these broker-dealers and were sold Provident Royalties private placements, call a Securities Arbitration Lawyer for a free consultation on how to potentially 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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22
SII Investments and Santa Barbara’s Villa Rose Subordinate Notes
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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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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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21
CFO of Securities America Says they are on the Brink without Legal Settlement
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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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