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

TAG | targeting elderly investors

Jun/11

28

Did You Experience Significant Losses with Morgan Keegan?

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Morgan Keegan Fund Losses*
Ticker Bond Fund 2007 2008
RMH RMK High Income Fund (-)58.0% (-)39.0%
RHY RMK Multi-Sector High Income Fund (-)60.6% (-)44.5%
RMA RMK Advantage Income Fund (-)56.9% (-)39.1%
RSF RMK Strategic Income Fund (-)58.1% (-)42.0%
RHICX RMK Select High Income-C (-)59.9% (-)45.9%
MKHIX RMK Select High Income-A (-)59.7% (-)46.1%
RHIIX RMK Select High Income-I (-)59.6% (-)46.0%
RIBCX RMK Select Intermediate Bond Fund-C (-)50.6% (-)66.6%
MKIBX RMK Select Intermediate Bond Fund-A (-)50.3% (-)66.5%
RIBIX RMK Select Intermediate Bond Fund-I (-)50.1% (-)66.5%
*Information accurate as of July 1, 2008 (4:25 CST) c/o Morningstar.

Soreide Law Group, PLLC, is currently investigating, for several clients, Morgan Keegan fund losses.

Morgan Keegan allegedly marketed the funds as safe investments that were suitable for low-risk investors. When the housing market crashed in 2007, the funds fell in value. Investors meanwhile experienced huge financial losses.

Many lawsuits and arbitration claims have been filed against Morgan Keegan, as well as against several of the company’s top executives. Evidence has continued to back up investors’ claims that the Memphis-based brokerage allegedly misled clients when it marketed and sold the bond funds.

Additional charges came in April, 2010, when the Securities and Exchange Commission, (SEC) state regulators and FINRA charged Morgan Keegan and two employees – James Kelsoe and Joe Weller – with fraud for inflating the value of the risky securities held by the bond funds.

If you or a loved one have lost money in an RMK bond fund, call Soreide Law Group, PLLC at (888) 760-6552 and speak to a FINRA Arbitration Lawyer free of charge to discuss how you could potentially recover your losses, or visit http://www.stockmarketlawsuit.com.

 

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Jun/11

25

Life Insurance Sold to Church Members Alleged Scam by Agents

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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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Jun/11

16

BOYNTON BEACH MAN CHARGED WITH MAIL FRAUD IN “PONZI” SCHEME

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It was anounced on Florida’s Office of Financial Regulation, that on June 3, 2011 there was a filing of a Criminal Information against defendant Anthony F. Cutaia, 65, of Boynton Beach, Florida.  Cutaia made his initial appearance in federal court, and was released on a personal surety bond.  
 
The news-release states that the Information charges Cutaia with nine counts of mail fraud, in violation of Title 18, United States Code, Section, 1341.  More specifically, the Information alleges that Cutaia was the managing member and beneficial owner of CMG Property Investment Group, LLC, which purportedly engaged in commercial real estate investment.  Cutaia was also the host of “Talk About Mortgages and Real Estate,” a television and radio program. 
 
From March 2003 through December 2006, Cutaia entered into Contract Participation Agreements with investors according to the charges.  These contracts stated that investors’ money would be used solely to purchase real estate contracts in Palm Beach and Broward Counties and that CMG would not collect commissions or fees until the properties were sold and a profit was made.  In fact, however, Cutaia allegedly invested little of the investors’ money in real estate and instead used the investors’ money to make payments to pre-existing investors and to pay his own business and personal expenses.  
Have you or your family members become an alleged victim or Anthony F. Cutaia? Protect yourself and your investments from the unscrupulous brokers and brokerages who turn your investments into Ponzi schemes. Call a Securities Arbitration Lawyer at Soreide Law Group, PLLC, for a free consultation on how to potentially recover your investment losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com.

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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

16

Robin Bush, Fined and Suspended by FINRA

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 Robin Fran Bush (CRD #1994431, Registered Principal, Coral Springs, Florida) submitted a Letter of Acceptance, Waiver and Consent in which she was fined $15,000 and suspended from association with any FINRA member in any principal capacity for six months. The fine must be paid either immediately upon Bush’s reassociation with a FINRA member firm following her 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, Bush consented to the described sanctions and to the entry of findings that, as her member firm’s CCO, she was responsible for creating, maintaining and updating her firm’s WSPs and for conducting due diligence for private offerings. The findings stated that Bush’s firm approved for sale, and sold, various private offerings and for one offering, Bush’s due diligence consisted of reviewing the PPM and investor subscription documents, but she did not seek or obtain financial documents or information from the issuer regarding the offering, did not obtain any due diligence report, did not visit the issuer’s facilities or meet with its key personnel. The findings also stated that Bush did not take steps to ensure, or otherwise verify, that other firm principals were conducting any due diligence of the offering’s issuer. FINRA found that the firm and Bush obtained a third-party due diligence report after firm customers had already invested in the offering. FINRA also found that for a third private offering her firm approved for sale and sold, Bush conducted due diligence after the product had been sold to customers; Bush’s due diligence consisted of obtaining investor subscription documents without obtaining PPMs for the offerings, did not obtain any due diligence report from an independent third party and did not meet with any executives to understand the nature of the offerings.

 

In addition, FINRA determined that Bush’s firm sold additional, different unregistered offering to customers, and Bush, acting in her capacity as CCO and the designed principal for private offerings, failed to conduct due diligence for each of these other offerings. Moreover, FINRA found that the firm’s supervisory system and the firm’s written procedures for private offerings Bush drafted and maintained were deficient; these procedures Bush drafted and maintained did not identify, in any detail,specific due diligence steps to be taken for private offerings or identify specific documents to be obtained for private offerings the firm was contemplating selling.

Furthermore, FINRA found that the firm’s written procedures for private offering due diligence were conclusory, non-specific and lacking in the requisite minimum detail regarding steps to be taken and firm personnel responsible for such steps. The suspension will be in effect from September 7, 2011, through March 6, 2012.

 (FINRA Case #2009016159402) 
 This information was obtained on FINRA’s website under “May, 2011, Disciplanary and Other Actions.”
 
 If you feel you have been a victim of the alleged fraudulent schemes of  Robin Fran Bush, 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

15

Pricing Gap Revealed in Apple REIT Eight

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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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Jun/11

14

FRAUD CHARGES BROUGHT BY SEC IN SILICON VALLEY REAL ESTATE INVESTMENT SCHEME

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On the U. S. Securities and Exchange Commission’s website, it was announced that the Securities and Exchange Commission (SEC) charged Mountain View, Calif.-based JSW Financial Inc. and five officers for defrauding investors in two real estate funds, alleging that the firm used investor funds to prop up the officers’ own failing real estate development projects while concealing the loss of $17 million of investors’ money.

In the article it says that the SEC alleges that from 2002 to 2008, JSW and its predecessor, Jim Ward & Associates (JWA), created two real estate investment funds – Blue Chip Realty Fund and Shoreline Investment Fund – and told investors that their money would be used to make loans secured by residential real estate. In reality, according to the SEC, the firms’ officers used most of the money to make unsecured and undocumented loans to entities that the officers themselves controlled, which were suffering mounting losses and protracted delays on Silicon Valley real estate development projects. Meanwhile, as the enterprise collapsed, investors continued receiving monthly statements showing steady growth in the value of their portfolios.

In the SEC’s complaint, filed in federal district court in San Francisco, names as defendants founder James S. Ward and Edward G. Locker (both of Ohio) and David S. Lee, Richard F. Tipton and David C. Lin (all Silicon Valley residents). The complaint alleges that JSW and JWA, through these individual officers, breached their fiduciary duties by misusing investors’ money to benefit the officers rather than the funds. The SEC also alleges that the officers concealed millions of dollars in losses from Blue Chip and Shoreline investors by sending fraudulent account statements claiming that the Funds were earning more than 10% in annual profits, until the scheme collapsed in November 2008 and the officers finally revealed to investors that nearly all of the Blue Chip and Shoreline loans were unsecured. The SEC also alleges that Ward and Locker together took $900,000 of investor money to purchase homes for themselves.

On the SEC’s website it was announced that the SEC’s complaint charges JSW, Ward, Lee, Locker, Tipton and Lin with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint also charges JSW with violating Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 (Advisers Act) and Rule 206(4)-8 thereunder, and charges Ward, Lee, Locker, Tipton and Lin with aiding and abetting violations of Sections 206(1), 206(2) and 206(4) of the Advisers Act and Rule 206(4)-8 thereunder. The SEC seeks injunctive relief and disgorgement of ill-gotten gains against JSW, Ward, Lee, Locker, Tipton and Lin, as well as monetary penalties against the five officers. The complaint also seeks disgorgement of ill-gotten gains and appointment of a receiver over Blue Chip and Shoreline as relief defendants.

If you feel you or a family member has become an alleged victim of  JSW Financial Inc., Jim Ward & Associates, James Ward, Edward Locker, David Lee, Richard Tipton , David Lin, 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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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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Jun/11

12

FINRA Fines Northern Trust Securities $600,000 for Failure to Supervise Accounts

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FINRA, the Financial Industry Regulatory Industry, has found that during an 18 month period, Northern Trust Securities, failed in their supervision and monitoring of 43.5% of their total business.

FINRA also stated that “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”.  

These FINRA findings raise questions and doubts about broker-dealer reporting systems in general.  The failure of this supervision and exception reporting is not a question of software or technology.  Almost every failure of an automated exception reporting system relates to very human error in the design and implementation of the exception reporting rules and criteria.   These rules and criteria are established by the individual broker-dealer that implements an automated exception reporting system.  The software provider is providing the means and opportunity to generate the exception reporting.  The broker-dealer is defining the rules and establishing analysis standards.  FINRA reported that almost 50% of Northern Trust Securities business went without analysis, including all of the trading in CMO’s.   The potential risk to investors of over-concentration in CMO’s during the period in question, October 2006 to October 2009, would dwarf the amount of the FINRA fine.

It should not have gone unnoticed by Northern Trust that such a large percentage of their overall business was “escaping” surveillance.  Having such a large percentage of a broker-dealer’s business pass without analysis may be dramatic but, then again, what percentage is acceptable?  Implementation of an automated exception reporting system by a broker-dealer is only the beginning of a compliance and surveillance process.  An automated exception reporting system requires constant monitoring and audit.  In the absence of that, the broker-dealer exposes their business to severe potential failures of supervision and exception reporting. 

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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