Investor Lawyers Blog

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

Investors in UDF IV REIT Want Texas Federal Judge to Approve $13.5M Ponzi Fraud Settlement

Published on: August 29, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Investors who placed their funds in the Texas-based United Development Funding IV real estate investment trust are asking a federal judge to approve a $13.5M REIT fraud settlement they’d reached with the company over the allegations that it had been run like a Ponzi-like scam and concealed this. The plaintiffs contend that UDV IV and its affiliates not only made false statements but also they did not disclose material facts involving business and operations.

They brought their REIT fraud case against the UDF companies three years ago, accusing the defendants of using investors’ funds from newer offering to pay investors who had gotten involved in earlier offerings. The investors, who want class certification, alleged that disclosures they were offered were misleading and lending practices lacked transparency.

Both sides eventually arrived at the $13.5M settlement—$10.5M in cash and another $3M once the REIT hits its $75M cash flow target in two years. This deal is separate from a settlement the plaintiffs reached with UDF accountants, as well as those that underwrote and sold the allegedly fraudulent offerings.

Shepherd Smith Edwards & Kantas LLP Investigating Claims Involving Donna Tucker and UBS Financial Services

Published on: August 29, 2018 | by Shepherd Smith Edwards & Kantas, LLP

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.

Oppenheimer Found Liable for Representative Mark Hotton’s Fraud

Published on: August 29, 2018 | by Shepherd Smith Edwards & Kantas, LLP

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.

Oppenheimer Continues to Show Serious Supervisory Deficiencies

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

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.

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.

Securities News: Genstar to Acquire Cetera With $1B in Junk Bond Sales, Financial Adviser Admits to Fraud Involving $2M Trading Loss, and BlackRock Funds Shareholders Sue Over Excessive Fees

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

$1M in Junk Bond Sales Helps Fund Cetera Acquisition by Genstar Capital

According to InvestmentNews, private equity firm Genstar Capital will sell $1B of junk bonds to help pay for its acquisition of Cetera Financial Group, which will be bought for $1.7B. Genstar will use $700M of its own money in the purchase.

Cetera Financial Group is comprised of six independent brokerage firms with approximately 8,000 brokers and advisers, including Cetera Advisors, Cetera Advisors Network, First Allied Securities, Cetera Financial Institutions, Summit Financial Services, and Cetera Financial Specialists. Cetera initially spun out of ING Groep (ING), a Dutch insurer, in 2010.

Investor Fraud: Alleged $100M Future Income Payments Fraud, Capital Investment Group to Pay One Elderly Investor $400K, and Tech Fund Adviser is Now Facing Fraud Charges

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

Over 1000 Investors May Be Victims of Alleged Future Income Payments Fraud

Dozens of stockbrokers, financial planners, financial advisers, and insurance agents are now the defendants of investor fraud lawsuits over an alleged $100M scam that may have bilked over 1000 investors. Many of these investors were retirees, which means that elder investor fraud may have been involved.

InvestmentNews reports that according to the plaintiffs, the advisers breached their fiduciary obligation and were negligent when they sold them structured cash flows offered by Future Income Payments, LLC. At least 370 investment intermediaries in the US are believed to have sold these investments to investors, with the representatives receiving 6-10% in commissions upfront.

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.

Ex-Wells Fargo Advisors Claim Bank Pressured Them to Sell Products That Charged Higher Fees to High-Net Worth Investors

Published on: August 23, 2018 | by Shepherd Smith Edwards & Kantas, LLP

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.