In a June 17, 2011, article written by Darla Mercado for InvestmentNews.com, she writes that six life insurance agents claim that Aviva Life and Annuity Co. had consented to the offer of insurance coverage to some 119 churchgoers in Los Angeles.

It was reported that insurance agents, Kazimir Patelski, Glenda Smith-Lee, Napoleon B. Kinney, Cheralynne Bridgewater, Candice H. Hobdy and Rene Williams responded to a lawsuit filed by the insurer in U.S. District Court in the Central District of California.

Mercado writes that originally, Aviva had sued the agents in March, claiming that the six had sold life insurance to the church parishioners in 2009 and 2010 under false pretenses. Wilshire Coast Consultants Inc., a named defendant, was trustee over 119 irrevocable life insurance trusts, each one holding an Aviva policy on the life of a churchgoer, according to the suit.

The carrier alleged that the parishioners were solicited at church for an “endowment program,” which involved taking out a policy on a church member and dividing the death benefits between that person’s beneficiaries, the church and an unknown third party. Aviva claimed that some parishioners who contacted the insurer said they either never paid premiums on the policy or that they paid only the initial premium and another entity made subsequent payments. Indeed, two churchgoers contacted by InvestmentNews in April had claimed that the program was offered as a way to help their church.

InvestmentNews.com reports that in the latest chapter of the litigation, the agents have turned the table, claiming that Aviva is guilty of “unclean hands” and had consented to the very acts it accuses the insurance agents of participating in.

“Plaintiff directed, ordered, approved, and in all other respects, ratified the acts and performance of these answering defendants,” the agents claim in their response. The insurer had “consented to the acts and omissions alleged in the complaint.”

The defendants specifically denied perpetrating a “Choli” or charity-owned life insurance scheme involving the provision of fraudulent marketing tactics, undisclosed premium finance payments and other financial incentives. Choli is a variation of stranger-owned life insurance (Stoli). The agents also denied Aviva’s allegation that the insurer’s producer guidelines don’t permit policy sales to be sold in the manner the agents had used.

The InvestmentNews.com article said that Mr. Patelski and the other defendants acknowledge that people who apply for coverage from Aviva need to answer questions about whether anyone other than the insured will pay for the premiums or whether the insured intends to transfer the policy to another party. However, the defendants denied the allegations, claiming they lacked the sufficient knowledge to determine the veracity of the accusations.

“We are fortunate this issue was discovered early before any claims were made on any of the policies,” Aviva spokesman Steve Carlson said. “Multiple misrepresentations were made to Aviva as part of these transactions.”

If you feel you’ve been allegedly defrauded by any of the above agents who sold life insurance policies through Aviva Life and Annuity Co. , contact Soreide Law Group.  For more information about our services please visit:  www.stockmarketlawsuit.com or call for a free consultation with an attorney at:  (888) 760-6552.

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David Kelly of InvestmentNews.com, June 15, 2011, writes that the price of one in a series of 10 nontraded REITs sold exclusively through David Lerner Associates Inc. took a hit yesterday when management from Apple REIT Eight Inc. said that its book value was $7.57 per share at the end of March, according to a filing with the Securities and Exchange Commission. That’s in contrast to the $11-per-share price that Apple REIT Eight posted last week in a separate SEC filing and had consistently listed as an estimated share price on client account statements.

With about 370 registered reps, David Lerner Associates, has been on the hot seat over pricing of the Apple REITs since the end of May, when the Financial Industry Regulatory Authority Inc. filed a complaint against the firm in which it voiced concern over the fact that it had marketed shares in Apple REITS that hadn’t been re-priced in years. Finra said in the complaint that it was misleading to investors not to reflect the updated value of the REITs on the David Lerner Associates website, especially in those cases where the REITs were paying dividends with principal and borrowed funds instead of operating income. David Lerner Associates allegedly violated Finra suitability rules selling the Apple REITs, according to the complaint, and could face Finra fines and potentially pay restitution to clients.

David Lerner Associates has been the sole underwriter and distributor of the 10 REITs since 1992, most of them dubbed Apple REITs, that have issued $6.8 billion in securities, according to the Finra complaint. Investors have been attracted to the REITs’ steady dividends of 7% to 8%.

Apple REIT Eight took the step to restate its value in order to recommend to the owners of the REIT not to sell shares in response to a $3 tender offer by a series of pooled investment funds managed by Mackenzie Patterson Fuller LP, which buys illiquid real estate investments at deep discounts according to yesterday’s filing with the SEC.

“The board of directors believes that the offer price represents an opportunistic attempt by the bidders to purchase units at an unreasonably low price and as a result, deprive the stockholders who tender the units of the potential opportunity to realize the long-term value of their investment in the company,” the company said in the filing.

Kelly writes, adding to the confusion over the value of Apple REIT shares, David Lerner client account statements report an estimated value of $11 per share, said a plaintiff’s lawyer in New York. He said that he had spoken with about two dozen David Lerner investors, but had so far not filed any complaints against the firm.

An SEC filing on Apple REIT Ten Inc. yesterday stated that a member of the board of directors, Ronald Rosenfeld, resigned earlier this month. The board plans to fill his seat at a later date.

The InvestmentNew.com article goes on to say that accurate pricing of shares of the illiquid, long-term nontraded REITs has been an issue for almost two years. Before 2009, the common practice in the brokerage industry was to list the share price on client account statements at par value, or the amount at which the broker-dealer sold it, with the product typically priced at $10 or $11 a share.

Finra told broker-dealers that they needed to adjust the prices on the investments more frequently in 2009. In a notice to members, Finra said that it was prohibiting broker-dealers from using information that was more than 18 months old to estimate the value of a nontraded REIT.

If you or a family member have become a victim of the sale of Apple REITs by David Lerner Associates, Inc., 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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WASHINGTON — In a June 2, 2011 article on FINRA’s website it stated that the Financial Industry Regulatory Authority (FINRA) announced  it has fined Northern Trust Securities $600,000 for deficiencies in supervising sales of collateralized mortgage obligations (CMOs) and failure to have adequate systems in place to monitor certain high-volume securities trades.

It was written in the FINRA article that FINRA found, from October 2006 through October 2009, Northern Trust failed to monitor customer accounts for potentially unsuitable levels of concentration in CMOs, in large part because it used an exception reporting system that failed to capture or analyze substantial portions of the firm’s business, including all CMO transactions, certain trades of 10,000 equity shares or more, and certain trades of 250 or more of fixed-income bonds. FINRA found that from January 2007 to June 2008, 43.5 percent of the firm’s business was excluded from review.

Also, FINRA found that the absence of systems to monitor equity trades of over 10,000 shares or fixed income trades of over 250 bonds also resulted in a failure to review these trades for suitability, concentration, excessive trading, excessive mark-ups or commissions, or for trading in restricted stocks.

 Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, “Northern Trust’s deficient systems and procedures allowed more than 40 percent of its transactions to proceed without review, which in turn left vulnerable investors exposed to the risk of losing all or a substantial portion of their principal through potential over-concentration in CMOs.”

According to FINRA, in concluding this settlement,  orthern Trust neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

This article was obtained on FINRA’s website.

If you or a family member have invested with Northern Trust and feel your account was not properly supervised, 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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Currently Soreide Law Group, PLLC, is investigating, Merrill Lynch “Accelerated Return Notes” Structured Product. 

We have found on certain broker-dealer websites that these notes are touted as offering  “investors the opportunity to earn three times the upside appreciation potential of the underlying security, index or basket of securities, up to a specific cap, while only risking one for one on the downside.”

If in your experience as an investor, you have found this not to be true, or if you feel you have lost your investment with Merrill Lynch “Accelerated Return Notes” Structured Product, 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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In an article from InvestmentNews.com, June 7, 2011, Bruce Kelly writes that the litigation stemming from a series of oil and gas private placements that failed two years ago have now ensnared a giant in the clearing and custody business, National Financial Services LLC, a unit of Fidelity Investments.

The trustee overseeing the liquidation of assets of Provident Royalties LLC, which the Securities and Exchange Commission charged with fraud in 2009, last month requested that a federal judge in Dallas issue a subpoena to National Financial. In the court filing, the trustee wants access to retirement account documents of clients of four broker-dealers that sold preferred stock of Provident and used National Financial as a clearing firm.

Bruce Kelly writes that dozens of broker-dealers sold the Provident offerings from September 2006 to January 2009, raising $485 million. Regarding National Financial records, the trustee wants documents of 579 clients who bought $39.1 million of Provident from four firms: J.P. Turner & Co. LLC, Milkie/Ferguson Investments Inc.,National Securities Corp. and Securities America, Inc.

A spokesman for National Financial, said the firm typically does not comment on matters involving its correspondent clearing, broker-dealer clients. Clearing firms do not sell securities but rather hold them for broker-dealers and their clients.

The InvestmentNews.com article goes on to say that calling Provident a “massive Ponzi scheme,” the trustee claimed that the “trustee is entitled to information concerning the relationship between the broker-dealers and their respective clearing houses, and how those funds were transferred, paid for and accounted for by the clearing houses,” the court filing stated.

“As custodial fiduciary, [National Financial] should have agreements with the various broker-dealers they did business with and records for every dollar that went through their controlled account,” according to the filing.

Last year the trustee sued dozens of broker-dealers to claw back revenue and commissions from the sale of Provident.

If you feel you have been an alleged victim of these or other 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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Soreide Law Group, PLLC,  is currently investigating the Simply Fit Beverage Company’s private placement offered by Rockwell Global Capital.

Simply Fit Beverage Company was located in South Florida and raised capital through Rockwell Global Capital. If you or a family member invested in Simply Fit through Rockwell Global Capital, 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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WASHINGTON — On FINRA’s website, The Financial Industry Regulatory Authority (FINRA) announced May31,2011, that it has filed a complaint against David Lerner & Associates, Inc. (DLA), of Syosset, NY, charging the firm with soliciting investors to purchase shares in Apple REIT Ten, a non-traded $2 billion Real Estate Investment Trust (REIT), without conducting a reasonable investigation to determine whether it was suitable for investors, and with providing misleading information on its website regarding Apple REIT Ten distributions. DLA has sold and continues to sell Apple REIT Ten targeting unsophisticated and elderly customers with unsuitable sales of the illiquid security.

FINRA’s complaint goes on to say that since January 2011, as sole underwriter for Apple REIT Ten, DLA has sold over $300 million of an open $2 billion offering of the REIT’s shares. Apple REIT Ten invests in the same extended stay hotel properties as a series of other Apple REITs closed to investors. Apple REIT Ten and the closed Apple REITs were founded by the same individual, and are all under common management. DLA has been the sole underwriter for Apple REITs since 1992, selling nearly $6.8 billion of the securities into approximately 122,600 DLA customer accounts. DLA earns 10 percent of all offerings of Apple REIT securities as well as other fees. Apple REIT sales have generated $600 million for DLA, accounting for 60 to 70 percent of DLA’s business annually since 1996.

 This complaint against David Lerner & Associates (DLA) alleges that since at least 2004, the closed Apple REITs have unreasonably valued their shares at a constant price of $11 notwithstanding market fluctuations, performance declines and increased leverage, while maintaining outsized distributions of 7 to 8 percent by leveraging the REITs through borrowings and returning capital to investors. As sole distributor, DLA did not question the Apple REITs’ unchanging valuations despite the economic downturn for commercial real estate.

 The FINRA article goes on to say that in its solicitation of customers to purchase Apple REIT Ten, DLA’s website provided distribution rates for all of the previous Apple REITs. These distribution figures were misleading and omitted material information because they did not disclose recent distribution rate reductions or that distributions far exceeded income from operations and were funded by debt that further leveraged the REITs.

 FINRA alleges that DLA failed to sufficiently investigate the valuation and distribution irregularities of the closed Apple REITs prior to selling Apple REIT Ten. As the sole underwriter of all of the Apple REITs, DLA was aware of the Apple REITs’ valuation and distribution practices. Rather than conduct due diligence into those valuations and distribution irregularities to determine that they were reasonable and that the Apple REITs were suitable, DLA accepted the valuations and continued to record them on customer account statements.

 This issuance of a disciplinary complaint represents the initiation of a formal proceeding by FINRA in which findings as to the allegations in the complaint have not been made, and does not represent a decision as to any of the allegations contained in the complaint. Under FINRA rules, a firm or individual named in a complaint can file a response and request a hearing before a FINRA disciplinary panel. Possible remedies include a fine, censure, suspension or bar from the securities industry, disgorgement of gains associated with the violations and payment of restitution.

This article was obtained on FINRA’s website.

If you or a family member have become a victim of the alleged fraudulent schemes of David Lerner Associates, Inc., call a Securities Arbitration Lawyer for a free consultation on how you could potentially recover you 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.com, May 29, 2011, Bruce Kelly writes that Neal Smalbach was fired by a broker-dealer in 2008 for selling securities while he was unregistered, an infraction that got him suspended by the Financial Industry Regulatory Authority Inc. (FINRA) for six months, according to the organization’s BrokerCheck system. It was the second time that a securities firm had let him go. Though he no longer had a securities license, Mr. Smalbach still had a license to sell insurance, and made good use of it — at least for himself, authorities said.

Kelly writes that on April 29, Mr. Smalbach was arrested in Florida by the Pinellas County sheriff and charged with one count of insurance fraud and one count of organized fraud. Each count carries a maximum of five years in prison, along with a potential $5,000 fine. The charges of insurance fraud against Mr. Smalbach, who also has 37 pending customer disputes from his time as a broker, according to BrokerCheck, highlight a persistent problem in the investment advice business:

Registered representatives who permanently or temporarily lose their license to sell stocks, bonds and mutual funds often retain a license to sell insurance.

Although state agencies that regulate insurance agents and securities brokers try to work together to keep an eye on brokers who get fired from either side of the industry, regulators are sometimes limited in their authority because of a lack of information sharing about reps and agents, observers said.

A common criticism among registered reps is that insurance agents who lose a license to sell securities products often sell equity-indexed annuities, an insurance product that is nonetheless marketed as an investment that can compete with a mutual fund or variable annuity.

“It’s been an issue, and still is, among states,” said Joseph Borg, director of the Alabama Securities Commission. “If you’ve been kicked out of one end of the financial markets, you probably don’t need to be in another.”

According to the InvestmentNews.com article, Mr. Smalbach, 48, was selling mortgage insurance policies that promise to pay the balance of a policyholder’s mortgage in the event that he or she dies, according to Jeremy Powers, an assistant state attorney in Florida’s Fifth Judicial Circuit. But instead of mortgage insurance, Mr. Smalbach’s clients were, in fact, sold whole-life policies that were worth no more than $20,000.

“Somebody who’s had the level of problems that [Mr.] Smalbach appears to have had would create a risk for consumers,” Mr. Powers said. “The activities alleged in this case are pretty serious and had the potential to create multiple hundreds of thousands of dollars in victim losses.”

 Smalbach, whose sales practices were profiled last month by the St. Petersburg (Fla.) Times, serve as a backdrop to efforts by lawmakers in Washington and regulators across the country to create a single fiduciary standard for investment advisers, registered reps and insurance agents. This year, a law went into effect in Florida that gives the state’s Department of Financial Services the power to revoke an insurance agent’s license immediately if the agent has his or her securities license revoked.

“Fraud is fraud,” said Nina Ashley, a department spokeswoman.

Kelly reminds us that when confronted with a broker whose securities license had been pulled — but who maintained an insurance license — regulators’ hands are, at times, tied. To take actions against a broker’s insurance license, Ms. Ashley said a specific insurance violation has to be found. “That didn’t always exist,” she said.

Florida already has used the new law to revoke the insurance license of a broker who misrepresented information when selling securities to a senior citizen, Ms. Ashley said. In February, the Florida Office of Financial Regulation permanently barred Jeffrey Donner on charges that he failed to disclose to clients that their accounts would automatically be billed advisory fees of 30% annualized, according to a statement from the agency. Approximately $40,000 in management fees were deducted from clients’ accounts. While Mr. Donner neither admitted nor denied the findings, Florida regulators revoked his insurance license this month according to the InvestmentNews.com article.

THEY ARE FINDING LOOPHOLES

We’ve learned that Mr. Smalbach, however, still has a license to sell insurance products such as life and health policies, and variable annuities, according to the Florida Department of Financial Services’ website.

The broker in question exploited another loophole in the law when he sold stock in a firm called Transfer Technology International Corp., whose shares are currently listed at less than a penny a share. At least a dozen elderly investors, some in their 80s and 90s, bought nearly $1 million of the stock from Mr. Smalbach, according to the St. Petersburg Times. Although he didn’t have a securities license, Mr. Smalbach was an employee of Transfer Technology and could sell shares in the company to accredited investors legally, the newspaper reported.

THEY ARE SMOOTH OPERATORS

Bruce Kelly writes that one longtime client of Mr. Smalbach who invested in the Wesley Chapel, Fla.-based company was Bob Fox, 78, of Sebring, Fla. A client of Mr. Smalbach’s for over a decade, Mr. Fox said he has lost $100,000 in his Transfer Technology investment.

“He was a really smooth talker,” Mr. Fox said, adding that Mr. Smalbach often hurried him through paperwork when buying an investment.

Mr. Smalbach’s former accountant, Robert Ferreira, corroborated Mr. Fox’s statement said the ex-broker often rushed clients through the process of buying investment products, including variable annuities.

“His method was to say, “Sign here, fill in this and that — I’m in a hurry and will fill in the rest at the office,’” Mr. Ferreira said.

If you or a family member have purchased policies through Neal Smalbach or other brokers and experienced a similar situation, contact an insurance fraud attorney for a free consultation on how to potentially recover your investment losses.  To speak with an attorney, call 888-760-6552, or visit stockmarketlawsuit.com. 

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In a June, 2011, article from Bloomberg News, it was written that David Lerner Associates Inc. has been accused of targeting unsophisticated and elderly customers while selling real estate investment trust (REITs) shares without considering whether the illiquid security was suitable for its clients.

David Lerner Associates is based in Syosset, New York, and known for its “Take a tip from Poppy” advertising slogan, misled investors who bought more than $300 million of shares in the $2 billion Apple REIT Ten offering this year, the Financial Industry Regulatory Authority(FINRA) said in a disciplinary complaint on its website. The firm denies the allegations, according to a statement.

It was reported in the Bloomberg News article that David Lerner Associates solicited customers for Apple REIT Ten, it provided misleading information about distribution rates for a series of predecessor securities that are now closed to investors, Finra said. The figures failed to show that distributions far exceeded income and were funded by debt that increased leverage in the REITs, which invest in extended-stay hotels, the regulator said.  David Lerner Associates has sold almost $6.8 billion of Apple REIT shares to more than 122,000 customers since 1992, according to the Finra complaint, the industry-funded regulator for U.S. brokerages. Those sales have generated more than $600 million, accounting for more than 60 percent of the firm’s business since 1996, Finra said.

This complaint is the first step in a formal proceeding, Finra said. It isn’t filed in court, and the firm can request a hearing before a disciplinary panel, the regulator said in its statement.

“The firm conducted thorough due diligence of Apple REIT Ten’s offering documents and audited financial statements,” DLA said in its statement. “DLA will vigorously defend these claims. It looks forward to the opportunity to set the record straight and expects to be completely vindicated.”

Also, in the Bloomberg News article it was stated that in September, DLA paid a $255,000 fine for failing to provide required information in connection with the replacement of variable life insurance policies and annuity contracts from November 1998 through February 2004, according to the New York State Insurance Department. A year ago this month, DLA was accused by Finra of overcharging customers on sales of municipal bonds and mortgage securities. That case is still pending, according to Finra’s brokerage records.

If you or a family member have become a victim of the alleged fraudulent schemes of David Lerner Associates, Inc., call a Securities Arbitration Lawyer for a free consultation on how you could potentially recover you 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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Puerto Rico and Global Income Target Maturity Fund, are two funds that are currently being investigated by Soreide Law Group, PLLC.

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