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

TAG | broker recommending risky investments

Jun/11

14

INVESTMENT ADVISER, FUND MANAGER, AND TWO INDIVIDUALS WITH CHARGED BY SEC WITH SECURITIES FRAUD INVOLVING CLIENT FUNDS

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Recently on the US Securities and Exchange Commission’s website, they announced the filing of a civil injunctive action in U.S. District Court in Los Angeles, California against MAM Wealth Management, LLC (MAM), MAMW Real Estate General Partner, LLC (MAMW), Alex Martinez and Ralph Sanchez, alleging fraud in connection with client investments in a $10.3 million risky real estate venture.

According to the Commission’s complaint, from July 2007 through March 2009, Martinez, a MAM and MAMW principal, and Ralph Sanchez, a MAM registered representative and MAMW principal, had 50 of their advisory clients invest in MAM Wealth Management Real Estate Fund, LLC (Fund). The complaint alleges that Martinez and Sanchez misrepresented to some clients that the Fund was a safe, relatively liquid investment, was earning 9% per year, and would show profits in three years. The complaint alleges that they used their discretionary authority over other clients’ funds to invest them in the Fund, even though it was unsuitable for their conservative investment goals. The complaint alleges that many accounts were retirement accounts and that the Fund was an unsuitable investment for clients who did not have the ability and willingness to accept the risks of losing their entire investment. The complaint further alleges that the defendants caused the Fund to use client funds to make risky mortgage loans.

On the U.S. Securities and Exchange Commission’s website they write that there was a complaint alleging that the defendants have violated the antifraud provisions of the federal securities laws, including violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder by MAM, MAMW, Martinez and Sanchez and Sections 206(1) and 206(2) of the Investment Advisers Act by MAM and Martinez and aiding and abetting violations of Sections 206(1) and 206(2) of the Investment Advisers Act by Sanchez. The SEC seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and monetary penalties.

If you feel you or a family member has become an alleged victim of  MAM, MAMW, Alex Martinez, Ralph Sanchez or any of their brokers, or a similar situation, call a Securities Arbitration Lawyer for a free consultation on how to recover your investment 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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Apr/11

28

David Lerner Associates Sanctioned by the SEC For Allegedly Selling Illiquid REITs To Customers

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Back in 2004, David Lerner Associates, agreed to a “Cease and Desist” Order issued by the SEC regarding the sale of unsuitable REITs (Real Estate Investment Trusts) to 4 customers of the firm. The SEC Order read that one of the employees made investment recommendations “that his customers purchase illiquid REIT securities on margin collateralized by the customers’ bond holdings were contrary to the objectives of his customers who desired highly-liquid bond or tax-free bond issues. The margin purchases of illiquid REIT securities using the customers’ liquid bonds as collateral effectively rendered the customers’ holdings illiquid. The customers could not obtain cash by selling the REIT securities, which were illiquid, or by selling bonds, which collateralized the REIT securities.” 
Three of the customers “sustained losses arising from the illiquid REIT securities that were purchased for their accounts, as follows: (1) an 86-year old customer lost $103,281; (2) a 75-year old customer lost $37,778; and (3) a 55-year old customer lost $34,420″.
According to the SEC Order, another one of Lerner’s employees made a  ”recommendation and offer of securities that were unsuitable for his customer violated Section 17(a) of the Securities Act. [The employee's] investment recommendations were contrary to the objectives of his customer, a married, middle-aged man with two children residing in his home. The customer wanted a diversified investment for the approximately $30,000 in his IRA account. This IRA account constituted nearly all of the customer’s savings and was the customer’s financial safety net. [The employee's] concentrated the customer’s IRA account in an illiquid REIT security and did not provide the diversification that the customer desired. [The] customer sustained a loss of $6,518 arising from the illiquid REIT securities [the employee] purchased for his IRA account.”
 
If you feel you or a family member has become an alleged victim of David Lerner Associates or it’s brokers, or a similar investment in REITs, call a Securities Arbitration Lawyer for a free consultation on how to recover your investment 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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Apr/11

13

Santander Securities Ordered by FINRA to Pay $2M to Settle Charges Brokers Sold Unsuitable Investments to Elderly

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Yesterday, in an article from Bloomberg News, we learn that Banco Santander SA, Spain’s largest bank, will pay $2 million to resolve U.S. regulatory claims that its Puerto Rico-based brokerage improperly sold risky structured financial products to retail customers including the elderly.

“Santander Securities failed its customers through significant deficiencies in its systems and procedures, which allowed unsuitable recommendations of concentrated positions in risky reverse convertibles,” Brad Bennett, Finra’s chief of enforcement, said in a statement. Santander resolved the claims without admitting or denying the allegations, Finra said.

It was reported that Santander Securities, which has reimbursed customers for more than $7 million in losses on so-called reverse convertible notes, failed to properly train brokers as sales grew in 2007 and 2008, the Financial Industry Regulatory Authority said today. The Washington-based regulator said last month that it was conducting a sweep to survey advertising for the securities.

These reverse convertibles, generally marketed to individuals, are short-term bonds that convert into stock if a company’s share price plummets. They offer high interest rates, with notes paying 13 percent on average last year, according to data compiled by Bloomberg. Banks sold $6.76 billion of the securities to U.S. investors last year, the data show.

Santander recommended in November, 2007, that a retired couple in their 80s, with a moderate risk tolerance and long- term growth objective, invest more than 85 percent of their account and more than half of their net worth in a single reverse convertible position, Finra said. The couple, who has since been reimbursed, lost $88,000 of a $100,000 investment on the deal, the regulator said.

Also, some brokers recommended that customers use funds borrowed from the firm’s banking affiliate to purchase the securities, claiming it would enable them to profit on the interest-rate spread between the instrument and the loan, Finra said. Those recommendations substantially increased the clients’ risk, and some people who lost money then owed additional funds to the bank when the notes lost value, the regulator said.

Ferris, Baker Watts LLC, which was acquired by Royal Bank of Canada in 2008, was ordered to pay $690,000 to resolve Finra’s claims that it failed to supervise reverse-convertible sales for these products. H&R Block Financial Advisors Inc., acquired by Ameriprise Financial Inc. in 2008, was fined $200,000 for a lack of supervisory systems. Neither brokerage admitted wrongdoing.

If you feel you have been an alleged victim of  your brokerage or broker selling you Banco Santander reverse convertible notes, 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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Apr/11

11

Stuart Phillip Miller Sanctioned by FINRA

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Stuart Phillip Miller (CRD #4851567, Registered Representative, San Diego, California)

 

submitted a Letter of Acceptance, Waiver and Consent in which he was fined $10,000 and suspended from association with any FINRA member in any capacity for one year. The fine must be paid either immediately upon Miller’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Miller consented to the described sanctions and to the entry of findings that he and another individual were trainees in a member firm’s professional development program and formed a partnership through which they jointly solicited and handled customer accounts as well as splitting any production credits that either generated. The findings stated that as part of their efforts to attract clients, Miller and the individual created a spreadsheet that set a model fund portfolio that they either presented to potential customers during meetings or sent by email or mail to prospective customers. The findings also stated that Miller and the individual sent a version of their model fund portfolio that included a mix of conservative and risky securities along with a chart of history of returns the individual securities and overall portfolio earned; Miller and the individual, in some communications with potential customers, misrepresented that this was a portfolio that they managed and that the stated returns were their returns. The findings also included that neither Miller nor the individual sought or received a firm supervisor’s prior approval for the use of the model fund portfolio or permission of its dissemination, nor was the model portfolio’s spreadsheet filed with FINRA’s Advertising Regulation Department, within 10 business days after first dissemination of the material as required.

FINRA found that the model fund portfolios did not include any information regarding the risks associated with the funds, and the chart did not include a sound basis for the performance evaluation for each of the securities included in the portfolio. FINRA also found that the model portfolio failed to identify or to display in a prominent fashion Miller’s and the other individual’s association with their firm. In addition, FINRA determined that Miller had his assistant type up a stop transfer letter and he forged the customer’s signature on the letter meant to prevent the customer from transferring his account to another firm. Moreover, FINRA found that Miller admitted to his branch manager that he had forged the stop transfer request and the firm immediately terminated Miller’s employment.

The suspension is in effect from February 7, 2011, through February 6, 2012.

 

(FINRA Case #2009018219101)

 

 This information was obtained on FINRA’s website.

If you feel you have been a victim of these alleged fraudulent schemes of Stuart Phillip Miller, 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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