Investor Lawyers Blog

Two Former Meyers Associates Alleged Excessive Trading Cost Investors $3.6M

Published on: September 25, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission is accusing brokers Jovannie Aquino and Emil Botvinnik of fraud that allegedly cost investors about $3.6M. According to the regulator, Botvinnik, who is a Florida resident and is no longer a registered representative, and Aquino who is a New York resident, recommended frequent, short-term trades, earning them about $4.6M in commissions while practically guaranteeing that their customers would lose money. Botvinnik’s alleged excessive trading took place between 6/2012 and 11/2014. Aquino’s alleged excessive trading occurred between 12/2015 to 11/2017.

Many of these customers were retail investors. A number of them were of retirement age or close to that age.

At the time of the alleged broker fraud, Aquino and Botvinnik were with Meyers Associates LP. The firm is now called Windsor Street Capital LP. Aquino then went to work with Spartan Capital Securities while Botvinnik moved on to Newport Coast Securities, SW Financial, and Worden Capital Management.

Investor Fraud: Barred Michigan Investment Adviser is Accused of Defrauding Retirees of $2.7M and SEC Halts Alleged $345M Ponzi Scam That Bilked Seniors, Retail Investors, and Small Business Owners

Published on: September 20, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Former Michigan Financial Adviser Faces SEC Charges in $2.7M Investment Scam that Defrauded Seniors

The US Securities and Exchange Commission has filed fraud charges against Ernest J. Romer III, a former Michigan-based financial adviser with 47 disclosures on his Broker-Check record and who was barred by FINRA last year. Romer also pleaded no contest to embezzlement in July and is awaiting his sentence. According to the regulator, between 2014 and 2016, the ex-financial adviser defrauded unsophisticated investors and older retirees of $2.7M.

The regulator contends that Romer convinced at least 30 clients to “sell securities in their brokerage accounts” and transfer their proceeds to the companies CoreCap Solutions or P & R Capital. He purportedly gave them the impression that these were affiliated brokerage firms when, in fact, they were businesses that Romer owned. Many of these investors entrusted him with their life savings.

Investors Suing UBS Puerto Rico Over Closed-End Fund Losses Are Denied Class Action Certification

Published on: September 19, 2018 | by Shepherd Smith Edwards & Kantas, LLP

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.

SEC Issues $55.5M in Whistleblower Awards

Published on: September 18, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission announced this month that it is granting $55.5M in whistleblower awards to three people—two of them over the same enforcement action. These latest awards means that 58 whistleblower have been collectively awarded $322M since the regulator began issuing these in 2012.

In the same enforcement action, the SEC awarded $15M to one whistleblower and $39M to another. The latter award is the second largest award that the agency’s whistleblower program has granted to one person to date.

Under the SEC’s program, individuals who voluntarily provide unique, timely, and true information to the Commission, with said information resulting in a successful enforcement action and sanctions of over $1M, may be eligible to receive 10-30% of the funds collected. All awards are taken out of an investor protection fund set up by Congress. The money in the fund comes from sanctions paid by securities law violators.

Investor Fraud: Steele Financial is Accused of Selling Over $13M in Risky Securities, NJ Broker Allegedly Cherry Picked Trades, and the SEC Files Charges in $27M Microcap Fraud

Published on: September 15, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Steele Financial is Accused of Investor Fraud

The US Securities and Exchange Commission has filed civil charges against investment advisory firm Steele Financial Inc. and its owner Tamara Steele. According to the regulator, they allegedly sold $13M of risky securities to over 120 advisory clients. A lot of these clients are teachers, ex-teachers, or other public education employees. The SEC contends that Steele and her investment advisory firm did not tell them that Steele Financial would be making up to 18% in commissions in sales.

According to the Commission’s investment advisory fraud complaint, from 12/2012 to 10/2016, Stele Financial and Steele sold over $15M of Behavioral Recognition Systems Inc. securities. BRS is a company that the SEC has charged with fraud in the past. Meantime, Stele and her firm made over $2.5M of commissions.

Hedge Fund Fraud Cases: Adviser is Accused of Short-and-Distort Scam and Digital Asset Manager Faces Misrepresentation Allegations

Published on: September 12, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The SEC has filed fraud charges against hedge fund adviser Gregory Lemelson and his Massachusetts based investment advisory firm Lemelson Capital Management LLC. The regulator is accusing them of illegally profiting over $1.3M from an alleged short-and-distort scheme that involved Ligand Pharmaceuticals.

According to the hedge fund fraud allegations, Lemelson and his investment advisory firm put out false information about the San Diego-based pharmaceutical company after the hedge fund adviser took a short position in Ligand for The Amvona Fund. Lemelson is a part owner and advisor of this other hedge fund.

The SEC’s complaint said that Lemelson’s false statements were meant to rattle investor confidence in Ligand, drive its stock price down, and increase his short-position’s value. He allegedly used interviews, written reports, and social media to disperse the false claims.

Another Texas-Based Wells Fargo Broker is Barred by FINRA

Published on: September 12, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority (FINRA) has barred Wells Fargo (WFC) broker Edward O. Daniel, after he failed to participate in a probe into allegations that he made unsuitable investments for one client. Daniel, a Texas-based broker, was with Wells Fargo Advisers for seven years before he stepped down in September 2016. He was a longtime broker of 41 years.

Soon after Daniel resignation two years ago, Wells Fargo disclosed that a customer had filed an arbitration complaint accusing him of making unsuitable investments over a several-year period. The dispute was resolved for $225K. His BrokerCheck record documents that Daniel has been named in eight disclosures, all involving complaints by customers.

Now, FINRA is barring him because he would not cooperate in the self-regulatory authority’s investigation into the unsuitable investment allegations.

FINRA Bars Former JP Morgan, Stifel Nicolaus, and Benjamin & Jerold Brokers

Published on: September 11, 2018 | by Shepherd Smith Edwards & Kantas, LLP

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.

Financial Firm News: Includes Lincoln Investment Planning, Grenda Group, and Massachusetts Financial Services Company

Published on: September 7, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Lincoln Investment Planning to Pay Clients For Not Giving Discounts on Mutual Fund Shares

FINRA is ordering broker-dealer Lincoln Investment Planning to pay $1.37M to clients to whom it did not give the discounts they were entitled to when they purchased mutual fund A shares between 1/2011 and 6/2018.

The self-regulatory organization contends that the firm placed certain charitable organizations and retirement plan customers at a disadvantage by charging them a front-end sales charge even when they qualified to not pay the fees.

New Report Suggests Banco Popular de Puerto Rico Could Be Held Liable Over Island’s Final Junk Bond Issuance

Published on: September 6, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Four years after Puerto Rico brought to market what became its biggest and final issuance of junk bonds, a 600-page report by disputes and investigative international law firm Kobre & Kim suggests that Banco Popular de Puerto Rico (BPPR) could potentially be held liable for losses related to the issuance. The findings are part of the efforts of the U.S. territory’s Financial Oversight and Management Board to look into what caused the island’s current financial crisis. To date, Puerto Rico remains in over $120 billion in debt as a result of bond issuances and pension liabilities. Thousands of investors continue to file Puerto Rico bond fraud and closed-end bond fund claims to recover their losses sustained when the securities plunged in value in 2013.

According to Kobe & Kim’s findings, while initially both Citigroup (C) and Banco Popular cautioned against yet another junk bond issuance in the wake of the financial challenges Puerto Rico was facing at the time, Banco Popular became part of the syndicate of banks that participated in the $3.5B issuance, profiting in the process. The report indicates, while making clear that the findings are not legal advice, that Banco Popular could potentially be held liable for claim and repayments related to Puerto Rico’s bankruptcy process. Kobe & Kim’s findings are primarily related to a memo that Citigroup and Banco Popular sent to then-Government Development Bank President David Chafey, which included that they did not think the bond issuance was a good idea.

Still, both banks proposed providing instant liquidity backed by taxes in return for the Puerto Rico government approving a balanced budget law, an additional financial control law, and a supervisory group with members appointed by the U.S. Treasury and the Federal Reserve. Citigroup eventually opted not to take part in the bond issuance.