Stockbroker Misconduct

Former VSR Financial Broker John H. Towers Under Investigation for 46 BrokerCheck Disclosures

January 17, 2017 | Silver Law Group

Silver Law Group is investigating former Plano, Texas-based VSR Financial Services, Inc. (CRD# 14503) broker John H. Towers (CRD# 700221) due to an extraordinarily high amount of FINRA BrokerCheck disclosures alleging unsuitable recommendations and negligence.

According to John H. Towers FINRA BrokerCheck report, Towers has 46 misconduct disclosures, most of which are FINRA arbitrations. All the FINRA arbitrations allege that Towers recommended unsuitable investments and many allege overconcentration, and all but five of the disclosures have come in the last five years.

This is an extraordinary amount of FINRA BrokerCheck disclosures. While one or two complaints over a long period of time in the industry is not unheard of, the complaints Towers has amassed over a short period of time is concerning. Out of the 46, 42 are FINRA arbitrations and 35 of those have settled.

Cetera Investment Services, LLC Sanctioned by FINRA for Failure to Notify of Material Changes to Accounts

January 17, 2017 | Silver Law Group

Cetera Investment Services, LLC (CRD# 15340) entered into a Letter of Acceptance, Waiver and Consent (“AWC”) with FINRA after the regulatory body alleged it failed to notify account owners regarding changes to their account records.

According to the AWC, from October 1, 2008 through November 15, 2013, Cetera failed to mail or otherwise furnish 57,881 notifications to account owners of record regarding changes to their accounts, including, changes in the name of the account holder, address changes and more importantly, investment objective changes in the account. The significance of this that any change in the investment objectives in the account would affect what would be considered a suitable investment.

As part of the AWC, Cetera agreed to a censure and a fine in the amount of $75,000. Since Cetera’s formation in November 2012, it has been subject to nine (9) disclosures on its FINRA BrokerCheck report.

Former Boca Raton, Florida-based Raymond James Broker Under Investigation for Discretionary Trading in Non-Discretionary Account

November 3, 2016 | Silver Law Group

Silver Law Group is investigating former Boca Raton, Florida-based Raymond James broker Gregory E. Barr (CRD# 1312703) after being discharged by two different firms in less than three years.

Barr was most recently employed by Raymond James & Associates (CRD# 705), but most of his trouble involves his prior firm, Deutsche Bank Securities Inc. (CRD# 2525).

In May 2014, Deutsche Bank discharged Barr after the he allegedly admitted exercising discretion in non-discretionary accounts.

Former Miami, Florida-based Broker Under Investigation for Unsuitable Recommendations

August 26, 2016 | Silver Law Group

Former Dakota Securities International (“Dakota”) broker Christopher R. Mcnamee (CRD# 4271195) is under investigation for recommending unsuitable investments to his customers.

The Financial Industry Regulatory Authority (“FINRA”) arbitration complaint, according to Mcnamee’s FINRA BrokerCheck report, alleges damages in the amount of $1 million. Aside from unsuitable recommendations, the FINRA arbitration complaint alleges the use of excessive margin.

Mcnamee has an additional BrokerCheck report disclosure alleging unsuitable investment recommendations as well. The dispute was settled in March 2015 for $50,000.

Woodbury Financial Services Broker Daniel J. Dunn Under Investigation

June 10, 2016 | Silver Law Group

Silver Law Group is investigating Woodbury Financial Services (“Woodbury”) broker Daniel J. Dunn (CRD# 3105100) for customer complaints filed with the Financial Industry Regulatory Authority (“FINRA”) against the broker.

According to Dunn’s FINRA BrokerCheck report, there are five customer complaints against him, four of which have settled for a total of $685,000. The complaints against Dunn allege securities law violations such recommending unsuitable investments and misrepresentations among other claims.

One of the complaints, which has since been settled, was Dunn’s recommendation to a customer to borrow money against the customer’s family home to invest in an investment that was unsuitable for the customer. According to the report, there are two complaints that allege those same facts, one settled in 2007 and the other settled almost a year later, but it is not clear whether or not the complaints arose out of the same situation.

The New Fiduciary Duty Rule Governing Retirement Accounts

April 25, 2016 | Silver Law Group

While it has been argued by investor advocates for a long time that a fiduciary duty applies to those individuals that give investment advice to others, the Department of Labor (DOL) finally put the issue to rest with respect to retirement accounts. After six years in the making, the DOL put forth a rule that redefines who is a retirement investment advice fiduciary. The rule is designed to protect investors who obtain investment advice for retirement accounts from stockbrokers, insurance agents and other types of financial advisor who “put their own profits ahead of their clients’ best interest.” Several provisions of the rule are expected to take effect April 2017 with full compliance required by January 1, 2018.

Under the rule any person that is paid to give advice to a plan sponsor (e.g., an employer with a retirement plan), plan participant or IRA owner is now to be considered a fiduciary. The fiduciary standard would also apply to advisors that provide advice as to whether to rollover money from an employer-sponsored retirement plan (e.g., 401(k)) to an IRA. The new rule is meant to do away with possible conflict of interests by increasing fee disclosures and requiring the investment adviser to always put the investors’ best interest first. Previously, a financial advisor’s recommendation was only required to be “suitable” meaning that if there were a couple of products that fit the investor’s investment objectives and risk tolerance, the advisor could pick the one with the higher commissions and fees which would lower the possible return instead of what was in the best interest of the investor.

Legal challenges to the rule from the Securities Industry are expected. However, according to several news stories the DOL is confident that the new rule will survive legal challenges

SEC Charges Oregon-based Aequitas Management LLC and Its Executives with Operating $350 Million Investment Fraud

March 16, 2016 | Silver Law Group

The U.S. Securities and Exchange Commission (SEC) has charged Oregon-based Aequitas Management, LLC (“Aequitas”), and several of its executives with operating a $350 million investment scheme that defrauded investors in a last-ditch effort to raise funds to save Aequitas from a complete financial collapse. Aequitas, along with CEO Robert J. Jesenik, Executive Vice President Brian A. Oliver, and former CFO and COO N. Scott Gillis, were charged with multiple violations of federal securities laws in a Complaint filed in Oregon federal court. The SEC is seeking injunctive relief, disgorgement of ill-gotten gains, prejudgment interest, and civil monetary penalties as well as bars prohibiting Jesenik, Oliver, and Gillis from serving as officers or directors of any public company.

According to the SEC’s Complaint, Aequitas and four of its corporate affiliates (Aequitas Holdings LLC, Aequitas Commercial Finance LLC, Aequitas Capital Management Inc., and Aequitas Investment Management LLC) defrauded more than 1,500 investors nationwide between January 2014 and January 2016 into believing they were making health care, education, and transportation-related investments. To the contrary, the Complaint alleges that invested funds were instead being used for other purposes, including to pay lucrative salaries and extravagant perks for Jesenik, Oliver, and Gillis; and to stave off the businesses’ impending financial collapse. In mid-2014, Corinthian Colleges, a for-profit education provider, defaulted on its recourse obligations to Aequitas, which significantly increased Aequitas’ already dire cash flow problems. Rather than disclose to its investors the rapidly deteriorating state of its finances, Aequitas purportedly hid that vital information and used investor funds to keep its enterprise afloat — even using some new investor funds to pay earlier investors in a classic Ponzi scheme fashion. By November 2015, Aequitas’ operations reached a point of nearly total collapse; and in February 2016, the firm dismissed two-thirds of its employees and hired a Chief Restructuring Officer.

“We alleged that Aequitas had severe and persistent cash flow shortages and top executives knew they weren’t using money raised from investors like they said they would. But they refused to disclose the true financial condition, continued to draw lucrative salaries, and roped even more unknowing investors into a losing venture,” said Jina L. Choi, Director of the SEC’s San Francisco Regional Office.

New York Broker Patrick Teutonico Under Investigation

March 16, 2016 | Silver Law Group

According to the Financial Industry Regulatory Authority (FINRA) BrokerCheck website, a customer filed a complaint against Teutonico (CRD# 2875434) on November 23, 2015 for excessive trading. This is the eleventh disclosure on his checkered broker report and the fifth in the last year. Teutonico has been employed by Network 1 Financial Securities, Inc. since December 2012.

Silver law group previously covered Teutonico’s checkered broker report and the ramifications of a report littered with disclosures. On March 27, 2015, Teutonico, without admitting or denying the findings, consented to sanctions in the amount of $5,000 and a suspension totaling 15 business days for failing to observe the high standards of commercial honor and just and equitable principles of trade in violation of FINRA Rule 2010.

Teutonico’s other FINRA report disclosures indicate multiple clients alleging he churned their accounts – meaning he allegedly made excessive trades in client accounts to generate commissions. Additionally, the disclosures allege that he made unsuitable and unauthorized transactions, abused commissions, breached his fiduciary duty, executed excessive markup/markdowns and committed possible fraud, all totaling more than $650,000 in requested damages.

Recidivist Fraudster Edward Durante is Indicted for Scamming Investors out of $11 Million Through the Sale of VGTel

March 16, 2016 | Silver Law Group

After serving 10 years in prison for prior securities law violations, investment fraud orchestrator Edward Durante is back in the news for allegations of a penny stock pump-and-dump scheme.

Durante was criminally charged in December 2015 by the U.S. Attorney’s Office for the Southern District of New York and civilly charged by the Securities Exchange Commission (the “SEC”) for defrauding at least 50 investors out of at least $11 million through the sale of securities of VGTel, Inc. (“VGTel”), a shell company Durante controlled.

According to the SEC’s complaint, Durante sold approximately six millions shares of VGTel stock to investors using various fictitious names to hide his criminal past, including “Edward Wise,” “Ted Wise,” “Efran Eisenberg,” and “Anthony Walsh.” He solicited and enlisted the aid of Larry Werbel (CRD# 828351) and his adviser firm Evolution Partners Wealth Management, LLC (“Evolution Partners”), Sheik Khan (CRD# 2448117), Christopher Cervino (CRD# 2778817), Walter Reissman, and Kenneth Wise to help perpetrate the scheme, according to the complaint.

Former Smith Barney, Raymond James, and Morgan Keegan Broker Claus Foerster Indicted for Fraud

March 14, 2016 | Silver Law Group

A grand jury of the U.S District Court in Spartanburg, S.C. indicted former broker Claus C. Foerster (CRD# 1912949) for defrauding clients of $2.8 million over a 14-year period.

Foerster perpetrated the fraud from 2000 to June 2014 while employed as a financial advisor at Smith Barney & Co., Morgan Keegan & Co. and Raymond James Financial Inc., according to an indictment filed March 8, 2016 in the U.S. District Court in Spartanburg, S.C.

The charges follow the Financial Industry Regulatory Authority Inc.’s 2014 decision to bar Foerster from the brokerage industry due to allegations that he was running a Ponzi scheme.