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Securities Fraud Blog

Greco & Greco, P.C.

W. Scott Greco

Fight Investment Fraud

Greco & Greco's lawyers represent investors to recover losses caused by securities fraud, churning, lack of suitability, negligence, sales of unregistered securities, unauthorized trading, and other misconduct by stock brokers, investment advisors, financial planners and their firms.

For a Free Attorney Consultation, call us at 877-821-5550 or 

SEC

Washington DC Investment Advisor Dawn Bennett Barred by SEC

As set out in this SEC Order from an Administrative Law Judge (https://www.sec.gov/alj/aljdec/2016/id1033jeg.pdf), Dawn Bennett has been barred from the securities industry by the SEC. Dawn Bennett was a Washington DC area advisor who was previously registered to sell securities with Western International Securities.

Judge Grimes also imposed over one million dollars of fines and disgorgement against Ms. Bennett.  The findings in the above Order included the following:

"Respondents repeatedly overstated their AUM [Assets Under Management] by at least $1.5 billion in Barron’s magazine, on a radio show hosted by Bennett, and in various other advertisements and communications with existing and prospective clients to create the impression that Respondents were larger and more successful players in the industry than was actually the case."

Judge Grimes' Order ultimately found that "Respondents made multiple material misstatements with scienter regarding AUM and investor performance. They therefore violated Securities Act Section 17(a)(1) and (2), Exchange Act Section 10(b), and Exchange Act Rule 10b-5(a), (b), and (c)." 

Greco & Greco is a law firm located in the Virginia, DC, Maryland area representing investors against securities brokerage firms and advisors involving cases of securities fraud, unsuitable investments, misstatements, churning, and other investment fraud causes of action.  We have previously represented harmed investors in FINRA arbitration proceedings against Ms. Bennett and Western International Securities.  If you would like to discuss potential claims, please contact Scott Greco for a free consultation (http://www.securities-lawyers.net/contact.html).

Posted by W. Scott Greco on 07/12/16.
ArbitrationBrokerage FirmsWestern International SecuritiesFINRAFraudSECSuitabilityPermalink

SEC and FINRA FINE UBS OVER PUERTO RICO BOND FUNDS

The SEC and FINRA have brought charges and fined UBS relating to sales practices and supervision of their UBS Puerto Rico Bond Funds.

The SEC press release and Orders can be found here: http://www.sec.gov/news/pressrelease/2015-217.html.  The SEC alleged that UBS Financial Services of Puerto Rico (UBSPR) failed to supervise its broker in relation to solicited loans used to purchase additional UBSPR closed end funds, while failing to disclose the risks of this strategy and misrepresenting the safety of the strategy.  The SEC further alleged that UBSPR did not implement reasonable supervisory procedures and had inadequate systems in place to prevent and detect this wrongful conduct. 

UBS was censured and fined over fourteen million dollars.

FINRA also fined UBSPR for actions related to its Puerto Rico Bond funds - see the press release here (http://www.finra.org/newsroom/2015/finra-sanctions-ubs-puerto-rico-185-million-supervisory-failures) which states the following:

“...for more than four years, UBS PR failed to monitor the combination of leverage and concentration levels in customer accounts to ensure that the transactions were suitable given the customers’ risk objectives and profiles. The firm failed to implement a reasonably designed system to identify and prevent unsuitable transactions in light of the unique Puerto Rican economy, in which retail customers typically maintained high levels of concentration in Puerto Rican assets and often used those highly concentrated accounts as collateral for cash loans. Despite UBS PR’s knowledge of these common practices, it failed to adequately monitor concentration and leverage levels to identify whether certain customers’ CEF transactions were suitable in light of the increased risks in their existing portfolio.”

The above sales practices and lack of supervision have formed the basis of hundreds of FINRA arbitration claims pending against UBS and UBSPR.  If you would like to speak to an attorney about possible claims related to UBS of Puerto Rico bond funds, please read more about these claims at Greco & Greco’s website (http://www.securities-lawyers.net/ubs_puerto_rico.html) and contact Scott Greco for a free consultation (http://www.securities-lawyers.net/contact.html).

Posted by W. Scott Greco on 10/09/15.
Closed End Funds ( CEF )Puerto RicoArbitrationBondsBrokerage FirmsUBS Financial Services of Puerto RicoUBSFINRAMutual FundsSECSecurities FraudSuitabilityPermalink

H.D. Vest Charged With Failures Related to Supervision

The SEC entered a Cease and Desist Order pursuant to an Offer of Settlement by H.D. Vest Investment Securities Inc.  The Order can be found here.

The SEC charged H.D. Vest with failing to implement proper supervisory procedures and policies that would have discovered and prevented a fraudulent scheme by one its brokers who wired monies out of customer accounts to an account controlled by the broker.  H.D. Vest further failed to monitor and preserve investment related emails from its brokers.

H.D. Vest was fined $225,000 and ordered to hire an independent consultant to recommend improvements to its supervisory systems.

Greco & Greco regularly represents investors in broker theft cases such as this.  Customers may attempt to recover their losses in FINRA arbitration and/or court by demonstrating firms’ failures to supervise, failure to follow up on red flags, and by arguing the firm is responsible for the acts of its agent under the legal theories of respondeat superior and vicarious liability.  Federal and state securities laws also mandate liability of control persons (such as brokerage firms) if certain requirements are met.  If you are a victim of broker theft, please contact one of our attorneys for a free consultation. Contact

Posted by W. Scott Greco on 03/11/15.
ArbitrationBrokerage FirmsH.D. Vest InvestmentFINRAFraudSECPermalink

UBS Puerto Rico Funds Suffering Drastic Losses

Since 1995, UBS Financial Services Inc. of Puerto Rico (UBS PR) has been the primary underwriter for 14 separately organized closed end fund companies and 9 co-managed closed end fund companies.  The funds primarily held Puerto Rico municipal bonds and were available only to Puerto Rico residents.  Many of these funds’ values have collapsed recently, resulting in massive losses in UBS PR customer accounts.

The background of these Puerto Rico funds can be found here in a SEC cease and desist Order from 2012.  The Order, to which UBS PR consented entry, finds that UBS PR “willfully violated Section 17(a) of the Securities Act, which prohibits fraudulent conduct in the offer and sale of securities, and Sections 10(b) and 15(c) of the Exchange Act and Exchange Act Rule 10b-5, which prohibit fraudulent conduct in connection with the purchase or sale of securities.”

UBS Puerto Rico Funds referenced in the SEC Order include:

Puerto Rico Fixed Income Funds I – VI
Puerto Rico Mortgage Backed & US Govt. Fund
Tax-Free Puerto Rico Funds I and II
Tax-Free Puerto Rico Target Maturity Fund
Puerto Rico AAA Portfolio Target Maturity Fund
Puerto Rico AAA Portfolio Bond Funds I and II
Puerto Rico GNMA & U.S. Gov. Target Maturity Fund
Puerto Rico Investor’s Tax-Free Funds I – VI
Puerto Rico Tax-Free Target Maturity Fund I and II
Puerto Rico Investors Bond Fund I

The SEC Order, which was issued in 2012, discusses at length a voluminous number of misrepresentations and omissions in relation to these funds, which purportedly represented “the largest single source of revenue for UBS PR.”  The SEC found that the “market values” reported by UBS PR were “misleading” because they were “simply what UBS PR thought they should be, not true market prices.”  Despite warnings and concerns in 2008 about the concentration of customer investments in these funds, UBS PR continued to promote the sales of these funds through its financial advisors.  In response to high levels of these funds being owned by UBS PR on its own books, the SEC details how UBS PR encouraged sales to customers and reduced its inventory by “undercutting customer sell orders.”

Specific findings made by the SEC in its Order include the following:

Page 3.  “Since 1995, UBS PR has been the primary underwriter of fourteen separately organized closed-end fund companies’ CEFs [closed-end funds] with a total market capitalization of approximately $4 billion, and nine co-managed closed-end fund companies’ CEFs with more than $1 billion in total market capitalization.”

“The CEFs represent the largest single source of revenue for UBS PR. For example, between 2004 and 2008, the CEF business generated 50% of annual total revenues for UBS PR and UBS Trust Company combined, which included Fund advisory and administration fees, and primary and secondary market sales commissions.”

Page 2.  “During 2008 and 2009, UBS PR, its former CEO (“CEO”) and its Head of Capital Markets (“HCM”) made misrepresentations and omissions of material facts to numerous retail customers in Puerto Rico regarding the secondary market liquidity and pricing of UBS PR-affiliated, non-exchange-traded closed-end funds (“CEFs” or “Funds”). For example, UBS PR claimed CEF prices were based on market forces such as supply and demand. However, UBS PR did not disclose that CEF prices were set solely at the discretion of the trading desk. Moreover, although UBS had certain disclosures about liquidity in prospectuses (not supplied to secondary market customers) and on its website, it did not adequately disclose, among other things, that as the dominant CEF broker-dealer, UBS PR controlled the secondary market. In reality, any secondary market sales investors wanted to make depended largely on UBS PR’s ability to solicit additional customers or willingness to purchase shares into its inventory.”

“As UBS PR, the CEO and the HCM promoted CEF sales throughout 2008, they knew investor demand was significantly declining relative to supply. For much of 2008, UBS PR purchased millions of dollars of CEF shares into its own inventory while promoting the appearance of a liquid market with stable prices, without disclosing UBS PR’s actions were propping up prices and liquidity.”

“But in the spring of 2009, UBS PR’s parent firm determined UBS PR’s growing CEF inventory represented a financial risk to the firm. The parent company directed UBS PR to substantially reduce its inventory of CEF shares. To accomplish the reduction, UBS PR and the HCM executed a plan, dubbed “Objective: Soft Landing” in one document, in which UBS PR routinely offered and sold its CEF shares at prices that undercut pending customer sell orders.”

“During this period, numerous UBS PR customers were also attempting to sell their holdings but UBS PR’s actions effectively prevented certain customers from selling their CEF shares. Between March and September 2009, UBS PR sold about $35 million, or 75%, of its inventory to investors. At the same time, UBS PR increased its efforts to solicit sales of CEFs while continuing to misrepresent how it was setting secondary market prices and the liquidity of the market. UBS PR also did not disclose its withdrawal of market support. By September 2009, when UBS PR completed its CEF inventory reduction, the market price of certain funds had declined by 10-15%.”

Page 4.  “The CEF share prices in UBS PR customers’ monthly account statements were similarly misleading in that they described “market values.” As with the newspaper prices, these prices were simply what UBS PR thought they should be, not true market prices.”

Page 6.  “Notwithstanding his knowledge of the weak demand for CEF shares in the secondary market, the CEO repeatedly misled UBS PR’s financial advisors throughout the fall of 2008 into continuing to promote CEF sales. In numerous e-mails, he repeatedly misstated the strength, stability and liquidity of the CEF market. The CEO did not disclose to the sales force the liquidity issues in the secondary market, or that UBS PR was keeping the CEF prices high by increasing its CEF inventory.”

Page 9.  “UBS PR did not disclose to its customers it was substantially reducing the use of its inventory to support the CEF market. UBS PR also continued to accept customer limit orders without disclosing that it was undercutting those limit orders to sell UBS PR’s shares first. UBS PR also failed to disclose the conflict of interest created by recommending CEFs to investors while selling its own shares.”

Page 11.  “UBS PR willfully violated Section 17(a) of the Securities Act, which prohibits fraudulent conduct in the offer and sale of securities, and Sections 10(b) and 15(c) of the Exchange Act and Exchange Act Rule 10b-5, which prohibit fraudulent conduct in connection with the purchase or sale of securities.”

Page 12.  “UBS PR shall, within 14 days of the entry of this Order, pay disgorgement of $11,500,000.00, prejudgment interest of $1,109,739.94, and a civil money penalty of $14,000,000.00 to the Securities and Exchange Commission.”

The risk in the funds was also increased by leverage within the funds, and according to news reports, leverage within customer accounts.  According to this New York Times article, UBS customers in the funds “were encouraged by its brokers to borrow even more money to invest in those funds.”  Such leverage of already leveraged investments can lead to increased risk as well as increased losses.

If you have suffered losses in the above funds with UBS PR, and wish to speak to an attorney with our firm at no charge to discuss your legal options, please contact Greco & Greco.

Posted by W. Scott Greco on 10/01/13.
ArbitrationBondsBrokerage FirmsUBS Financial Services Inc. of Puerto RicoFINRAFraudSECSecurities FraudSuitabilityPermalink

SEC Releases Financial Literacy Study

Pursuant to the Dodd-Frank Act, the Securities and Exchange Commission (SEC) was required to conduct a study identify the financial literacy of retail investors in the U.S.  The study can be found here. 

Not surprisingly, the study showed that retail investors consistently lacked financial literacy of basic investment issues, and lacked critical knowledge about investment fraud.  The report states:  “... studies have found that investors do not understand the most elementary financial concepts, such as compound interest and inflation.  Studies have also found that many investors do not understand other key financial concepts, such as diversification or the differences between stocks and bonds, and are not fully aware of investment costs and their impact on investment returns.”

Despite most individuals’ lack of financial literacy, and the fact that most individuals rely on investment professionals due to their own lack of investment knowledge, a standard defense raised by brokerage firms in FINRA arbitrations is to blame the victim and claim that the investor understood the risks involved in following the broker’s advice.  This study refutes the common defense that almost every individual is a “sophisticated investor” capable of understanding the risks involved.  If you suffered losses due to the wrongful acts of a broker, advisor, or brokerage firm, please contact one of our attorneys for a free consultation.

Posted by W. Scott Greco on 08/31/12.
ArbitrationBondsBrokerage FirmsFINRARetirementSECSecurities FraudSuitabilityPermalink

New FINRA Suitability Rule Goes Into Effect

As of July 9, 2012, FINRA’s new suitability Rule (Rule 2111) takes effect to replace the old NASD/FINRA Rule 2310.  The new Rule can be found here. 

The new suitability Rule, and its supplemental material, contains several clarifications which are important for investor protection.  First, the Rule clearly states that recommendations of investment strategies as well as transactions fall under the rule.  The supplemental material further states that “investment strategy” is to be interpreted broadly, including recommendations to hold securities. 

The new Rule also sets out more specifically investor financial information that a registered representative must consider when making recommendations.  Specific information includes:  “customer’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, risk tolerance, and any other information the customer may disclose to the member or associated person in connection with such recommendation.”  The Rule also sets out a standard to be applied in regard to the representative’s efforts to discover customer suitability information:  “reasonable diligence” is required to discover the customer’s investment profile.

The supplemental material to the Rule further clarifies FINRA standards regarding three kinds of suitability:  reasonable-basis suitability, customer-specific suitability, and quantitative suitability.  Reasonable basis suitability is required due diligence on a security before it can be recommended to customers - this issue can arise in private placement or TIC situations where the security is not on a national exchange.  Customer specific suitability is, as described above, recommending a security only if it is suitable for a customer’s specific situation.  Quantitative suitability is in essence a ban on churning - representatives cannot recommend (or trade with discretion) if the number of trades is excessive in light of the customer’s financial situation and investment profile.  Turnover rates and cost-equity ratios are often used to demonstrate the lack of suitability of churned accounts.

Posted by W. Scott Greco on 08/03/12.
ArbitrationBrokerage FirmsChurningFINRAIRAsMutual FundsPrivate PlacementsSECSecurities FraudSuitabilityTICPermalink

Virginia Financial Fraud Task Force

As set out in this Washington Post article, federal prosecutors in Virginia have set up the Virginia Financial and Securities Fraud Task Force.  This task force is comprised of members of the FBI, the Postal Inspection Service, the Securities and Exchange Commission, the Commodities Futures Trading Commission and the Virginia State Corporation Commission.

As set out in the story, the task force’s efforts have already resulted in multiple criminal convictions.  A criminal conviction, however, does not always recoup losses for investors wronged by financial fraud.  If you are the victim of a financial crime in which the salesperson or others involved in the scheme were registered to sell securities through a FINRA brokerage firm, you may be able to seek recovery of your losses through FINRA’s arbitration system.  Please contact Greco & Greco for a free consultation with one of our lawyers.

Posted by W. Scott Greco on 11/02/11.
ArbitrationBrokerage FirmsFINRAPonzi SchemeSECSecurities FraudState RegulatorsVirginiaPermalink

FINRA testifies regarding fiduciary standard and oversight of investment advisors

Rick Ketchum, the Chairman & CEO of FINRA testified before Congress recently regarding the Dodd-Frank Act, fiduciary standards for brokers and investment advisors, and oversight and regulation of investment advisors.  His testimony can be found here

In its testimony, FINRA agrees with many customer advocates that feel that Broker-Dealers (and their representatives) should be bound by the same fiduciary standard as registered investment advisors when giving personalized investment advice to the public.  The testimony further restates the obvious:  most customers cannot differentiate between services offered by Broker-Dealers versus Investment Advisors, and further are not aware of any differing standards of care or obligations.

The testimony further addresses the insufficient nature of current examinations of investment advisors by the SEC, and offers an allegedly better alternative:  examinations by FINRA.  FINRA maintains that investment advisor examinations and oversight by SRO’s (Self Regulatory Organizations) such as itself would help protect investors due to the fact that FINRA is currently overseen by the SEC, and currently examines many Broker-Dealers who also have investment advisory businesses. 

Setting aside the adequacy of FINRA oversight, the fact remains that many customers who lose money due to the wrongful conduct of their broker or advisor cannot count on FINRA or the SEC to recover their funds.  If you face such a situation, it is advisable to speak to an attorney to discuss your options.  Our lawyers at Greco & Greco can be contacted here for a free consultation.

Posted by W. Scott Greco on 09/16/11.
ArbitrationFINRASECSecurities FraudPermalink

New SEC Office of the Whistleblower website

The SEC recently launched its webpage for the Office of the Whistleblower, an office created by the Dodd-Frank Wall Street Reform and Consumer Protection Act.  (Click here for the site.)  In the words of the SEC Whistleblower Chief Sean McKessy, the goal of the program is to “incentivize you to report possible violations of the US securities laws of which you become aware.”  The site contains a FAQ section, links to the SEC Rules regarding whistleblowers, and Form TCR (Tip, Complaint, or Referral) to be used to submit a tip.

If you are a witness to information regarding a possible securities fraud, contact one of Greco & Greco’s attorneys here for a free consultation to discuss your options.

Posted by W. Scott Greco on 08/19/11.
FINRASECSecurities FraudWhistleblowerPermalink

SEC Adopts Securities Fraud Whistleblower Rules

The SEC recently approved final rules to govern its whistleblower program established pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The program has been established to encourage individuals to alert the SEC to evidence that helps the SEC in bringing securities fraud cases.  The Rules were designed under the Act to increase the SEC’s authority to compensate whistleblowers regarding violations of the federal securities laws.  The Rules may be found here.

There are several requirements for a whistleblower to be considered for an award of compensation.  The whistleblower must voluntarily provide the SEC with original information regarding violations of the federal securities laws, rules, or regulations that leads to the enforcement by the SEC of a federal court or administrative action in which the SEC obtains monetary sanctions totaling more than one million dollars.  The program also covers “related actions” which includes judicial or administrative actions by the U.S. Attorney General, regulatory authorities, self-regulatory organizations, or criminal prosecution by a state attorney general. 

In regard to the “original information” requirement, the Rules contain complex requirements, limitations, and exceptions to information acquired through attorney-client privileged situations, and information obtained as an officer, director, trustee, partner, or compliance/audit employee.  In certain circumstances, the Rules require disclosure of the information to the relevant entity within a specified time frame for the whistleblower to be entitled to payment under the Rules.

The amount of the award to the whistleblower will be decided by the SEC, however if the Rules’ requirements are met, the award will be between 10 and 30 percent of the monetary sanction that the SEC and other authorities are able to collect.  The SEC will exercise its discretion in determining the exact percentage based on criteria set out in the Rules.  Some of the positive and negative criteria to be applied by the SEC in the decision making process include significance of the information, assistance provided by the whistleblower, law enforcement interest, participation in internal compliance systems, culpability, unreasonable reporting delay, and interference with internal compliance systems.

This amount may also be divided by the SEC among multiple whistleblowers.  Should the SEC deny payment, the Rules provide for an appeals process as well as an ultimate appeal to the U.S. Court of Appeals for the District of Columbia, or the circuit where the aggrieved person resides.

The SEC has provided specific forms for submission of information and a claim for an award.  A whistleblower may remain anonymous when providing the information to the SEC, however to do so the whistleblower must be represented by an attorney with respect to the submission of information and claim for an award. 

The Act and Rules also provide protections for the whistleblower from retaliation by the whistleblower’s employer, providing certain requirements are met. 

If you wish to discuss a potential SEC whistleblower claim with a lawyer, please contact Greco & Greco here for a free consultation with one of our attorneys.

Posted by W. Scott Greco on 07/08/11.
SECSecurities FraudWhistleblowerPermalink

SEC Fraud Charges Regarding The Nutmeg Group LLC

As set out in the SEC Complaint which can be found here, the SEC filed civil fraud claims in Illinois against The Nutmeg Group, LLC, Randall Goulding, and others.  The SEC alleges in its Complaint that Nutmeg was an investment adviser to 15 funds which invested fund assets in private investments in public equity (PIPE) transactions.  As a basis for its fraud claims, the SEC alleges in the Complaint that Nutmeg “improperly commingled investor and fund assets,” “misappropriated over $4 million in fund assets,” “failed to maintain the required books and records,” and “overstated the performances of its Funds to investors.”  (paragraphs 2 and 3 of SEC Complaint). 

All FINRA registered representatives are required to be registered with a FINRA firm (Broker-Dealer).  FINRA firms have legal responsibilities to supervise their registered representatives, and further may be found liable for the wrongful actions of their agents.  Examples of legal grounds for liability of Broker-Dealers in these situations include:

a) under tort and agency law, principals can be found liable for the acts of their agents even if they are entirely innocent and have received no benefit from the transaction;

b) a broker?s Broker-Dealer can also be found liable as a ?control person? of that broker under state and federal securities laws; and

c) claims can be pursued in arbitration based on violations of FINRA rules including Rules related to supervision, suitability, and outside business activities.

If you were sold investments in Nutmeg Group funds by a FINRA registered representative, and you would like to discuss legal options with an attorney, please contact Greco & Greco for a free consultation with one of our lawyers.

Posted by W. Scott Greco on 06/08/11.
ArbitrationBrokerage FirmsPonzi SchemePrivate PlacementsSECState RegulatorsColoradoFloridaSuitabilityUnregistered SecuritiesPermalink

FEBG / McLeod Receiver Files Initial Report

The Receiver appointed by the US District Court in Florida regarding the case against Kenneth Wayne McLeod and the Federal Employee Benefits Group Bond Fund (FEBG) has filed his initial report to the Court.  It can be found here.  Although the receiver is in the process of reviewing hundreds of boxes of documents, the initial findings regarding assets are not promising.  Reference is made to five pieces of real estate, but the amount of equity, if any, in the properties is unclear.  Furthermore, the bank and brokerage accounts found and frozen at this time only account for approximately $90,000.  The ponzi scheme allegedly involved over $34,000,000 invested by mostly government employees.

In his report, the Receiver encourages victims to contact their own attorneys to discuss potential claims against third parties.  As set out in our previous blog post, Mr. McLeod was a FINRA registered representative of Lincoln Financial Securities Corporation until May, 2010.  Prior to Lincoln, Mr. McLeod was FINRA registered with Capital Analysts, Incorporated and Washington Square Securities.  FINRA firms have legal responsibilities to supervise their registered representatives, and further may be found liable for the wrongful actions of their agents. If you are a victim of the FEBG bond fund ponzi scheme, and you would like to discuss legal options with an attorney, please contact Greco & Greco for a free consultation with one of our lawyers.

Posted by W. Scott Greco on 08/27/10.
ArbitrationBrokerage FirmsCapital AnalystsLincoln Financial SecuritiesWashington Square SecuritiesFINRAPonzi SchemeSECUnregistered SecuritiesPermalink

McLeod Ponzi Scheme Preys on Government Employees

The SEC filed an Emergency Complaint on June 24, 2010 against the Estate of Kenneth Wayne McLeod, F&S Asset Management Group, and Federal Employee Benefits Group, alleging that Mr. McLeod engaged in a ponzi scheme.  The SEC release and Complaint can be found here.  The Complaint alleges that Mr. Mcleod solicited federal government workers across the country to invest in a purported bond fund (the FEBG Bond Fund) which offered “guaranteed, tax-free returns of eight to ten percent annually in the fund.”  In reality, the fund did not exist and Mr. McLeod used newly invested funds to pay off old investors, a classic ponzi scheme.  Mr. McLeod raised $34 million from current investors. 

According to this Florida Times Union article, Mr. McLeod killed himself days after confessing to investigators. 

Mr. McLeod was a FINRA registered representative of Lincoln Financial Securities Corporation until May, 2010.  Prior to Lincoln, Mr. McLeod was FINRA registered with Capital Analysts, Incorporated and Washington Square Securities.  FINRA firms have legal responsibilities to supervise their registered representatives, and further may be found liable for the wrongful actions of their agents.  Examples of legal grounds for liability of Broker-Dealers in these situations include: 

a)  under tort and agency law, principals can be found liable for the acts of their agents even if they are entirely innocent and have received no benefit from the transaction;

b) a broker’s Broker-Dealer can also be found liable as a ?control person? of that broker under state and federal securities laws; and

c) claims can be pursued in arbitration based on violations of FINRA rules including Rules related to supervision, suitability, and outside business activities.

If you are a victim of the FEBG bond fund ponzi scheme, and you would like to discuss legal options with an attorney, please contact Greco & Greco for a free consultation with one of our lawyers.

Posted by W. Scott Greco on 07/02/10.
ArbitrationBrokerage FirmsCapital AnalystsLincoln Financial SecuritiesWashington Square SecuritiesFINRAPonzi SchemeRetirementSECSuitabilityPermalink

Medical Capital Charged With Fraud by SEC

Medical Capital Holdings is another private placement investment that has been subject to claims of fraud by the SEC.  In the Amended Complaint found on the Receivership site the SEC alleges that despite promises in the offering memoranda from Medical Capital not to use investor funds to pay administrative fees, 24% of investor funds were paid out as administrative fees, and the companies engaged in sham intercompany transactions to pay back principal and interest to investors in prior offerings. 

Furthermore, as set out in this Orange County Register article, the head of Medical Capital (Sidney Field) had previously had his insurance license revoked by California, had been sued twice by state insurance regulators for racketeering and fraud, and had filed bankruptcy.

Investors who were sold these offerings by their stock brokers and have suffered losses may have claims that they can bring in FINRA arbitrations against their brokerage firms.  Firms selling such offerings have due diligence duties prior to approval of their sale, and representatives are required to only make suitable recommendations to their customers.  Additionally, representatives may not misrepresent the risk of securities they recommend, and they must disclose material facts related to risk.  Greco & Greco is pursuing claims in arbitration on behalf of customers who were sold these products.  If you think you may have a claim, please contact us for a free consultation with one of our attorneys.

Posted by W. Scott Greco on 03/19/10.
ArbitrationBrokerage FirmsCapWestGunn AllenFINRAPrivate PlacementsSECSuitabilityPermalink

QUEEN SHOALS INVESTMENT FRAUD

According to this Western District of North Carolina Department of Justice release, Sidney Hanson of Charlotte, North Carolina pleaded guilty in July, 2009 to securities fraud, mail fraud, and money laundering in relation to an investment scheme known as Queen Shoals.  The SEC has also filed a Complaint related to the investment scheme.

The SEC states in the above Complaint that the Hansons and their sales force sold almost $33 million in “private loan agreements” to investors around the country.  The investments were allegedly to be placed in a diversified portfolio? of precious metals, foreign currency and treasury notes, generating high returns while remaining safe in non-depletion accounts.  In reality according to the SEC, the investment funds were invested “in a number of very risky private investment opportunities” and funds from new investors were used to pay off old investors.

Investors who were sold Queen Shoals investments by their stockbrokers, investment advisers, retirement specialists, or financial planners may have claims to be brought against related firms based on securities fraud, suitability, failure to do due diligence, misrepresentations and omissions, and other legal grounds.  Greco & Greco is currently investigating sales by FINRA registered parties in Virginia - please contact us for a free consultation if you believe you may have a claim.

Posted by W. Scott Greco on 11/25/09.
ArbitrationBrokerage FirmsFINRAPonzi SchemeRetirementSECState RegulatorsNorth CarolinaSuitabilityUnregistered SecuritiesPermalink

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