Investor Lawyers Blog

Finra Bars Another Ex-Morgan Stanley Representative, Fines Firm $10M for AML Detection Deficiencies, and Orders It To Pay Two Investors $4.2M For Broker Fraud

Published on: January 10, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Daniel Todd Levine, a former Morgan Stanley (MS) broker, has been barred by the Financial Industry Regulatory Authority after he failed to cooperate in a probe into allegations that he may have taken part in outside business activities that he did not disclose to the broker-dealer while he worked for the firm. Levine was a Morgan Stanley broker based in Denver, Colorado between 2013 and July 2018 when he stepped down. His next employer was First Financial Equity Corp., but that brokerage firm fired him a few weeks later after he did not notify them about the FINRA investigation.

According to Levine’s BrokerCheck record, he previously worked with Prudential Securities, Merrill Lynch, and UBS (UBS). He was employed in the securities industry for over 20 years.

A number of other former Morgan Stanley brokers have recently made news headlines over allegations of broker fraud. Last month, FINRA announced that it had filed a lawsuit against Ami Forte, who is accused of making unauthorized trades in the account of now deceased Home Shopping Network co-founder Roy M. Speer. In November, former Morgan Stanley financial adviser James Polese was sentenced to five years behind bars after pleading guilty to defrauding customers of over $1M.

Houston, TX-Based Brokerage Firm Next Financial is Acquired by Atria

Published on: January 9, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Next Financial Group Inc. will be purchased by Atria Solutions. The Houston-based independent broker-dealer is the fourth brokerage firm that Atria, which is located in Dallas, has acquired since 2017. The other brokerage firms are Cadaret Grant & Co., Cusco Financial Services, and Sorrento Pacific Financial.

Next Financial currently has almost 540 advisers and representatives and nearly $13B in assets under management. According to InvestmentNews, Under the Next Financial deal, Atria will acquire the broker-dealer and its related companies. Following the acquisition, Atria will work with almost 2,000 advisers with about $65B in assets under administration.

Next Financial’s BrokerCheck record shows 19 disclosure events that have been settled, usually without the firm admitting to or denying the findings, for various causes, including:

Puerto Rico’s Fiscal Oversight Board Reportedly Will Pay Advisor Brown Rudnick $790/Hour

Published on: January 7, 2019 | by Shepherd Smith Edwards & Kantas, LLP

According to Puerto Rican local new site Noticel.com, the US Territory’s Financial Oversight and Management Board, which has chosen Brown Rudnick as its claims advisor, will pay the law firm $790 an hour—a figure that reportedly will rise 4% annually and does not include its team’s travel expenses that the island’s government will also pay for. Considering that the Fiscal Oversight Board was appointed to help Puerto Rico restructure its financing and deal with its over $70 billion of debt, there are significant questions as to whether this is the best allocation of the island’s limited financial resources.

Another local news source, Caribbean Business, reports that Brown Rudnick’s job will be to help the Board’s Special Claims Committee look into possible claims that may result from the findings in the debt probe recently conducted by Kobre & Kim. The disputes and investigative international law firm had put together a 600-page report on its investigation, which was published a few months ago.

News of Brown Rudnick’s appointment came almost immediately after the Official Committee of Unsecured Creditors asked for discovery to look into possible claims. According to Caribbean Business, the Committee wants to know if the Puerto Rican government has “claims toward third parties,” which the Committee feels that Kobre & Kim did not look into during its probe.

Ex- Wells Fargo Broker Faces 128 Felony Counts in Alleged $1M Ponzi Scam

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

John G. Schmidt, an ex-Wells Fargo (WFC) broker, is now facing 128 felony counts over his alleged running of a $1M Ponzi scam. Criminal charges include:

124 counts of forgery
1 count of telecommunications fraud

Big Banks End 2018 Holding At Least $1.6B of Unsold Loans Involving Leveraged Buyout Debt

Published on: December 31, 2018 | by Shepherd Smith Edwards & Kantas, LLP

According to Bloomberg, market woes have left Goldman Sachs Group Inc. (GS), Barclays Plc (BARC), Bank of America Corp. (BAC), and other Wall Street banks unable to get rid of at least $1.6B of “unwanted leveraged buyout debt” as investors continue to run from high-risk assets in the wake of fears about the global economy. A leveraged buyout (LBO) involves the acquiring of a company using borrowed funds. The assets of the company that is acquired, as well as the acquiring company’s assets, usually serve as collateral. LBOs make it possible for companies to get involved in big acquisitions without having to use a lot of capital.

Bloomberg reports that as of the 22nd of December, at least four loan sales involving acquisitions and buyouts had yet to “clear the market” leaving banks with no choice but to retain the debt on their books, including:

· A group led by Goldman Sachs in charge of the financing for First Reserve’s acquisition of pipeline operator Blue Racer was expected to end the year holding a $516M loan.

FINRA Sues Ex-Morgan Stanley Broker Ami Forte for Elder Financial Fraud

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

The Financial Industry Regulatory Authority (FINRA) announced that it is suing Ami Forte, a former star Morgan Stanley (MS) broker. Forte is accused of making unsuitable trades in the account of Home Shopping Network co-founder Roy M. Speer, who was mentally impaired and bedridden at the end of his life.

Forte earned over $9M commissions in less than a year from her work with Speer alone, and overall his accounts were responsible for nearly 90% of the commissions she made. At one point she was considered one of the highest earning female financial advisers in the US.

While the FINRA fraud complaint only refers to the older investor by his initials, news sources and other court documents identify the elder financial fraud victim as Mr. Speer. The Home Shopping Network co-founder, who was 80 when he died in 2012, had an estimated worth of about $775M in 2003. For a time, he was romantically involved with Forte.

SEC Files Charges Against 10 Companies and 13 Unregistered Brokers That Sold Woodbridge Securities in $1.2B Ponzi Scam

Published on: December 26, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission has filed civil charges against a number of companies and brokers who illegally sold Woodbridge Group of Companies securities to retail investors. Woodbridge, which filed for bankruptcy protection last year, its owner Robert H. Shapiro, and several others have since been charged with running a $1.2B Ponzi scam that defrauded nearly 8,500 investors. Many of their victims were older investors who together took almost $400M out of their IRA to invest in the securities.

Now, the SEC is charging 13 unregistered brokers that were among the top sellers of Woodbridge securities. Collectively, they allegedly sold over $350M in the unregistered securities to more than 4,400 investors. The regulator contends that the defendants promoted the Woodbridge securities as “safe” investments, making millions of dollars in commissions from the sales even though they were not registered brokers or even affiliated with a registered brokerage firm and should never have sold the Woodbridge investments to begin with. The brokers named in the SEC broker fraud case include:

• Robert S. Davis, Jr., the VP of Old Securities Financial Group

FINRA and SEC Reportedly Probe GPB Capital Holdings and The Brokerage Firms That Sold Its Private Placements

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

According to InvestmentNews, sources are reporting that GPB Capital Holdings is now under investigation by both the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). The probes come just a few months after Massachusetts Secretary of the Commonwealth William Galvin announced that he was conducting a widespread probe into over 60 brokerage firms that sold private placements that came from GPB Capital Holdings. Now, both federal securities regulators are also reportedly looking into these broker-dealers.

GPB, which mostly purchases auto dealerships, raised about $1.8B from investors who bought GPB private placement shares. InvestmentNews reports that according to one brokerage executive, the private placements’ loads were as follows: Investors paid 10% commission to the brokerage firm and financial representative that sold them the shares and they paid 2% went for organization and offering expenses.

Another source reportedly told InvestmentNews that at issue for the SEC in its investigation are:

When Margin Calls Lead to Investor Fraud Losses

Published on: December 22, 2018 | by Shepherd Smith Edwards & Kantas, LLP

If you are an investor that has lost money because of an unsuitable margin call in your investment account, you may have grounds for filing a Financial Industry Regulatory Authority (FINRA) arbitration claim to try and recover your losses. Unfortunately, a lot of investors may not understand what they are getting into when they open a margin account.

What is A Margin Account?

Margin accounts are not suitable for every investor, especially those that can’t handle too much risk. A customer that sets up with a margin account with a broker is indicating that he or she may want to borrow money later on down the road. With a margin account, you are essentially providing the securities and money in your margin account as collateral for this possible loan. Should you decide to borrow the money to buy securities, a broker is then allowed to sell your assets if necessary to fulfill the margin loan.

Puerto Rico Consultant McKinsey & Company’s Ownership of $20 Million of Puerto Rico Bonds Raises Conflict of Interest Concerns

Published on: December 21, 2018 | by Shepherd Smith Edwards & Kantas, LLP

In the U.S. House of Representatives, lawmakers have introduced a bipartisan bill that would require advisers and others contracted to help with the debt restructuring proceedings in Puerto Rico to abide by stronger reporting requirements. The move comes in the wake of an article in The New York Times reporting that McKinsey & Company, one of the advisers to the island’s federal oversight board, had bought millions of dollars of Puerto Rico bonds at a huge discount but did not disclose the purchases.

McKinsey, claims that it has satisfied all disclosure requirements. The company contends that it was MIO Partners, its investment division, that purchased about $20 million of Puerto Rico bonds. The consulting firm maintains that MIO Partners is separate from the consulting arm and McKinsey consultants having no control over MIO Partners or involvement in any of its investments.

Under the proposed bill, called the Puerto Rico Recovery Accuracy in Disclosures Act, consultants and others hired by the fiscal oversight board must submit verified disclosures noting any connections they might have before they can receive payment for their services. These disclosure requirements already apply to other bankruptcies, but they have not been part of the island’s bankruptcy proceedings so far. Because the U.S. territory is not a municipality, it was unable to file for Chapter 9 bankruptcy protection and instead sought relief under the 2016 Puerto Rico Oversight Management and Economic Stability Act (PROMESA).