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May/11

10

The Z Seven Fund ( ZSEVX ) , is down 73.2%

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Soreide Law Group would like to know if your stock broker or financial advisor recommend to you the this year’s worst-performing fund? According to Smart Money, the Z-Seven Fund decided to liquidate the fund as of December 29.
The Z Seven fund’s stock-picking system was designed to incorporate the lessons learned in the 1973-74 bear market, and the international stock fund did outperform a world stock index during the downturn in late 2008 and early 2009, but it fell behind in the recovery. If you put $10,000 in this fund at the beginning of this year would have lost more than $7,000 in the last 12 months.
So, you ask, what went wrong? Smart Money says that with just 14 stocks in its portfolio at the end of the third quarter, the fund may have suffered from bad timing – some of its top holdings, including British investment management company Rathbone Brothers PLC, PetMed Express, and British consulting firm RPS Group suffered steep losses in the spring and summer. While shares of those companies have since recovered, this fund’s shareholders never did.

If you were an investor in the Z-Seven Fund (ZSEVX), 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

13

Co-founders of Marvell Technology Allege they were Tricked into Selling Shares to Goldman Sachs

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In an April 12, 2011 article in Bloomberg News, we learn that Goldman Sachs Group Inc. was sued by two co-founders of Marvell Technology Group Ltd. who allege the investment bank tricked them into selling company shares by claiming the sale was needed to cover a margin loan.

The Bloomberg article goes on to report that Sehat Sutardja, Marvell’s chief executive officer, and Weili Dai, the company’s former chief operating officer, said they were duped into selling shares in 2008 that are now worth $141.5 million, according to a complaint filed yesterday in state court in San Francisco. Goldman Sachs pressured them by claiming a regulatory rule, which didn’t exist, required them to sell their stock, according to the complaint. Goldman Sachs held millions of shares of Marvell stock in 2008, they said.

“Goldman forced its clients to unnecessarily liquidate their holdings through forced margin calls, only to repurchase these same shareholdings for accounts owned by Goldman and its related hedge funds,” according to the complaint.

Further, Goldman Sachs also forced a sale of Sutardja and Dai’s shares of Nvidia Corp., causing them to lose $166 million, they said in the complaint.

Marvell Technology Group is the maker of processors for the BlackBerry phone, and is based in Santa Clara, California.

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

8

Tampa Based Brokerage Executives Charged by SEC With Failing to Protect Confidential Customer Information

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Washington, D.C.,– In an April 7, 2011 article on the SEC’s website, it was announced that the Securities and Exchange Commission charged three former brokerage executives for failing to protect confidential information about their customers.

From the SEC’s investigation it was found that while Tampa-based GunnAllen Financial Inc. was winding down its business operations last year, former president Frederick O. Kraus and former national sales manager David C. Levine violated customer privacy rules by improperly transferring customer records to another firm. The SEC also found that former chief compliance officer Mark A. Ellis failed to ensure that the firm’s policies and procedures were reasonably designed to safeguard confidential customer information.

“Brokerage customers should be able to trust that sufficient safeguards are in place to protect their private information from unauthorized access and misuse,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “Protecting confidential customer information is particularly important when a broker-dealer is winding down operations.”

Kraus, Levine, and Ellis each agreed to settle the SEC’s charges against them. This is the first time that the SEC has assessed financial penalties against individuals charged solely with violations of Regulation S-P, an SEC rule that requires financial firms to protect confidential customer information from unauthorized release to unaffiliated third parties.

Glenn S. Gordon, Associate Director of the Miami Regional Office, added, “Kraus and Levine violated the law by transferring customers’ private information without giving them reasonable notice to opt out. GunnAllen did not have adequate policies or procedures in place to safeguard client information, ignoring several red flags from security breaches at the firm in prior years.”

Also, according to the SEC’s orders instituting administrative proceedings, Kraus authorized Levine to take information from more than 16,000 GunnAllen accounts to his new employer as the firm wound down operations in April 2010. Levine downloaded customer names and addresses, account numbers, and asset values to a portable thumb drive, and provided the records to his new employer after resigning from GunnAllen. The SEC found that the record transfer violated Regulation S-P because account holders were only informed about it after the fact. The cases against Kraus and Levine mark the first time that the SEC has charged individuals with Regulation S-P violations arising when a departing representative takes customer information to a new employer without providing sufficient notice and opt-out procedures.

In the article it was announced that according to the SEC’s order against Ellis, GunnAllen’s policies and procedures to protect customer information were vague and did little more than recite a provision of Regulation S-P known as the Safeguard Rule. There were several serious security breaches at GunnAllen from July 2005 to February 2009, including the theft of three laptop computers belonging to GunnAllen’s registered representatives and the unlawful access of its e-mail system by a terminated employee using stolen password credentials. Despite the security breaches, Ellis failed to revise or supplement GunnAllen’s policies and procedures for safeguarding customer information.

The SEC’s found that Kraus, Levine, and Ellis willfully aided and abetted and caused GunnAllen’s violations of Rule 30(a) of Regulation S-P under the Securities Exchange Act of 1934, and that Kraus and Levine willfully aided and abetted the firm’s violations of Rules 7(a) and 10(a) of the same regulation.

It was noted that without admitting or denying the SEC’s findings, Kraus, Levine, and Ellis each consented to the entry of an SEC order that censures them and requires them to cease and desist from committing or causing any violations or future violations of the provisions charged. Kraus and Levine have been ordered to pay penalties of $20,000 each, and Ellis has been ordered to pay a $15,000 penalty.

If you feel you have been an alleged victim of GunnAllen Financial, Inc.’s, Frederick O. Kraus, David C. Levine or Mark A. Ellis, 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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Apr/11

8

Two Firms and Seven Individuals Sanctioned by FINRA for Selling Private Placements Without Conducting a Reasonable Investigation

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WASHINGTON — It was announced today on FINRA’s website that the Financial Industry Regulatory Authority (FINRA)  has sanctioned two firms and seven individuals for selling interests in private placements without conducting a reasonable investigation. The companies whose securities were sold in these private placements were unrelated to the firms and individuals FINRA sanctioned. The companies ultimately failed, resulting in significant investor losses.

 In their article it was announced that FINRA imposed sanctions against the following firms and individuals for failing to conduct a reasonable investigation of the sale of private placements offered by Medical Capital Holdings, Inc. (MedCap) and/or Provident Royalties, LLC.

  • Workman Securities Corp., of MN, was ordered to pay $700,000 in restitution to affected customers. Robert Vollbrecht, Workman’s former President, was barred in any principal capacity, and fined $10,000.
  • Timothy Cullum, former Chief Executive Officer, and Steven Burks, former President, of Cullum & Burks Securities, Inc., of Dallas, TX, a now-defunct firm, were each suspended in any principal capacity for six months and fined $10,000.
  • Jeffrey Lindsey and Bradley Wells, two former executives with Capital Financial Services, Inc., of ND, were each suspended for six months in any principal capacity and fined $10,000.
  • Jay Lynn Thacker, former Chief Compliance Officer for Meadowbrook Securities, LLC (fka Investlinc Securities, LLC), of MS, was suspended for six months in any principal capacity and fined $10,000.
  • David William Dube, former Owner, President, Chief Compliance Officer and Anti-Money Laundering (AML) Compliance Officer of (now-defunct) Peak Securities Corporation, of FL, was barred for failing to conduct adequate due diligence, as well as a failure as AML Compliance Officer to detect, investigate and report numerous suspicious transactions in 10 customer accounts where “red flags” existed.

Additionally, FINRA fined Askar Corporation, of MN, $45,000 for its failure to conduct due diligence on a private placement from DBSI, Inc., another company that defaulted on its obligations. FINRA found that Askar only reviewed the offering documents and sales materials provided by DBSI before approving the product for sale, without independently verifying DBSI’s representations in the offering documents.

 It was reported that FINRA found that broker-dealers who sold the MedCap, Provident and DBSI private placement offerings did not have reasonable grounds to believe that the private placements were suitable for any of their customers. Also, they failed to engage in an adequate investigation of the private placements and failed to establish, maintain and enforce a supervisory system reasonably designed to achieve compliance with applicable securities laws and regulations. Without performing proper due diligence, the firms could not identify and understand the inherent risks of these offerings. The sanctioned principals did not have reasonable grounds to allow the firms’ registered representatives to continue selling the offerings despite the red flags that existed regarding the private placements.

 Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, “Senior officials at these firms failed to fulfill their responsibilities to customers by not conducting reasonable investigations of these unrelated offerings, especially in light of multiple red flags suggesting liquidity concerns, missed interest payments and defaults. FINRA will continue to look closely at sales of both affiliated and unaffiliated private placements to determine whether the selling firms fulfilled their responsibility to customers.”

 In July 2009, the SEC filed a civil injunctive action in federal district court in which it sought, and was granted, a preliminary injunction to stop all MedCap sales. The SEC alleged that MedCap and its executives defrauded investors in MedCap VI by misappropriating approximately $18.5 million of investor funds. The SEC also alleged that MedCap misrepresented that it had never defaulted on or had been late in making interest or principal payments, when in fact, MedCap had defaulted on or was late in paying nearly $1 billion in principal and interest on the notes from its previous Regulation D offerings. The court appointed a receiver to gather and conduct an inventory of MedCap’s remaining assets. The SEC action is pending.

 From 2001 through 2009, MedCap, a medical receivables financing company based in Anaheim, CA, raised approximately $2.2 billion from over 20,000 investors through nine MedCap private placement offerings of promissory notes. MedCap made interest and principal payments on its promissory notes until July 2008, when it began experiencing liquidity problems and stopped making payments on notes sold in two of its earlier offerings. Nevertheless, MedCap proceeded with its last offering, MedCap VI, which it offered through an August 2008 private placement memorandum.

 On July 2, 2009, the SEC filed a civil injunctive action in the Northern District of Texas naming Provident and others, and the Court granted its request for a temporary restraining order and an emergency asset freeze and appointment of a receiver to take control of the entities, and marshal and preserve the assets for the benefit of the defrauded investors. All the named defendants subsequently agreed to the entry of a preliminary injunction, which remains in effect. In March 2010, FINRA expelled Provident Asset Management, LLC from membership for marketing a series of fraudulent private placements offered by its affiliate, Provident Royalties, LLC. (FINRA Case No. 2009017497201.)

From September 2006 through January 2009, Provident Asset Management, LLC marketed and sold preferred stock and limited partnership interests in a series of 23 private placements offered by an affiliated issuer, Provident Royalties. The Provident offerings were sold to customers through more than 50 retail broker-dealers nationwide and raised approximately $485 million from over 7,700 investors. Provident Royalties’ business plan included the acquisition of a combination of producing and non-producing sub-surface mineral interests, working interests and production payments in real property located within the United States. Although a portion of the proceeds of Provident Royalties’ offerings was used for the acquisition and development of oil and gas exploration and development activities, millions of dollars of investors’ funds were transferred from the later offerings’ bank accounts to the Provident operating account in the form of undisclosed and undocumented loans, and were used to pay dividends and returns of capital to investors in the earlier offerings, without informing investors of that fact.

It is noted that FINRA’s investigation of broker-dealers that sold the MedCap, Provident, DBSI and other troubled private placement offerings continues.

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

8

FINRA Fines and Suspends Eric Damien Kallies

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The following was obtained on FINRA’s website:

Eric Damien Kallies (CRD #4753714, Registered Representative, Waunakee, Wisconsin)

submitted a Letter of Acceptance, Waiver and Consent in which he was fined $15,000 and suspended from association with any FINRA member in any capacity for 30 business days. The fine must be paid either immediately upon Kallie’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, Kallies consented to the described sanctions and to the entry of findings that he executed purchases of exchange-traded fund (ETFs) in a managed joint account of public customers without the customers’ knowledge or consent, and without having obtained the customers’ prior written authorization to exercise discretion and his firm’s prior written acceptance of the account as discretionary. The findings stated that Kallies made a presentation consisting of several slides to the customers in connection with an investment strategy program he was recommending and was considered “sales literature.” 

The findings also stated that Kallies made the presentation without first obtaining approval from the appropriate registered principal of the firm, and it was never filed with FINRA within 10 business days of its first use. The findings also included that the presentation generally failed to disclose the risks of investing in the securities that were discussed, failed to disclose the general risks associated with investing in mutual funds and ETFs, and failed to disclose the heightened risk of investing in inverse types of ETFs.

FINRA found that the absence of certain disclosures resulted in the presentation not being fair and balanced and not providing the investor with a sound basis for evaluating facts in regard to a particular security or service, and the slides contained unwarranted and/or misleading information. FINRA also found that charts in some slides failed to include the total annual fund operating expense ratio, a prospectus offer and standardized average annual total returns for one, five and ten years; rather, they included the annualized rates of return, which is considered non-standardized performance and must be accompanied by the standardized performance listed. In addition, FINRA determined that the charts in some slides failed to include the performance disclosures required by SEC Rule 482(b)(3); these disclosures generally require that the sales material disclose that the performance data quoted represents past performance, that past performance does not guarantee future results and that performance may be lower or higher.

The suspension is in effect from February 7, 2011, through March 21, 2011. 

(FINRA Case #2009016654401)

If you feel you have been a victim of these alleged fraudulent schemes of  Eric Damien Kallies, 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

7

FINRA Preparing to Sanction Wells for Failing to Meet Advertising Standards and Keeping Information Safe

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In an April 6, 2011, article for InvestmentNews.com, Bruce Kelly writes that the Financial Industry Regulatory Authority, or FINRA, is prepared to sanction the broker-dealer arm of one of the largest sponsors of non-traded real estate investment trusts for allegedly failing to meet standards for advertising and keeping client information safe.

The Securities and Exchange Commission (SEC) in a filing last Friday, Wells Timberland REIT Inc. said that Finra in March notified its broker-dealer manager, Wells Investment Securities Inc., about its preliminary decision to recommend a disciplinary action against the broker-dealer.

Leo Wells, its founder and chairman, is well known in the independent broker-dealer industry. Wells Real Estate Funds Inc. is one of the largest sponsors of investments in the non-traded REIT industry, with $11 billion in assets and 250,000 investors.

Finra notified Wells Investment Securities in August and said that it had made a preliminary decision to discipline the firm, according to the filing.

According to the InvestmentNews.com article, in its SEC filing, Wells Investment Securities said it “intends to vigorously defend these charges.”

The Wells Timberland REIT had $360 million in assets at the end of last year.

Industry lawyers said there was no way to determine the amount of a likely fine without knowing more details about the matter.

In Kelly’s article, he states that Wells’ REITs are extremely popular with independent broker-dealers, and it has as many as 200 selling agreements with such firms. The Wells Core Office Income REIT Inc. is another product sold by independent broker-dealers.

Nancy Condon, a Finra spokeswoman, had no comment about the matter, and a spokesman for Wells, Terrell McCollum, said he could not comment beyond the contents of the SEC filing.

Kelly goes on to say that Wells has been down this path before. In October 2003, Finra’s precursor, NASD, sanctioned Wells Investment Securities for improperly rewarding broker-dealer reps who sold the company’s REITs. Those rewards included lavish entertainment and travel perquisites. At the time, the regulator also censured Mr. Wells and suspended him from acting in a principal capacity for one year.

If you feel you have been a victim of these alleged fraudulent schemes of  Leo Wells and the Wells’ REITs, 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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