Articles Posted in Retirement Funds

Cambridge Capital Group Advisors, its president Phillip Timothy Howard, and previously barred investment adviser Don Warner Reinhard are now the subject of a Securities and Exchange Commission (SEC) case accusing them of defrauding 20 investors, the majority of whom are retired National Football League players. Howard, who is also an attorney, represented the NFL retirees in a class action lawsuit over brain injuries they sustained while playing the game.

The investors invested about $4.1M in two proprietary hedge funds, the Cambridge Capital Partners and Cambridge Capital Group Equity Options Opportunities. According to the SEC, even though Howard knew that the former NFL players whom he represented lack proper brain function, employment capacity, credit, or capital, he and Reinhard still allegedly persuaded them to invest in the two funds. The regulator said that more than half of players who invested used their retirement money.

Among the false claims and misrepresentations that the defendants allegedly made while soliciting investors were that:

The Financial Industry Regulatory Authority (FINRA) announced that because of its mutual fund waiver initiative, it has arrived at a settlement with 56 broker-dealers that will provide almost 110,000 retirement and charitable accounts with $89M in restitution. Two of the firms, Western International Securities and Park Avenue Securities, settled on the same day that the self-regulatory organization (SRO) announced the multi-firm resolution. According to FINRA, the brokerage firms neglected to wave mutual fund sales charges for accounts that were eligible and they did not properly supervise the  sales.

FINRA’s Mutual Fund Waiver Initiative

FINRA launched its mutual fund waiver initiative in 2016 after arriving at a settlements with 10 member firms that self-reported how, going as far back as 2009, their registered representatives did not always apply sales waivers when warranted to the accounts of charitable and retirement plan accounts that bought mutual fund shares. While mutual funds are offered in different share classes and usually charge a sales fee upfront, a lot of the funds will waive the upfront fee on the more expensive Class A shares for certain retirement accounts and charities. The SRO also found that the firms had failed to adequately supervise these transactions, which could have helped to ensure that the mutual fund sales waivers were granted.

An investor in GPB Capital has filed a Financial Industry Regulatory Authority (FINRA) Claim against Arkadios Capital and one of its brokers over losses she sustained to her IRA after she followed the financial adviser’s recommendation to invest in GPB Capital Holdings.

Now she is claiming retirement fund losses in the hundreds of thousands of dollars. Our investor fraud law firm, Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) is representing the investor, who hails from the greater Atlanta area, and we have filed a FINRA arbitration claim on her behalf.

GPB Capital Holdings is an alternative asset management firm whose private placement funds are primarily invested in auto dealerships and waste management. The firm is under scrutiny by FINRA, the US Securities and Exchange Commission (SEC), Massachusetts Secretary of the Commonwealth William Galvin, and the FBI over its private placements that were sold by dozens of brokerage firms and their brokers.

A federal court has ordered the Woodbridge Group of Companies and its former CEO and owner Robert H. Shapiro to pay $1B in disgorgement and penalties for allegedly running a $1.2B Ponzi scam that victimized 8,400 retail investors, including many senior investors who ended up losing their retirement money. Of this $1B, Woodbridge and its 281 related companies must pay $892M in disgorgement. Shapiro must disgorge $18.5M in ill-gotten gains, as well as pay $2.1 in prejudgment interest and a $100M civil penalty.

In 2017, the US Securities and Exchange Commission (SEC) filed charges against Woodbridge, which it called a “group of unregistered investment companies,” and other defendants. The regulator contends that Woodbridge claimed that its main business was to issue loans to third-party commercial property owners. The defendant allegedly promised investors 5-10% in interest yearly. The company’s marketing materials touted an “over 90% renewal rate” from investors because of “proven results.”

The SEC said that the reality was that most of these supposed third-party borrowers were, in fact, companies that Shapiro owned. They purportedly made no income and did not pay interest on any of these supposed loans.

In Texas, a federal grand jury has indicted a couple accused of embezzling $14.5M dollars from the retirement plans that they oversaw. Wendy Richie and Jeffrey Richie co-own Vantage Benefits Administrator, which acted as a third party administrator for many retirement funds, including 401(K) plans. According to the US Attorney’s Office for the Northern District of Texas, the couple misappropriated money from “at least 1,000 plan participants in at least 20 employer retirement plans.”

The indictment against the couple alleges that Wendy Richie:

• Posed as a number of different beneficiaries.

Nearly years after settling two 401K lawsuits for $12 million, participants in Fidelity Investments’ retirement plan are once more suing the firm. The plaintiffs allege that self-dealing cost them money while allowing the financial firm and a number of its affiliated entities to turn a profit.

According to the complaint in Moitoso et al v. FMR LLC et al, Fidelity breached its fiduciary obligation to plan participants by including too many proprietary mutual funds in its $15B 401(K) plan. The plaintiffs claim that compared to 2014 and 2015, there was an increase in in-house funds in the 401(k) plan in 2016: 234 proprietary mutual funds with no non-proprietary funds in the plan, whatsoever.

Fidelity is accused of choosing proprietary investment products to promote its own interests even if they may not have been suitable for plan participants. As a result, contend plaintiffs, compared to the typical 401(k) plan, plan participants have lost $100M more annually because of poor performance and costly fund fees.

The US Securities and Exchange Commission has filed fraud charges against 1 Global Capital LLC, a Florida-based cash advance company, and its ex-CEO Carl Ruderman. According to the regulator, they allegedly defrauded at least 3,400 investors and since 2014 have fraudulently raised over $287M through unregistered securities sales.

According to the SEC’s complaint, 1 Global worked with a network of both registered and unregistered investment advisors, brokers who were barred from the industry, and other sales agents. The company paid them millions of dollars in commissions for offering and selling the unregistered securities to investors in at least 25 US states.

Investors were promised that they would make money from loans that 1 Global would issue to companies. The investments were touted as “high-return, low-risk” and purportedly involved the issuing of short-term cash advances to businesses that didn’t qualify for financing of the “more traditional” varieties.

The US Securities and Exchange Commission is accusing John S. Jumper, a Tennessee businessman and ex-broker, of stealing about $5.7M from the pension plan of Snow Shoe Refractories, LLC, a Pennsylvania company. Now, the commission wants disgorgement of ill-gotten gains with interest, injunctive relief, and penalties.

According to the regulator’s complaint, three times, between 3/2015 and 2/2016, Jumper stole money from the Snow Shoe Refractories, LLC Pension Plan for Hourly Employees by forging documents that supposedly showed he had authority over the fund’s money. He then allegedly used the funds to “capitalize” several businesses to which he had some ties, including, in some cases, ownership. These companies, Alluvion Securities, Speedee Brakes, American Investment Funds II, Thousand Hills Capital, and Evertone Records, have been named relief defendants in the SEC’s pension plan fraud case. The regulator contends that they have no “legitimate claim” on the pension fund’s monies.

Jumper previously worked as a registered representative at a number of brokerage firms for almost two decades. He was the CEO, owner, and registered representative of Alluvion Securities. He also was an investment adviser and President of Alluvion Investments.

The Securities and Exchange Commission said it would perform a number of exams on financial advice firms as part of its plans to more closely examine the guidance that investors are getting as they plan for retirement. The regulator’s new program is called the Retirement-Targeted Industry Reviews and Examinations Initiative. The SEC’s Office of Compliance Inspections and Examinations will conduct exams. OCIE is responsible for more than 10,000 advisory firms and 4,500 brokerage firms.

Areas of scrutiny will include firm oversight and investment sales processes and procedures, as well as the areas where retail investors seeking to save for retirement may be at risk of sustaining financial losses. The SEC wants to look at whether the compensation provided to advisers establishes conflicts of interest and how firms deal with this.

The regulator also wants to examine the marketing material provided to customers and whether they are accurate, as well as if financial advisers are conducting enough due diligence on investments. Marketing collateral will be checked for accuracy, including making sure documents disclose the necessary information and are not misleading or contain omissions. The Commission will also study specific recommendations that are being made to clients.

In its alert about the initiative, the SEC acknowledged that a lot of retail investors have become more dependent than ever on their own investments to support them during retirement. OCIE will look at the complex and changing factors that investors deal with when deciding where to invest their money, including the wide variety of investments that are made available in this constantly changing market environment. The regulator will also study registrant sales, and disclosures.
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About 7,500 General Motors workers recently agreed to a buyout of early retirement incentives and leave the company. Chrysler, Ford and many suppliers of the industry have also made offers to entice workers to take early retirement. This follows tens of thousands of other industry workers who have been bought-out of pension and other benefits in recent years.

Many who retire have little if any experience in investing and are soon beseiged by droves of salespersons hawking financial plans. In the past, strict laws and regulations were enforced regarding investors’ funds, especially retirement funds. However, as we have recently witnessed, securities regulators appear to be overwhelmed or incompetent.

For decades, Wall Street has blamed any abuse of investors on a few “rogue” brokers. Yet, many now believe that Wall Street is actually rotten to the core. In fact, the majority of financial advisors sincerely and diligently seek to serve their clients, although many of the investment products they are told to sell are inappropriate, riddled with costs or just plain fraudulent. Sadly, too many of the worst advisors attract unwary investors with false promises.

Victims of financial abuse are often unaware that they can seek recovery of undue investment losses according to the law. But investors must understand that the regulators “police” the securities industry and write tickets when they catch the bad guys. In order to recover, victims must hire an attorney to represent them in court or in securities arbitration.
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