FINRA

FINRA Says Former MML Investors Services Broker Bilked Older Couple in Senior Fraud

Published on: November 9, 2016 | by Shepherd Smith Edwards & Kantas, LLP

FINRA has issued a complaint against Stanley Clayton Niekras accusing the broker of elder financial abuse. According to the regulator, Niekras allegedly cheated a couple, who are in their nineties and in failing mental and physical health, out of over $70K in financial panning services fees.

Even though Niekras didn’t have an investment advisory or financial planning agreement with the elderly couple, he allegedly billed them for hundreds of hours of time that he purportedly spent working on their “financial future” –work that he claimed to have done over four years. The purported elder fraud would have taken place while he worked for MML Investors Services. FINRA said that Niekras charged the couple $250/hr in retroactive compensation. The couple received their bill for these supposed services in 2013.

FINRA contends that Niekras knew that he had no right to the “financial planning fees or the “estate planning” fees he was charging the couple. The self-regulatory organization said that the broker, who had been contending with tax liens, had told MML Investors Services that he could cover the liens because of commissions he was expecting. Niekras purportedly thought that he could sell variable annuities to the children of the older couple, who had gifted them with about $500K in securities and cash each.
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Voya Financial Advisors, Cetera Advisors, and Six Other Broker-Dealers to Pay $12.5M in Fines and Restitution For Allegedly Not Properly Supervising The Sale of L-Share Variable Annuities

Published on: November 2, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority is fining eight brokerage firms $6.2M for not supervising the sale of L-share variable annuities to customers. Five of the firms must pay another $6.3M to customers because the variable annuities that they were purchased were potentially not compatible with the latter’s investment goals and accounts.

The firms, and their sanctions, include: Voya Financial Advisors Inc., for $2.75M fine, First Allied Securities, Inc., for $950K fine, VSR Financial Services, for $400K fine, Cetera Financial Specialists LLC, for $350K fine, Cetera Advisors Networks LLC, for $750K fine, Summit Brokerage Services, Inc., for $500K fine, Kestra Investments, for $475K fine, and FTB Advisors, for $250K fine. The firms that have to pay restitution are: Voya, for $1.8M, while first Allied, Cetera Advisors Networks, VSR, and Summit Brokerage Services will collectively pay $4.5M. All the firms are settling, but they are not denying or admitting to any of the alleged claims.

At issue was the sale of the L-share annuities, which are “potentially incompatible, complex and expensive long-term minimum-income and withdrawal riders.” L-share annuities are more likely to pay registered representatives and their firms higher compensation than more traditional instruments.

Securities Cases: Merrill Lynch Ordered to Pay $2.8M for Supervisory And Other Violations, Ernst & Young Agrees to Pay $11.8M for Failed Audits, and Ex-Morgan Stanley Client Administrator is Suspended Over Fraudulent Wire Transfer

Published on: October 20, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Financial Industry Regulatory Authority Fines Merrill Lynch $2.8M

FINRA has fined Merrill Lynch, Pierce, Fenner and Smith Inc. $2.8 million. By settling, the firm is not denying or admitting to the self-regulatory organization’s charges.

FINRA said because of system errors, Merrill Lynch inaccurately reported millions of trades. The regulator said that Merrill Lynch’s supervisory system as it relates to specific matters related to documenting, reporting, and records was not designed in a reasonable manner.

Ernst & Young Settles Audit Failure Charges By Agreeing to Pay Over $11.8M

Ernst & Young LLP has agreed to resolve U.S. Securities and Exchange Commission charges accusing it of audit failures. The monetary settlement, along with the $140M penalty that audit client Weatherford International agreed to pay separately, will go back to investors who were hurt in the accounting fraud.

FINRA Actions: Former UBS Broker Is Barred for Overvaluing Customer’s Account by Up to $3M, Ex-Broker Allegedly Stole $400K From Parents, Wells Fargo Adviser is Suspended After Client is Victimized in Phishing Scam, and Former Stifel Broker is Accused of Unauthorized Payments

Published on: October 15, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Ex-UBS Broker is Accused of Inflating Customer’s Account

The Financial Industry Regulatory Authority has barred Jeffrey Hamilton Howell from the broker-dealer industry. The former broker is accused of giving a customer bogus weekly account statements that overvalued an account by up to $3M. The alleged misconduct is said to have occurred between 9/2008 and 11/2014.

According to FINRA, Howell sent the customer over 300 Stock Tracking Reports that misstated the client’s portfolio in amounts ranging from $289K to approximately $3M. He purportedly used his personal e-mail to send the customer some of the fake reports. This left UBS with records and books that were not accurate.

Texas Securities Cases: IMS Securities to Pay $100K Over Variable Annuity Exchanges, State Regulator Bans Broker from Making Nontraded REIT Recommendations, and Former Dallas Billionaire Sam Wyly to Pay $198M To Settle Fraud Case

Published on: October 10, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Texas-Based Brokerage Firm Accused of Inadequate Supervision Involving VA Exchanges

The Financial Industry Regulatory Authority is ordering IMS Securities Inc. to pay a $100K fine. The Texas-based brokerage firm is accused of failures related to its monitoring of variable annuity exchanges. By settling, however, it is not denying or admitting to the allegations.

According to the self-regulatory authority, the firm exhibited inadequate supervisory procedures for “problematic rates of exchange” in transactions involving variable annuities. FINRA claims that from 7/ 15/13 through 7/8/14, IMS Securities depended on its CFO to review annuity exchanges but did not provide tools or guidance to help look for “problematic rates of exchange.” The broker-dealer is accused of not probing possibly “problematic patterns” of VA exchanges and not enforcing written supervisory procedures related to consolidated reports.

Investors Capital To Pay $1.1M Over UIT Sales

Published on: October 7, 2016 | by Shepherd Smith Edwards & Kantas, LLP

A Cetera Financial Group network brokerage firm will pay $1.1M in fines and restitution related to its sale of unit investment trusts. The broker-dealer is Investors Capital Corp.

According to the Financial Industry Regulatory Authority, in 74 clients’ accounts, certain advisers recommended steepener notes, as well as short-term trading of UITs that were not suitable for these investors. Investors Capital is also accused of not applying discounts when applicable to certain UIT purchases.

The regulator claims that two representatives at Investors Capital recommended these unsuitable short-term UIT transactions between 6/2010 and 9/2015.

Securities Cases: Hawaii-Based Investment Adviser is Accused of Cherry-Picking Trades, Broker Ordered to Pay $600K for Elder Financial Fraud, and FINRA Bars Ex-Axa Advisors Broker

Published on: October 6, 2016 | by Shepherd Smith Edwards & Kantas, LLP

SEC Charges Hawaii-Based Investment Adviser for Misleading Clients and Cherry Picking

The U.S. Securities and Exchange Commission has filed civil charges against Oracle Investment Research, which is based in Hawaii, and its owner Laurence I. Balter. The regulator claims that the investment adviser cherry picked trades that were profitable for his own accounts. He is also accused is misleading clients, including senior citizens, about the risks involved in the investments he recommended, as well as about the fees they would be charged.

According to the SEC Enforcement Division, Balter and Oracle Investment Research bought options and equities in an omnibus account but waited to distribute the trades until their execution. Then, he would allegedly move the profitable trades into his accounts and the unprofitable ones to the accounts of clients.

FINRA Expels DT Securities and Its CEO Over Alleged Private Placement Misrepresentations

Published on: September 24, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has expelled the real estate firm formerly called DT Securities and its owner/CEO Markel Newton. According to the regulator, DT Securities and Newton engaged in negligent misrepresentations involving private placements. Markel is also barred for alleged violations involving two of the firm’s offerings to purchase real estate in Georgia and Florida, as well as a third one involving alcoholic treatment facilities in California.

According to FINRA, in the private placement offerings Fresh Start, DT Atlanta, and DT Florida, Markel and DT Securities should have disclosed that the California Department of Real Estate had submitted a complaint against him in 2010.

The complaint against Markel and DT Ventures Real Estate Investments accused them of performing certain activities without the required real estate license, as well as making misrepresentations about deposits made for purchase to sellers. In 2011, Markel consented to a 30-day suspension.

In addition to accusing Markel of not alerting the state, FINRA also accused Markel of improperly releasing escrow proceeds to purchase properties prior to satisfying funding-raising goals that were delineated in two of the private offerings. The settlement document said that although DT Florida had originally aimed to raise at least $3M by the end of November in 2009, that closing date was extended to 1/29/10. The funds were to go back to investors if that figure wasn’t achieved. The private placement offering put into effect by DT Atlanta in 2011 came with the goal to raise a minimum of $1.7M—a figure that was later lowered to $400K. That lower figure was reportedly never properly fulfilled.

FINRA Sanctions Avenir Financial Group For Fraud

Published on: September 22, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has ordered Avenir Financial Group to pay a $229K fine over allegations that the latter engaged in the fraudulent sale of promissory notes and equity interests in the firm. Avenir is suspended from taking part in the self-offerings of securities for two years.

According to the FINRA hearing panel, the firm, its ex-CEO/CCO Michael Todd Clements, and registered representative Karim Ahmed Ibrahim, also known as Chris Allen, purposely omitted or misrepresented material facts related to the sale of equity interests in the firm. Avenir is accused of making misrepresentations when selling debt and equity interests in the holding company of its branch office.

The FINRA ruling said that in 2013, Avenir solicited investors through funds via an equity self-offering because the firm needed capital. The self-regulatory organization said that Clements told Ibraham to tell customers that this money would go toward day-to-date operations and growth at Avenir but did not tell him about the firm’s financial issues and certain other information.

Broker Who Stood To Inherit 91-Year-Old Customer’s Condo is Barred by FINRA

Published on: September 20, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has barred ex-broker Douglas Wayne Studer after it was discovered that he was named to inherit a 91-year-old customer’s Florida waterfront condominium. FINRA’s investigation, which began last year, sought to determine whether he violated his ex-employer’s policy by being named in the estate documents belonging to the elderly investor.

Without denying or admitting to FINRA’s allegations Studer agreed to the sanction. Until July, Studer had worked for Kovack Advisors Inc. since last October.