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TAG | private placement fraud

Jun/11

16

Christian Genitrini Fined and Suspended by FINRA

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Christian Genitrini (CRD #3277581, Registered Representative, New York, New York)

submitted a Letter of Acceptance, Waiver and Consent in which he was fined $15,000,

suspended from association with any FINRA member in any capacity for two years, and

required to requalify by exam for Series 7 and Series 63 before becoming re-associated

with a member firm after the expiration of the suspension term. The fine shall be paid in

installments beginning 90 days after Genitrini’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, Genitrini consented to the described sanctions and to the entry of findings that

he advertised guaranteed returns on investments of up to 20 percent per year on a website

belonging to a company he wholly owned; Genitrini claimed that his company was a fullservice

investment firm and would, among other claims, provide high-yield investment

opportunities. The findings stated that the website declared that the company invested

nationwide and all industries were considered, but did not disclose the nature of the

investment product or the risks of investment. The findings also stated that Genitrini’s ads

appeared on other websites guaranteeing returns, and his company’s contemplated private

placement documents provided no assurance that by following its current investment

strategy, it would be successful or profitable; the subscription agreement also stated that

the investments the company carried might be volatile and present operational risks.

The findings also included that Genitrini’s Internet ads constituted communications with

the public; were not based on principles of fair dealing and good faith; were not fair and

balanced; did not disclose risks associated with the investment; guaranteed promising

returns that were exaggerated, unwarranted or misleading; and the predictions of

performance were also exaggerated or unwarranted.

FINRA found that Genitrini’s private offering of securities, which involved promissory

notes his company issued according to the private placement memorandum, was not

made pursuant to an effective registration statement filed with the SEC; the offering

was intended to be made pursuant to the exemption from registration in Section 4(2)

of Rule 506 of Regulation D of the Securities Act of 1933, which prohibits offers or sales

of securities by any form of general solicitation or general advertising. FINRA also found

that Genitrini’s use of the Internet and his company’s website violated Section 5 of the

Securities Act of 1933, and guaranteeing returns in the offer of securities over the Internet

violated Section 17(a)(1) of the Securities Act of 1933. In addition, FINRA determined

that Genitrini falsely described his work with his company on his member firm’s outside

business activity disclosure form and also failed to disclose that he maintained a website

for the company; Genitrini told his firm, in writing, that his business and website were for

tax-planning services.

The suspension is in effect from April 4, 2011, through April 3, 2013.

 

(FINRA Case #2010022859701)

 This information was obtained on FINRA’s website under the May disciplanary actions.

 

If you feel you have been a victim of the alleged fraudulent schemes of Christian Genitrini, 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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Jun/11

15

FINRA Expels Firm and Brokers Sanctioned

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 Brewer Financial Services, LLC (CRD® #132558, Chicago, Illinois), Adam GaryErickson (CRD #3081286, Registered Principal, Chicago, Illinois) and Steven

John Brewer (CRD #2214515, Associated Person, Chicago, Illinois)

 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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Jun/11

8

Provident Private Placement Paper Trail Lands on Fidelity’s Doorstep

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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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Jun/11

8

Did You Invest In Simply Fit Beverage Company’s Private Placement?

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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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May/11

26

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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May/11

10

Did you Invest in Argus Preferred Notes, LLC?

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Argus Preferred Notes, LLC, are unsecured notes. Argus was a start up company that began with less than $100k in assets and had no real track record. The guarantor of the Argus note, ARI Capital, also was a start up and had no reported investment track record. Argus was a highly speculative start up that was pitched as safe and secure to its investors which later became defunct in 2009.  The Argus note was pitched as backed by real property, guaranteed and secured and was allegedly falsely listed on some brokerage account statements as a short term bond.
 At their own admission under the “Risk Factors” in their Argus Preferred Notes, LLC, Private Placement Memorandum, was the following:
“An investment in the notes is highly speculative and involves substantial risks. Notes should not be purchased by persons who cannot afford the loss of their entire investment. You should carefully consider the risks described below, as well as the other information in this memorandum, when evaluating whether to make an investment in the notes. You should also consult with your own legal, tax and financial advisors about an investment in the notes. If any of the following risks actually occur, our business, financial condition and results of operation could be materially and adversely affected. In such case you could lose all or part of your investment.  

You and your advisors are invited to ask us questions and to request information about the terms and conditions of this offering for the purpose of evaluating the merits and risks of an investment in the notes. We will provide such information to the extent we possess the information or can acquire it without unreasonable effort or expense. This memorandum contains certain forward-looking statements that involve risks and uncertainties. ” 

Also, words used in their own memorandum to describe their own product were:  “New Venture, Speculative Investment, and Highly Leveraged.”

 
If you feel you were not made aware of some of the “fine print” by your brokerage or broker, and were an investor in Argus Preferred Notes, LLC, 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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Apr/11

28

Do You Have Investments in CapWest Securities, Inc.?

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CapWest Securities Inc. has reported in its recent filing with the SEC that three years of losses, a decline in net capital and many lawsuits — “raise substantial doubt about the company’s ability to continue as a going concern.” CapWest, is owned by Capstone Financial Group, reported a net loss of $109,000 last year on revenue of nearly $3 million.

Many broker-dealers who sold private placements have gone under.

“If, as a result of losses from operations of from litigation, the company were to fail to meet regulatory net-capital requirements, it would be required to raise additional capital to continue operations,” the firm’s management noted in the filing. “Although the company’s parent may assist from time to time with funding for the company, there can be no assurance that the company will be successful in obtaining additional capital on terms favorable to the company, or at all.”

In the court filings it was noted that, CapWest brokers sold around $22 million of private placements issued by Provident Royalties LLC, which the SEC charged with fraud in 2009. CapWest also sold an unknown amount of DBSI Inc., a packager of real estate deals that was popular among independent broker-dealers.

Currently CapWest is working with its insurance company to settle several outstanding legal actions against the firm, and faces other claims in FINRA arbitrations this year. It also faces five pending civil actions in court according to the filings.

If you or a family member bought private-placements with CapWest Securities, Inc., 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

Attention Capital Financial Services Investors:

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Soreide Law Group, PLLC, wants to speak with you about your Capital Financial private-placement investments. Call 888-760-6552.  Recently, it has been reported that Capital Financial Services Inc., with 332 representatives, sold Provident Royalties LLC, preferred stock from 2006 to 2009, according to an SEC cease-and-desist order. Capital Financial brokers also sold $63 million of the offerings by Provident, which the SEC charged with fraud in 2009. The reps received an 8% commission — or $5 million — for selling the Provident deals. The firm collected a 1% due diligence fee, or $600,000. Capital Financial also sold $100 million of private placements for Medical Capital Holdings Inc. Medical Capital has also been charged with fraud.

“Capital Financial never conducted independent verification of any of the offering materials provided by Provident,” the SEC stated in its order, which it issued April 6.

The broker-dealer “also never received audited or even unaudited financial statements for any of the Provident offerings,” the SEC said. “The only financial information Capital Financial received regarding Provident was an unaudited consolidated balance sheet review.”

“Capital Financial failed to disclose to customers that although it was collecting a due diligence fee, it was not conducting any due diligence,” the SEC order stated. When in fact, the firm collected the $600,000 as a due diligence fee but incurred no expenses to match the fee, the SEC alleged. “At no time did Capital Financial hire independent counsel, an accounting firm, contact third parties regarding Provident’s business, or hire consultants to review the Provident offerings,” the SEC alleged.

If you bought private placements, including but not limited to, Provident Royalties LLC, Medical Capital Holdings, Inc., or Capital Financial Services, Inc., Attorney Lars Soreide, of Soreide Law Group, PLLC, would like you 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

19

Puerto Rico Conservation Trust Fund Secured Notes

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Attorney Lars K. Soreide, of Soreide Law Group, PLLC, has announced that they are currently investigating possible claims on behalf of those investors who sustained losses in Puerto Rico Conservation Trust Fund Secured Notes 5.90%, due April 15, 2034.  These notes were issued on March 31, 2004. The Notes were underwritten by UBS Financial Services, Inc. of Puerto Rico, Popular Securities, R-G Investments Corp. and Santander Securities Corp. Approximately $100 million of the Notes were sold to investors. There have been recent developments causing significant losses to investments.

If you or a family member feel you have become an alleged victim of  the Puerto Rico Conservation Trust Fund Secured Notes, 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

11

UBS Financial Services Fined $2.5 Million by FINRA & Orders UBS to Pay Restitution of $8.25 Million for Omissions That Effectively Misled Investors in Sales of Lehman-Issued 100% Principal-Protection Notes

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WASHINGTON — It was announced today in an article on FINRA’s website that The Financial Industry Regulatory Authority (FINRA) has fined UBS Financial Services, Inc., $2.5 million, and required UBS to pay $8.25 million in restitution for omissions and statements made that effectively misled some investors regarding the “principal protection” feature of 100% Principal-Protection Notes (PPNs) Lehman Brothers Holdings Inc. issued prior to its September 2008 bankruptcy filing.

 The article describes PPNs as fixed-income security structured products with a bond and an option component that promise a minimum return equal to the investor’s initial investment. 

It was noted that from March to June 2008 as the credit crisis worsened, UBS advertised and some UBS financial advisors described the structured notes as principal-protected investments and failed to emphasize they were unsecured obligations of Lehman Brothers, which eventually filed for bankruptcy in September 2008.

 FINRA announced in it’s findings that UBS:

  • failed to emphasize adequately to some investors that the principal protection feature of the Lehman-issued PPNs was subject to issuer credit risk;
  • did not properly advise UBS financial advisors of the potential effect of the widening of credit default swap spreads on Lehman’s financial strength, or provide them with proper guidance on the use of that information with clients;
  • failed to establish an adequate supervisory system for the sale of the Lehman-issued PPNs, and failed to provide sufficient training and written supervisory policies and procedures;
  • did not adequately analyze the suitability of sales of the Lehman-issued PPNs to certain UBS customers;
  • created and used advertising materials that had the effect of misleading some customers about specific characteristics of PPNs

The article goes on to say that FINRA found that some of UBS’ financial advisors did not understand the product, including the limitations of the “protection” feature. Consequently, certain financial advisors communicated incorrect information to their customers. Also, certain advertising materials had the effect of misleading customers regarding the characteristics and risks of the PPNs, including the nature, scope and limitations of the 100% Principal-Protection Notes. The materials suggested that a return of principal was guaranteed if customers held the product to maturity; however, UBS did not adequately address the importance that credit risk could result in loss of principal.

Also, Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, “This matter underscores a firm’s need to be clear and comprehensive in disclosing risks of the structured products it sells to retail investors. In cases, UBS’ financial advisors did not even understand the complex products they were selling, and as a result, they neglected to disclose necessary information to customers about the issuer’s credit risk so investors would understand the magnitude of the potential losses.”

UBS’s suitability procedures were also lacking. UBS did not have risk profile requirements for certain PPNs; therefore, the PPNs were sold to some investors for whom the product was not suitable, including investors with “moderate” and “conservative” risk profiles. Moreover, these particular investors were more likely to rely on UBS’ representations about the “100% principal protection” feature of Lehman PPNs because of their risk averse investment objectives.

 In settling this matter, UBS neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

If you feel you have been an alleged victim of  UBS Financial Services Inc, or have become of victim of a similar situation, 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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