Broker Fraud

Investigations Involving William A. Hightower of UBS Financial Services and Legacy Asset Securities Inc.

Published on: September 6, 2018 | by Shepherd Smith Edwards & Kantas, LLP

SHEPHERD SMITH EDWARDS & KANTAS LLP INVESTIGATING CLAIMS INVOLVING William A. HIGHTOWER, UBS FINANCIAL SERVICES INC. and Legacy Asset Securities, INC.

Baytown, Texas – September 6, 2018

Lawyers with the Securities Law Firm of SHEPHERD SMITH EDWARDS & KANTAS LLP, www.sseklaw.com, are investigating claims involving William A. Hightower, UBS Financial Services Inc. and Legacy Asset Securities, Inc. Hightower worked as a broker throughout Texas for almost two decades, with his most recent two positions at UBS and Legacy starting in 2007. It appears that, starting in 2009, Hightower engaged in a series of improper private securities transactions including sales of stock in Hightower Capital and “private annuities” between Hightower and his customers. In 2015, Hightower was barred from the financial services industry by FINRA for failing to cooperate with an investigation and is currently under criminal investigation for securities fraud.

Dallas, Texas-Based Wells Fargo Broker Expelled by FINRA

Published on: August 30, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority (FINRA) has barred J. Gordon Cloutier, Jr. (Cloutier), a former Wells-Fargo (WFC) broker based in the Dallas area of Frisco, Texas, after he allegedly tried to make an unauthorized trade and requested a loan from a client. Cloutier, who had worked at the firm for seven years, was fired in 2016. Previous to working with Wells Fargo, Cloutier was a Merrill Lynch broker, which is now a division of Bank of America (BAC), from 1996 to 2009. FINRA ultimately barred Cloutier after he failed to respond to numerous attempts by the self-regulatory organization to interview him for its probe. It is FINRA’s policy to open an investigation after a broker is let go from a firm. It was Cloutier’s lack of response that led to FINRA issuing the default bar from the industry.

At Shepherd Smith Edwards and Kantas LLP, our Texas broker fraud law firm represents investors in helping them to recoup their losses sustained due to broker misconduct, negligence, or carelessness. Over the years, we have successfully helped thousands of investors from our Houston offices. If you were an investors who worked with Cloutier, our Wells Fargo investor fraud attorneys want to hear from you.

Broker Fraud

Transamerica Entities to Pay $97M to Investors Over Flawed Investment Models

Published on: August 28, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Four Transamerica entities have settled US Securities and Exchange Charges accusing them of misconduct involving investment models that were faulty. Collectively, the entities, AEGON USA Investment Management LLC (AUIM), its affiliated brokerage firm Transamerica Capital Inc., as well as its affiliated investment advisers Transamerica Financial Advisors Inc. and Transamerica Asset Management Inc., will pay $97M to retail investors that were impacted. However, the entities are not denying or admitting to the regulator’s findings.

The SEC’s order contends that investors placed billions of dollars into mutual funds and strategies that employed flawed investment models that AUIM developed without knowing they had errors. AUIM’s affiliated investment advisers and broker-dealer touted the quantitative models upon which their investment decisions would be made. Between July ’11 and June ’15, they purportedly offered, sold, and oversaw 15 mutual funds, variable annuity investment portfolios, variable life insurance investment portfolios, mutual funds, and separately management account strategies that were based on these quantitative models.

Unfortunately, contends the SEC’s order, the models were created by one junior analyst who was inexperienced. Not only that, but there were a number of errors in the models, which failed to operate as promised. Moreover, said the regulator, the Transamerica entities launched the Strategies and Products without first verifying that the models worked as they were meant to and without disclosing any risks identified with the models.

Unregistered Brokers Are Charged With Selling More Than $243M of Woodbridge Securities to Over 1600 Investors

Published on: August 24, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Top10-3 Five unregistered brokers and their companies are now facing US Securities and Exchange Commission charges accusing them of selling Woodbridge securities to investors even though they were not registered as broker-dealers and therefore were not allowed to sell these securities. The defendants allegedly made millions of dollars from the Woodbridge securities sales.

The unregistered brokers and their companies are Barry and Ferne Kornfeld and Fek Enterprises, Andrew G. Costa and Costa Financial Insurance Services Corp., Albert D. Klager and Atlantic Insurance & Financial Services Inc., and Lynette M. Robbins and Knowles Systems, Inc. They allegedly sold over $243M of Woodbridge unregistered securities to over 1600 retail investors.

According to the regulator’s complaints, the unregistered brokers and the companies marketed Woodbridge Group of Companies, LLC as an investment that was “safe and secure.” Woodbridge, however, declared bankruptcy last December. The moment Woodbridge filed for bankruptcy protection, investors stopped receiving the interest they were due each month and they still haven’t received a return on their principal.

Retired Couple Awarded $800,000 in Damages From Oppenheimer & Co., Inc

Published on: June 1, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Lawyers representing a retired couple in a claim against Oppenheimer & Co., Inc. recently obtained an award from a Financial Industry Regulatory Authority (“FINRA”) arbitration panel awarding them $800,000 in damages. The claim was based upon an investment of the couple’s money, including retirement assets, into various energy stocks, including Breitburn Energy Partners, Sandridge Permian Trust, Atlas Resource Partners, and Vanguard National Resources. The arbitration panel found that Oppenheimer was negligent in the treatment of the clients, and awarded $800,000 in damages, $61,5217 in costs, and post-judgement interest.

The broker, Evan Fischer, appears to have moved to Ameriprise Financial Services, Inc., despite the fact he currently has four customer claims against him, including the one recently concluded with this award, which allege various types of mismanagement of client assets. It is unclear whether these other customer complaints involve investments in energy stocks like Breitburn or Sandridge.

Unfortunately, when brokers act improperly with some clients, as Mr. Fischer has been accused of doing by at least four different clients, they often do so with many clients. If you are or were a client of Mr. Fischer and believe you may have been inappropriately invested or otherwise lost money with him, contact the law firm of Shepherd, Smith, Edwards & Kantas LLP for a free, no obligation evaluation of your account to determine if you might have a claim to attempt to recover some or all of your losses. All communications will be kept strictly confidential, and you will not be billed in any way for a consultation.

SEC Proposes “Regulation Best Interests” that Would Prevent Brokers from Merely Calling Themselves Investment Adviser

Published on: April 20, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission is proposing a rule that would keep registered representatives and brokers from also referring to themselves as investment advisors. In almost 1,000 pages of new proposals, the regulator articulated that it wants brokerage firms to make sure that the investing public knows that while brokers can sell investment products they are not trusted fiduciary advisors—nor is it their role to continue to offer advice after a sale has been made. Under the proposed rule, brokers would no longer be allowed to call themselves a trusted “advisor” or “adviser.” They can, however, take steps to become a registered investment adviser.

Addressing the proposed package, SEC Chairman Jay Clayton said that “investor confusion” about what differentiates broker-dealers from investment advisers is what prompted these latest initiatives. While both can give retail investors advice regarding possible investments, the two have different kinds of relationships with them. Clayton also noted that retail investors can suffer harm if they don’t know that certain conflicts of interest may be involved when working with either broker-dealers or investment advisers. Investors also may be giving more authority over their finances to a broker or investment adviser than they should.

In a 4-1 vote this week, the SEC’s ”Regulation Best Interests” measures for brokers was moved forward. Under the new measures, brokers would be obligated to place clients’ best interests before their own when it comes to recommending investment strategies or products. Brokers would have to set up and enforce written procedures and polices that would identify, expose, get rid of, or avoid conflicts of interest that might involve a financial incentive. While the existing broker standard requires that they recommend investment products that are suitable to each client, brokers are still allowed to endorse the products that gives them the greater financial payday.

Firm Executives Reportedly Were Aware of Domestic Violence Allegations Against High-Earning Morgan Stanley Broker for Years

Published on: April 11, 2018 | by Shepherd Smith Edwards & Kantas, LLP

According to the New York Times, even though Morgan Stanley (MS) executives have known for years about the domestic violence allegations against Douglas E. Greenberg, who was one of their leading brokers, the firm continued to allow him to stay employed in its wealth management division. However, after the NY Times tried to contact the firm about him, Greenberg was finally suspended, pending review. Now, the media is reporting that Greenberg has been fired. Still, a number of the former-Morgan Stanley broker’s exes have retained their own lawyers in light of the fact that he wasn’t let go until now.

Four women have come forward accusing him of domestic abuse. Court filings indicate that not only did Greenberg’s accusers go to the police seeking protection against the now former Morgan Stanley financial adviser, but also, according to one of the women’s attorneys, the firm was issued a federal subpoena notifying it about at least one of the allegations. Morgan Stanley was also aware that Greenberg was charged for allegedly violating a restraining order.

Still, no action was taken against Greenberg, who belonged Morgan Stanley’s exclusive Chairman’s Club as one of the firm’s highest earning brokers. Ironically, the members of this club are expected to maintain certain standards when it comes to “conduct and compliance.” Greenberg is considered one of the leading wealth managers in Oregon. Firmwide, he was among Morgan Stanley’s top 2% of brokers when it came to bringing in revenue.

Broker Fraud Allegations Lead to Finra Bars for Northwestern, Fortune Financial, and Morgan Stanley Representatives

Published on: March 24, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has barred three brokers in separate, unrelated cases for alleged misconduct. They are ex-Morgan Stanley (MS) representative Thomas Alain Meier, ex-Fortune Financial broker Michael Giokas, and ex-Northwestern Mutual broker Michael Cochran.

Former Morgan Stanley broker Thomas Alan Meier is accused of making unauthorized trades in customer accounts. In the self-regulatory organization’s letter of acceptance, waiver, and consent, FINRA stated that from 7/2012 through 3/2016, Meier “effected” over 1000 transactions that were not authorized in six customers’ accounts. His allegedly unauthorized transactions involved discretion without written permission or the accounts garnering discretionary acceptance and impacted four clients.

Between 4/2016 and 10/2017, Morgan Stanley submitted 21 amended Forms U5 for Meier. The forms showed that 14 customer complaints were filed against Meier, including two arbitration cases. AdvisorHub reports that because of Meier’s alleged misconduct, customers sustained $818K in losses and over $2M in unrealized losses. To date, the brokerage firm has paid customers about $2.5M in settlements and resolved 13 of the claims.

FINRA Cases: Allegis Investment Adviser and Ex-Broker Ordered to Pay Nearly $405K, Former Madison Avenues Securities Broker Accused in $1.67M Unauthorized Trading Case is Barred by FINRA, and US Senator Elizabeth Warren Introduces Bill To Address Unpaid Arbitration Awards

Published on: March 7, 2018 | by Shepherd Smith Edwards & Kantas, LLP

FINRA Arbitration Panel Awards Allegis Investment Advisors Client $404,482

A Financial Industry Regulatory Authority arbitration panel has awarded Mark Watson $404,482 in his unauthorized trading case against Allegis Investment Services, Allegis Investment Advisors, and ex-broker Brandon Curt Stimpson. Watson is accusing Stimpson of placing his life savings in investments that were too risky and complex and of making unauthorized trades involving index put options connected to the Russell 2000 Index even though he had told the broker that he only wanted up to 25% of his portfolio involved in these. Instead, Watson alleges, Stimpson invested way more of his money in the index put options.

In his securities arbitration case, Watson also alleged breach of fiduciary duty. Now, a FINRA panel has awarded him nearly $275K in compensatory damages, nearly $54K in interest, and other costs.

Stimpson was fired by Allegis last year for not abiding by the firm’s ethics code and policies. According to his BrokerCheck records, he has been named in eight other customer disputes.

Financial Firm News: Hilliard Lyons Must Pay $445K to Elderly Investor, Merrill Lynch Ordered to Pay Vermont $140K After Broker Makes Unauthorized Changes, and FSC Securities Settles with Montana Regulators

Published on: February 27, 2018 | by Shepherd Smith Edwards & Kantas, LLP

FINRA Panel Orders Hilliard Lyons to Pay Damages to Elderly Client

In a Financial Industry Regulatory Authority arbitration case, Hilliard Lyons is ordered to pay 84-year-old Elizabeth Nickens $445K in damages for losses she sustained from alleged churning and unauthorized trading. Nickens claims that advisor Christopher Bennett made transactions without her authorization in her retirement accounts, and her assets were allocated in such a way that were not suitable for her or investment goals.

Nickens, as an older investor, had a low risk tolerance and was more interested in preserving her funds. Yet, according to her attorney, more than half of her average account equity was in four stocks. She lost over $300K.

Hilliard Lyons is accused of not properly supervising the trades. The firm and Bennett deny the senior financial fraud allegations.
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