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The Financial Industry Regulatory Authority announced this week that it is barring three former brokers. They are ex-Morgan Stanley broker (MS) Kevin Smith and former Wells Fargo (WFC) brokers Wilfred Rodriquez Jr. and Thomas A. Davis.

According to the self-regulatory authority’s order, the bar against Smith comes after he wouldn’t appear before FINRA to testify regarding allegations involving a structured products trade in a family member’s trust that he may have executed without checking with the client first.

Morgan Stanley fired Smith in 2016 in the wake of the broker fraud allegations.

U.S. District Judge Sidney H. Stein is refusing to grant class action certification to a group of investors suing UBS Puerto Rico over its sale of proprietary closed-end mutual funds. In particular, the class action complaint dealt with a series of 23 closed-end bond funds that UBS Puerto Rico developed and marketed exclusively to Puerto Rico residents.

These proprietary closed-end funds were comprised of at least 2/3 Puerto Rico debt (and often much higher), resulting in a geographic concentration that placed the owners of such funds at a great risk if anything negative happened on the island. Additionally, the UBS closed-end funds were highly leveraged, typically borrowing $1 for every $1 invested, meaning that any losses in the closed-end funds would be significantly increased.

Notwithstanding the above, the plaintiff investors say that UBS falsely depicted these closed-end mutual funds as safe and secure investments that would garner fund holders tax-free income when, in truth, the mutual funds were “ticking time bombs” that were actually very risky.

The Financial Industry Regulatory Authority (FINRA) has barred three former brokers who failed to take part in the self-regulatory authority’s probe into allegations of wrongdoing. Stephen T. Hurtak, formerly of Stifel Nicolaus & Co., was a broker for 39 years. According to FINRA, Hurtak refused to take part in the investigation into possibly unsuitable recommendations he may have made to several customers.

Unsuitable Recommendations

Brokers have a duty to make investment recommendations and strategies that are appropriate for a customer as it pertains to their investment goals, risk tolerance, and portfolios. When unsuitable recommendations lead to investment losses, this can be grounds for an investor fraud case.

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.

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

Roanoke, VA – August 1, 2014

Lawyers with the Securities Law Firm of SHEPHERD SMITH EDWARDS & KANTAS LLP, www.sseklaw.com, are investigating claims involving Donna Tucker and UBS Financial Services, Inc.  Donna Tucker worked as a broker with A.G. Edwards for four years until she joined UBS Financial Services in November of 2007.  After working at UBS for about six years, Ms. Tucker was permanently barred from the industry by the Financial Institute Regulatory Authority (“FINRA”).  FINRA began conducting an investigation sometime in 2013, during which it requested information from Ms. Tucker.  When Ms. Tucker refused to comply with that request, her license was suspended, and she was later permanently barred from working in the industry.

Recently, the Securities and Exchange Commission charged Donna Tucker of operating a Ponzi scheme for almost the entire period of time she was working at UBS.  According to the SEC complaint, Ms. Tucker stole over $730,000 from her clients between January 2008 and April 2013.  She did this by forging checks drawn on client accounts, establishing margin loans on customer accounts without the knowledge or approval of the client, and used those funds to repay other customers.  To hide her actions, she ensured that her clients only received electronic statements, which Ms. Tucker knew her elderly clients would not check, and then falsified records that did not show anything amiss.  Ms. Tucker then used this money to fund a lavish lifestyle for herself, including vacations, multiple cars, expensive clothing, and a country club membership.

Recently, Oppenheimer was found liable for the conduct of one of its former brokers named Mark Hotton. Hotton joined Oppenheimer in November 2005, and proceeded to fleece a number of his clients, according to financial regulators. FINRA, the Financial Industry Regulatory Authority, has filed a disciplinary action against Hotton which is still pending.

According to the complaint, Hotton outright stole almost $6 million from his brokerage customers, and directed another $2.5 million to outside businesses that Hotton was affiliated with in some way. These numbers don’t even include the millions of dollars that FINRA believes that Hotton caused by excessively trading, or churning, customer accounts to generate commissions for himself.

The level of fraud that Hotton was engaging in should be shocking if it wasn’t becoming increasingly commonplace. In 2006, a customer filed a lawsuit against Hutton after it was convinced by Hotton to invest $4 million in real estate transactions. The customer claimed that Hotton simply stole the entire investment, which was accomplished by forging contracts, forging mortgages, forging account statements, and directing the investment being made into a shell corporation that he had created with a similar name to the company that was supposed to be invested in. Ultimately, that lawsuit was settled for millions of dollars which Hotton was individually liable for. Yet this lawsuit, its allegations, and its results were never disclosed to other customers as regulations require, permitting Hotton to continue to seek new customers to bilk.

Date: August 7, 2013

The attorneys at Shepherd, Smith, Edwards & Kantas LLP are investigating claims by investors with Oppenheimer & Co.  Although the firm’s investigations are usually target more specifically at particular conduct of a firm or broker, Oppenheimer & Co.’s supervisory system has been found so woefully inadequate by numerous regulators and arbitration Panels over the last several years that almost any trading strategy permitted in Oppenheimer customer accounts becomes suspect.

For example, in 2008 the Massachusetts Securities Division filed suit against Oppenheimer for its sales of Auction Rate Securities (ARSs).  Specifically, the regulator alleged that Oppenheimer marketed ARSs as safe alternatives to money markets and certificate of deposits (CDs).  In actuality, ARSs are complex debt securities that can suffer complete failures and ultimately leave the investor holdings a completely illiquid asset with no way to get their money back out.  The regulator further claimed that Oppenheimer was aware of many disruptions and failures that occurred in the ARS market in 2007, but blithely ignored these warnings.  Oppenheimer did not investigate the potential ramifications for the ARS securities that had been, and were currently being, sold to their clients.  Oppenheimer did not warn its clients of these warning signs.

According to Yahoo Finance, a number of Wells Fargo (WFC) advisors who used to work for the Private Bank’s wealth management unit are claiming that the firm pushed them to place client funds in investments that charged higher fees to clients. The ex-bank employees contend that they were pressured to cross-sell products and bill clients for fees that they would not have had to pay otherwise.

Yahoo Finance reported that there are internal company documents verifying the former employees’ claims. The media outlet said that it conducted interviews with a number of these former advisors.

The ex-Wells Fargo advisors were reportedly encouraged to place clients’ funds in complex products and separately managed accounts. The advisors claim that they were told that if they did not meet sales quotas for certain products, their compensation would suffer.


San Juan, Puerto Rico – October 3, 2013

Lawyers with the Securities Law Firm of Shepherd Smith Edwards & Kantas LLP,  are investigating claims involving Puerto Rico UBS bond funds.  UBS has been the most prominent broker-dealer operating in Puerto Rico for a number of years.  As a result, many, if not most, individuals in Puerto Rico with brokerage accounts use UBS, resulting in UBS managing roughly $10 billion of assets of Puerto Rico residents.

Unfortunately, UBS recommended that many of these clients make significant investments in proprietary UBS bond funds. These UBS bond funds, such as the Tax-Free Puerto Rico Fund II, invest primarily in Puerto Rico municipal bonds.

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