Stockbroker Misconduct

FINRA Files Disciplinary Charges against Candius J. Bannister

January 14, 2015 | Silver Law Group

Candius J. Bannister, of Sarasota, Florida, was named a respondent in a FINRA complaint alleging that she borrowed over $30,000 from a customer in violation of Edward Jones’ procedures and FINRA’s rules. The complaint alleges that Bannister has failed to repay the loans or otherwise comply with the terms of the loan. Bannister did not submit any loan request forms to her firm in connection with the loans she received from the customer. The complaint also alleges that Bannister, on an annual basis, informed her firm from 2007 to 2012, acknowledging her understanding of the firm’s procedures and had not borrowed any funds from customers. (FINRA Case #2012033565601)

Investors who have suffered losses through the sale of variable annuities and non-traded REITs may be able recover their losses through arbitration. The attorneys at Silver Law Group are experienced in representing investors in cases against brokerage firms for violations of the sales of these complex or high commission products. Financial advisors frequently need their own financial guidance and improperly borrow money or take loans from their own customers. These are red flags and conduct which a firm generally does not permit. We primarily represent investors on a contingent fee basis and, in most cases, we will agree to advance any costs.

FINRA Files Disciplinary Charges against Global Strategic Investments, LLC

January 14, 2015 | Silver Law Group

Global Strategic Investments, LLC, of Miami, Florida, was named a respondent in a FINRA complaint alleging that it failed to investigate or report, where appropriate, unusual activity related to bond transactions and subsequent money transfers relating to a new business line. The FINRA complaint alleges that the firm launched a new business line that was immediately successful, facilitating currency exchanges through the liquidation of over $650 million worth of Venezuelan bonds for correspondent accounts of foreign financial institutions located in high-risk jurisdictions, Venezuela and Curacao. The firm failed to establish supervisory policies and procedures that can be reasonably expected to detect and cause the reporting of transactions required under the law and failed to establish and implement policies, procedures, and internal controls reasonably designed to achieve compliance with the Bank Secrecy Act. The firm failed to identify red flags associated with the Venezuelan bond accounts, its two largest customers, and their anticipated activity, and failed to adjust its procedures to account for the high-risk nature of this new endeavor. Instead, the firm primarily relied upon its new clients’ representations about the legitimacy of the transactions without further reasonable risk-based review to corroborate such representations. The firm’s over-reliance upon the client’s representations led to failures to detect red flags that should have required additional due diligence on the part of the firm. The firm did not have a sufficient infrastructure (policies, systems and procedures) to adequately monitor this business. The firm was or should have been aware of numerous red flags related to its customers’ Venezuelan bond liquidations. (FINRA Case #2011025676501)

Silver Law Group represents investors in securities and investment fraud cases. Our lawyers are admitted to practice in New York and Florida and represent investors nationwide to help recover investment losses due to stockbroker misconduct. If you have any questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

JPMorgan Chase Settles Investor Class Action Relating to Forex Trading

January 7, 2015 | Silver Law Group

JPMorgan Chase & Co. is the first bank in a multi-defendant class action lawsuit to settle claims relating to allegations that the banks rigged the foreign exchange market. Commonly referred to as the Forex market, over 5 trillion dollars a day is traded as investors rely on the honesty of the marketplace to trade currencies. According to various news reports, Chase has agreed to pay about $100 million under the agreement. A Federal Judge in New York must still approve the settlement. This settlement comes on the heels of a regulatory settlement where JPMorgan agreed to pay $1 billion as part of $4.3 billion in fines paid by six banks to resolve foreign-exchange rate investigations by regulators in the U.S., the U.K. and Switzerland.

Wall Street’s largest banks were some of the largest traders in foreign currency. However, despite the façade of respectability large banks claim, traders allegedly frequently communicated in chat rooms using names such as “The Cartel,” “The Bandits’ Club” and “The Mafia” to share confidential client information and manipulate certain benchmark rates. Investors were harmed by trading at manipulated prices and frequently paying substantial fees, costs and commissions for investors Forex trading activity.

Silver Law Group represents investors in securities and investment fraud cases. Our lawyers are admitted to practice in New York and Florida and represent investors nationwide to help recover investment losses due to stockbroker misconduct. Our attorneys have represented investors in Forex cases and in NFA arbitrations against registered commodities firms. If you have any questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

FINRA Files Disciplinary Charges against Cantella & Co., Inc.

January 2, 2015 | Silver Law Group

Cantella & Co., Inc., of Boston, Massachusetts, submitted an AWC with FINRA in which the firm was censured, fined $50,000 and required to pay $81,973.65, plus interest, in restitution to customers for allegations relating to excessive commissions. Without admitting or denying the findings, Cantella consented to the sanctions and to the entry of findings that it charged customers excessive commissions on equity and options transactions. The findings stated that in connection with certain purchases and sales of primarily low-priced securities, the commissions the firm charged were not fair and reasonable. The transactions resulted in approximately $120,000 in excessive charges. The firm has already repaid customers approximately $42,000 of these excessive commissions related to equity transactions. The firm also charged $4,658.22 in excessive commissions in connection with options transactions. The findings also stated that the firm failed to create or follow an adequate supervisory system for the review of commissions charged. The firm blindly followed an automated commission schedule instead of reviewing each trade for fairness. (FINRA Case #2011025431801)

Silver Law Group represents investors in securities and investment fraud cases for claims including stockbroker misconduct, excessive fees or commissions and penny stock fraud. Our lawyers are admitted to practice in New York and Florida and represent investors nationwide to help recover investment losses due to stockbroker misconduct. If you have any questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

FINRA Hits Newport Coast Securities and Its Representatives with Churning Charges

August 14, 2014 | Silver Law Group

Last week, the Financial Industry Regulatory Authority (FINRA) filed charges against Newport Coast Securities, Inc. (“Newport Coast”) and some of its current and former registered representatives, accusing them of using margin and risky securities to artificially generate huge commissions for themselves while wiping out most of their customers’ investment capital.

Newport Coast, a New York-based broker-dealer, by and through brokers Douglas Leone, Andre LaBarbera, David Levy, Antontio Costanzo, and Donald Bartlet, allegedly churned the accounts of twenty four customers — many of whom are retirees — causing more than $1,000,000 in losses to the investor-clients. “Churning,” as it is known in the industry, is the act of a broker who excessively and needlessly engages in trading in a client’s account primarily to generate commissions for the broker on each trade without regard for the client’s financial well-being. Churning is an illegal and unethical practice that violates SEC rules and securities laws. The brokers are also purported to have created new account forms for their victimized clients that misstated the clients’ net worth, investment experience, and objectives; and two of the brokers (Levy and Costanzo) attempted to dissuade several customers from cooperating with FINRA’s investigation into the matter — all of which was done to cover up the illegality of the brokers’ excessive activity in the client accounts.

According to FINRA, former Newport Coast supervisors Marc Arena and Roman Luckey saw what was transpiring but took no meaningful steps to curtail the misconduct. To the contrary, the firm’s managers, supervisors, and the former President of the company allegedly profited through overrides on the churned accounts.

Federal Appeals Court Upholds SEC Ban on Broker-Dealer Principal for Failing to Prevent Churning and Excessive Trading

June 19, 2014 | Silver Law Group

In July 2013, the U.S. Securities and Exchange Commission (“SEC”) issued a lifetime ban upon Carl Birkelbach, the founder and principal of Birkelbach Investment Securities (headquartered in Chicago, Illinois), which prevents him from participating in any working capacity in the securities industry. Mr. Birkelbach appealed the SEC’s ban, claiming in part that the SEC exceeded its authority in imposing such a severe penalty upon him. Earlier this month, the U.S. Court of Appeals for the Seventh Circuit in Chicago denied his appeal and upheld the SEC ban, stating that Mr. Birkelbach’s offenses were sufficiently egregious to warrant the sanction imposed by the SEC.

As the head of Birkelbach Investment Securities, Mr. Birkelbach was required to supervise the trading activities of the company’s registered representatives, including William Murphy. According to the SEC, Mr. Murphy engaged for years in unauthorized conduct, steering clients into unsuitable investments, and churning in client accounts — all of which Mr. Birkelbach was purportedly aware of. Despite Mr. Birkelbach’s alleged knowledge of the wrongdoing taking place at his company, he imposed no discipline upon Mr. Murphy, never disapproved of a single trade by Murphy, and never contacted the most egregiously harmed customer to discuss the high volume of trading in the customer’s account. During the years in question, the revenues from Mr. Murphy’s trading in that account, according to SEC calculations, represented nearly 20% of Birkelbach Investment Securities’ total revenue. Even when the Financial Industry Regulatory Authority (FINRA) requested that Mr. Birkelbach place Mr. Murphy on heightened supervision, Mr. Birkelbach failed to comply. As a result, FINRA imposed upon Mr. Birkelbach a punishment that ultimately became a lifetime ban from the securities industry in any capacity, which the SEC subsequently affirmed in its July 2013 ruling.

If you have questions about your legal rights, or have been the victim of investment fraud, please contact Scott Silver of the Silver Law Group for a free consultation at ssilver@silverlaw.com or Toll Free at (800) 975-4345.

Connecticut Securities Regulator Seeks to Bar Meyers Associates from Selling Securities in Connecticut

April 16, 2014 | Silver Law Group

If the Connecticut Department of Banking (the “Department”) has its way, Meyers Associates and its owner, Bruce Meyers, will be barred from selling securities in Connecticut. A February 2014 Order to Cease and Desist issued by the Department, charges Meyers Associates and Bruce Meyers (“Respondents”) with numerous violations of Connecticut securities laws. The Order states the Department’s intent to fine Respondents and revoke their registration to sell securities in Connecticut.

The present charges against Respondents stem from a 2012 examination by the Department, out of which the Department claims to have discovered multiple violations of the Connecticut Uniform Securities Act and FINRA rules. Notably, the Department alleges that Respondents failed to properly supervise employees with known disciplinary histories, violated an order from the Vermont securities regulator, and failed to completely respond to both the Department’s and FINRA’s requests for information and documents.

In seeking fines and revocation of Respondents’ licenses, the Department cites to Meyers Associates’ history of run-ins with the Department over allegations that it employed unregistered agents, offered and sold unregistered securities, engaged in fraud in connection with the sale of securities, engaged in dishonest and unethical practices, violated FINRA conduct rules, and failed to enforce and maintain adequate supervisory procedures. FINRA’s BrokerCheck report for Meyers Associates shows 14 final regulatory events, two pending regulatory events, and nine final arbitrations.

Reuters’ Article Highlights the Risks of Variable Annuities to Investors

March 28, 2014 | Silver Law Group

Of all the guarantees, bells and whistles associated with variable annuities, perhaps the biggest guarantee is the steep up-front commission the financial advisor can earn for selling the product.

According to a recent Reuters’ article, variable annuity sales in the U.S. totaled $142.8 billion last year, and brokers can earn 7 percent or more in commissions on the insurance products. Based on simple arithmetic, the commissions earned on an annual basis exceeds a billion dollars.

However, investors may be damaged when these complex products are not properly explained, tax or liquidity factors are not considered, or the advisor engages in “twisting” of improper annuity switching. “Twisting” happens when a broker encourages a client to trade in an older annuity to buy a different one, often at significant cost to the client and benefit to the broker.

Bond Buyer Magazine Highlights Silver Law Group’s FINRA Arbitration Claims Against UBS For Puerto Rico Investors

February 13, 2014 | Silver Law Group

UBS Financial Services of Puerto Rico has come under the scrutiny of a leading bond market commentator, The Bond Buyer in yesterday’s article titled, UBS Puerto Rico Faces Surge in Arbitration Claims. Standard & Poor’s, Moody’s and Fitch’s credit ratings agencies downgraded Puerto Rico’s general obligation bonds to junk bond status, which is below the investment grade status given to most U.S. municipal bonds. The downgrade was predicted by UBS Financial Services’ (UBS) recent report Municipal Brief: Puerto Rico Credit & Market Update dated January 29, 2104. This prediction came long after UBS Financial Services of Puerto Rico branch offices mobilized its sales force with a targeted marketing campaign to sell the UBS Puerto Rico Family of Funds to investors. A market revelation that is too late for those Puerto Rico investors’ whose portfolios are now heavily laden with UBS’ proprietary closed-end funds geographically concentrated in Puerto Rico bonds.

As mentioned in our previous blog post, “The removal of Puerto Rico municipal bonds from the universe of ‘investment grade’ municipal bonds could potentially result in increased sell orders from municipal bond portfolio managers driving prices lower.” Further price declines in Puerto Rico municipal bonds has already occurred and the effects for many UBS closed-end funds, including UBS Puerto Rico Fixed Income Funds and UBS Puerto Rico Investors Tax Free Funds, has been an average drop in many of the funds’ net asset values (NAV) of another 5% since the announced credit ratings downgrades.

Scott L. Silver, managing partner of Silver Law Group, has brought clarity to many Puerto Rico investors who have contacted his law firm. These investors have a better understanding of the Financial Industry Regulatory Authority (FINRA) securities arbitration process. The bond buyer reported, “his firm has filed about three dozen claims for FINRA arbitration in the past several weeks.” According to the Bond Buyer interview Mr. Silver pointed out that FINRA “rules require dealers to supervise the activities in customer accounts” and said “his clients’ losses may be attributed to a failure by UBS to supervise their financial advisors.”

Why Are Financial Advisors Clueless About Risks of Leveraged & Inverse ETFs: The Stifel Nicolaus Story

January 17, 2014 | Silver Law Group

The Stifel Nicolaus & Company story about financial advisors’ lack of training and supervision concerning exchange traded funds (ETFs) is not much different than other Wall Street giants, including Morgan Stanley, UBS, Citigroup and Wells Fargo who were fined for similar violations. On December 17, 2013 Stifel Nicolaus & Company agreed to a Letter of Acceptance, Waiver and Consent (AWC) with the Financial Industry Regulatory Authority (FINRA) and fined $1 million for violation of FINRA rules related to the sale of non-traditional ETFs to retail investors. FINRA determined in the AWC violations related to a failure to supervise the unsuitable investment advice provided by its financial advisors to retail investors.

Non-traditional exchange traded funds are investments designed to achieve investment returns that are a multiple (leveraged) of an underlying benchmark or the inverse (negative correlation) to an underlying benchmark. The leveraged or inverse ETFs are designed to track an underlying basket of securities, indexes, currencies or commodities. In order to achieve these investment results derivatives, swaps and futures contracts must be used which makes non-traditional ETFs complex investments rarely understood by the financial advisors who recommend them.

Non-traditional ETFs use derivatives, swaps and futures contracts to accomplish the intended performance objectives and requires a daily reset of the portfolio holdings which results in a tracking error over time. In other words, most non-traditional ETFs are only managed to meet the investment objectives on a daily basis. Due to the tracking errors over time and the effects of leverage, the performance of an ETF can differ greatly from the performance of the underlying basket of securities, indexes, currencies or commodities. According to a FINRA regulatory notice, “While the customer-specific suitability analysis depends on the investor’s particular circumstances, inverse and leveraged ETFs typically are not suitable for retail investors who plan to hold them for more than one trading session, particularly in volatile markets.” For buy-and-hold investors, non-traditional exchange traded fund investments have experienced investment results much different from the projections made by their financial advisors.