Broker Fraud

Another Ex-LPL Broker Barred Following Misrepresentation Allegations

Published on: June 11, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Jason Nelson, an ex-LPL Financial broker (LPLA), is now barred by the Financial Industry Regulatory Authority (FINRA). The bar comes after Nelson refused to participate in the self-regulatory organization’s (SRO) probe into his sales activities.

LPL fired Nelson early last year after finding that he misrepresented customer financial information related to annuity sales. Without denying or admitting to FINRA’s findings, Nelson consented to the entry of findings and the bar. He worked nearly 14 years as a formerly registered broker. Previous to working with LPL Financial, Nelson was an Edward Jones broker.

It was just last month that FINRA permanently barred ex-LPL Financial broker Philip John Nalesnik, whom the broker-dealer also fired last year.

FINRA Bars Ex-Ameritas Broker Following Selling Away Allegations

Published on: June 6, 2019 | by Shepherd Smith Edwards & Kantas, LLP

James Anderson, an ex-Ameritas Investment Corp. adviser, is now barred by the Financial Industry Regulatory Authority (FINRA) after he failed to participate in a probe into allegations that he had taken part in selling away. Ameritas fired Anderson earlier this year after the brokerage firm’s own investigation found that he had engaged in selling promissory notes and indexed annuities that it had not approved.

Anderson was at Ameritas for 14 years. In April, a claimant filed a FINRA arbitration case accusing of making unsuitable recommendations by pushing promissory notes. The allegations are related to the selling away charges against him. The claimant is asking for $400K in damages.

Selling Away

Ex-Morgan Stanley Broker Suspended Over Alleged Churning

Published on: June 4, 2019 | by Shepherd Smith Edwards & Kantas, LLP

David Strnad, a longtime broker, has been suspended by the Financial Industry Regulatory Authority (FINRA) for 18 months. According to his BrokerCheck record, in 2016, the daughter of a client accused Strnad of churning in her father’s account while he was a registered Morgan Stanley representative. Following the allegations, FINRA opened a probe into the matter.

The self-regulatory authority (FINRA) found that Strnad made over 270 trades involving CDs in the account of one elderly customer between 2013 and 2015. While the client had given the former Morgan Stanley broker permission to purchase the CDs, Strnad allegedly exceeded the authority granted to him when he sold the CDs before they matured and used the money made from those transactions to purchase more CDs for the client.

As a result, said FINRA, the client ended up paying nearly $4300 commissions that were not warranted. Morgan Stanley has since paid that money back to the client.

FINRA Bars Additional Bad Brokers from Big Firms

Published on: June 3, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Former Securities America Broker Is Accused of Unsuitable and Unauthorized Trades

Michael Bastardi, an ex-Securities America broker, is barred by the Financial Industry Regulatory Authority (FINRA) after he failed to give the regulator the information it requested for an investigation into his alleged conduct. Bastardi was a registered representative with Securities America from 2014 to 2016.

In 2018, the brokerage firm submitted a Form U5 that disclosed that Bastardi had been named in a customer complaint accusing him of unauthorized trading, unsuitable margin trading, forgery, and fraud while at Securities America and previous to that when he was a registered Dalton Strategic Investment Services broker. His alleged misconduct is said to have resulted in about $250K in damages. The investor fraud claim is still pending.

Former LPL Financial Broker is Barred from the Securities Industry

Published on: May 24, 2019 | by Shepherd Smith Edwards & Kantas, LLP

On May 17, 2019, the Financial Industry Regulatory Authority (“FINRA”) issued a permanent bar against former Pennsylvania LPL Financial representative Philip John Nalesnik.

According to FINRA’s BrokerCheck records, Nalesnik was in the securities industry for roughly 17 years, from 2002 until he was kicked out in 2019. Nalesnik previously worked at IDS Life Insurance Company, American Express Financial Advisors, CCO Investment Advisors and, for almost a decade, LPL Financial, LLC.

Prior to receiving his FINRA bar, Nalesnik had a very questionable regulatory history. Nalesnik’s CRD shows that he has had at least five customer complaints, one criminal complaint, at least two tax liens and a personal bankruptcy, much of which happened while Nalesnik was a registered representative of LPL Financial.

Morgan Stanley Ordered to Pay $519K to Retired Couple

Published on: May 24, 2019 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority (FINRA) arbitration panel has awarded $519,000 to Stephen and Brenda Balock in their investor fraud claim against Morgan Stanley (MS). The couple contends that that one of the firm’s brokers, Tim J. Prouty, placed their funds in investments that were complex and inappropriate for them, causing them to lose money in eight accounts between 2012 and 2015. They filed their claim against Morgan Stanley in 2016.

The Balocks began working with Prouty after Stephen’s employer, the Public Service Co. of New Mexico, compelled him into early retirement due to downsizing. He had never worked with a broker before then.

The couple wanted to invest in certificates of deposit. Instead, Prouty placed them in a Morgan Stanley investment advisory program that involved more complex investments, such as options contracts, derivates, junk bonds, and exchange-traded funds. In their investor claim against Morgan Stanley, the Balocks made a number of allegations, including the following:

Broker Allegedly Illegally Sold Over $23M in Woodbridge Securities

Published on: May 22, 2019 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission (SEC) has filed civil charges against Charles Nilosek for acting as an unregistered broker and illegally selling Woodbridge securities to retail investors. The regulator said that Nilosek, who is based in Massachusetts, was one of the top revenue earners when it came to selling the unregistered investments from the Woodbridge Group of Companies.

The Woodbridge investments are tied to a $1.2B Ponzi scheme that ran from 2012 to 2017. Woodbridge and its 281 related companies are accused of bilking more than 8,400 investors, many of whom were elderly investors who lost their money investing in the company’s promissory notes and private placements. The customers were promised 5-8% in yearly returns and many used their retirement money to invest.

The SEC’s complaint said that Nilosek and his Position Benefits LLC sold over $23M in Woodbridge securities to more than 200 investors in at least four states between 9/2013 and 9/2015. He was paid over $1.4M in compensation. The regulator contends that Nilosek was never a registered broker nor was he ever registered with a brokerage firm.

Former Janney Montgomery Scott Broker Faces Charges

Published on: May 17, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Massachusetts Secretary of the Commonwealth William Galvin has filed charges against broker-dealer Janney Montgomery Scott accusing the firm of not properly supervising broker Stephen Querzoli during his trading of Class A mutual fund shares from 2012 to 2017. According to the state regulator, these alleged mutual fund sales violations caused investors, mostly older customers, to pay nearly $200K in unwarranted commissions that were shared between Janney and Querzoli.

Class A mutual fund shares usually charge higher fees of up to 5.7% at the front-end. They also lead to higher commissions for the investment advisers and brokers selling them compared to what other mutual fund class shares would render.

Although Class A shares are meant to be held for at least five years, according to the Massachusetts regulator, Querzoli would sell clients’ Class A shares within months of their acquiring them, thereby engaging in short-term trading. This resulted in higher and additional commissions charged to customers.

Stanford Ponzi Fraud Victims Awarded $1.4M

Published on: May 16, 2019 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority (FINRA) panel has ordered Pershing, LLC to pay $1.4m to six investors who lost money in R. Allen Stanford’s $7.2B Ponzi scam. Pershing is a Bank of New York Mellon Corp. (BK) division. It acted as Stanford Group Co.’s clearing broker for several years.

Pershing is accused of enabling the Stanford Ponzi Fraud, including through its transfer of hundreds of millions of dollars from US investors’ securities accounts, as it continued to make money from the sales of at least $500M in fake, unregistered certificates of deposit (CDs).

Pershing also allegedly disregarded the unusual ways in which Stanford ran his operations, including the use of offshore transfers and the high compensation awarded to brokers. The unregistered CDs were issued out of Stanford International Bank, a Stanford Financial Group unit based in Antigua, and then sold by Stanford’s brokerage firm in the US.

Fund Manager LJM Partners Sues Over Volatility Losses

Published on: May 15, 2019 | by Shepherd Smith Edwards & Kantas, LLP

LJM Partners is suing a number of unnamed parties after losing hundreds of millions of dollars during a major incident of stock market volatility early last year now known as “Vol-magedon.” The Chicago-based fund manager and commodity trading advisor (CTA) claims that these losses are what forced it to go out of business.

LJM had backed complex derivatives, which plunged in value after the largest ever one-day jump in the VIX volatility index in February 2018. The fund manager later gave back what was left of clients’ funds and shuttered its operations.

While LJM held $812M in assets at the start of that month, by the end of February, that figure had dwindled to $14M. One of its affiliates, which operated the LJM Preservation and Growth Fund—a mutual fund for retail investors—lost half its value due to the VIX volatility index jump. The fund then went on to lose the rest of its value as it unwound its holdings.