Investor Lawyers Blog

United Planners Fined $100K By Massachusetts for Inadequate Supervision of a Broker

Published on: February 20, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Massachusetts Secretary of the Commonwealth William Galvin’s office has fined United Planners Financial Services of America $100K for failing to properly supervise broker Thomas T. Riquier. The broker was charged last year for violating the state’s securities laws over his alleged involvement in a real estate scam that defrauded investors and others of at least $1M over 26 years.

According to the state regulator’s consent order, at one point Riquier, who is president of The Retirement Financial Center, oversaw 1,771 accounts for about 400 clients and generated more than $1.2M for United Planners, including over $500K in advisory fees. The state regulator charged Riquier, who is no longer a registered broker or investment adviser, last year with violating the Massachusetts Uniform Securities Act.

Investors of a limited partnership known as the Rowley Land Appreciation Fund Limited Partnership (The Rowley Fund) contend that Riquier told them that the property he was purchasing on their behalf would be sold for profit. Instead, he allegedly used their money to buy property that already belonged to him. Investors have yet to see any return on this property. Last year, The Salem News reported that according to investigators, Riquier made about $730K from his investor fraud.

Financial Firms: UBS Settles with Virginia’s Regulator over Broker’s Unsuitable Recommendations, FINRA Fines Texas Broker-Dealer $225K for Mutual Fund Sales Violations, and an Ex-Client Seeks $500K from Carson Wealth while Alleging Excessive Fees

Published on: February 19, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Virginia Regulator Fines UBS Financial After Its Broker Makes Unsuitable Recommendations

To settle charges brought by Virginia’s State Corporate Commission accusing a UBS (UBS) broker of making unsuitable recommendations involving gold and precious metals securities to 18 clients, UBS Financial Services will pay $319K—$289K to the clients and $30K to the state.

Virginia’s regulator contends that unsuitable recommendations were made in 2013 and 2014 and caused UBS clients to hold an overconcentration of these securities, which were not even suitable for some of them. The state said that this violated its securities rules.

U.S. First Circuit Court of Appeals Invalidates PROMESA Board

Published on: February 18, 2019 | by Shepherd Smith Edwards & Kantas, LLP

On Friday, February 15, the First Circuit Court of Appeals issued its ruling on Judge Laura Swain’s prior decision that had affirmed the PROMESA Board as constitutional.

In a surprise finding, the Court of Appeals overruled Judge Swain, finding that the PROMESA Board members were not appropriately appointed.

The issue in dispute is whether the members of the PROMESA Board are required to receive the consent of the U.S. Senate. In particular, under PROMESA, President Obama appointed the seven members of the PROMESA Board by using a list of board members the U.S. Congress recommended. At the time, since all stakeholders appeared to have been given a vote in the appointment process, there was little objection to the PROMESA Board members. Then, in May 2017, the PROMESA Board placed Puerto Rico in a bankruptcy-like proceeding under Title III of the Act. Prior to the enactment of PROMESA, many investors – both retail and institutional – had relied on the fact that Puerto Rico could not file for Title 9 bankruptcy as insurance against ever receiving anything less than the par value of their bonds from Puerto Rico. PROMESA, with its Title III bankruptcy-like process, changed that insurance policy for many investors.

Recover Losses From Investing With Former Ameritas Investment Corp. Broker Kristian Gaudet

Published on: February 16, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Current Investigation: Shepherd, Smith, Edwards & Kantas, LLP (“SSEK Law Firm”) is currently investigating claims on behalf of former clients of Kristian “Kris” Gaudet (“Gaudet”) of Cut Off, Louisiana.

In January 2019, the Financial Industry Regulatory Authority (“FINRA”) barred Gaudet from association with any FINRA member. The result of such a bar is that FINRA has effectively kicked Gaudet out of the brokerage business permanently. Kristian Guadet was most recently associated with Ameritas Investment Corp. (“Ameritas”), and had worked for Ameritas’ brokerage firm and insurance arm since 2003. Prior to Ameritas, Mr. Gaudet worked for The Advisors Group and Princor Financial Services. In November 2018, FINRA opened an investigation of Mr. Gaudet based on “suspicions that Mr. Gaudet was involved in fraudulent activities.” Then, only a few weeks later, on December 10, 2018, Ameritas terminated Mr. Gaudet based on allegations from clients that Mr. Gaudet was “using client funds for personal use.” Even after the termination from Ameritas, FINRA continued with its investigation. Rather than defend the allegations, Gaudet refused to appear or provide any on-the-record testimony, instead consenting to a permanent bar from the securities industry.

While it is unusual for brokers to find ways to steal client funds or otherwise use client funds as their own, it sadly does still happen. More importantly, our firm’s experience is that long before a broker starts taking client funds directly, that broker does many other less obvious things to hurt his/her clients while trying to profit from those same clients. The act of theft is typically the last in a series of wrongdoing that often goes undetected for years from customers.

Investor Fraud: Former MML Investors Broker Who Sold $3.5M of Woodbridge Notes is Barred, Ex-Merrill Lynch Rep Gets 40-Month Prison Term for Defrauding Clients, and Barred UBS Broker is Sentenced in $3.7M Fraud

Published on: February 15, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Ex-Merrill Lynch Broker Will Pay $5M Penalty and Serve Time In Prison

A federal judge has sentenced Thomas Buck, an ex-Merrill Lynch broker, to 40 months in prison. Buck pleaded guilty to securities fraud in 2017. As part of his plea, he admitted to lying to Merrill about telling clients about their account options, and, at certain times, making trades for them without getting their approval.

That year, the US Securities and Exchange Commission (SEC) had filed a complaint against Buck accusing him of making over $2.5M in excessive commissions and fees from more than four dozen clients. The SEC contends that Buck placed clients into accounts that charged them commissions instead of ones that were fee-based and not as costly. The regulator also accused him of making unauthorized trades. The Commission barred the former Merrill broker from the investment advisory and brokerage industries last year.

$18 Billion COFINA Deal to Restructure Puerto Rico Debt Gets Federal Court Approval

Published on: February 14, 2019 | by Shepherd Smith Edwards & Kantas, LLP

U.S. District Judge Laura Taylor Swain has approved a plan to restructure nearly $18 billion of Puerto Rico’s Sales Tax Financing Corp. (COFINA) debt. Judge Swain, who is based in New York but oversees Puerto Rico’s bankruptcy-like proceedings, said the Court believes that the COFINA plan is essential to the island’s financial recovery efforts.

The approval from Judge Swain required a two-step process. First, she had to determine whether the settlement agreement between COFINA bondholders and the Commonwealth was fair and reasonable. The agreement effectively provides a 53.65%/46.35% allocation of Puerto Rico’s Sales and Use Tax (“SUT”) revenue between COFINA and the Commonwealth, respectively. Judge Swain determined that the settlement “was a fair and reasonable settlement and compromise of the Commonwealth-COFINA Dispute given the substantial risks of litigation ….”

In total, Puerto Rico owes over $70 billion to bondholders and other creditors, as well as another $50 billion in unfunded pension obligations. The territory has been attempting to restructure this $120 billion of liabilities since it filed for bankruptcy-like protection in May of 2017.

Commodity Futures Trading Commission Orders Couple Who Pleaded Guilty in $11M Futures Trading Scam to Pay Restitution

Published on: February 13, 2019 | by Shepherd Smith Edwards & Kantas, LLP

The CFTC is ordering Lawrence/Laurence Hong, his wife Grace Hong, and their Pishon Holding LLC to pay over $1.25M in restitution for the misappropriation and fraudulent solicitation of futures contracts. The couple already pleaded guilty to related criminal charges last year, with Laurence sentenced to 180 months in prison and Grace to 72 months behind bars.

According to the CFTC’s complaint, which it brought against the couple in 2017, the Hongs defrauded investors of more than $11M. They allegedly did this by fraudulently soliciting people at a church gathering, through a YouTube video, and via misrepresentations that a Pastor made about Laurence’s supposed record as a successful trader and how much money he oversaw. The couple is accused of giving these misrepresentations to the Pastor before the church gathering.

The self-regulatory authority (SRO) also accused the Hongs of making false statements in solicitation materials, including that:

Statim Holdings Is Accused of Defrauding Private Fund Arjun and Its Investors

Published on: February 11, 2019 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission has filed civil charges against Statim Holdings, Inc. and its owner Atlanta investment adviser, Joseph A. Meyer. The regulator is accusing them of defrauding the private fund Arjun L.P., which they managed, and its investors.

Arjun, set up by Meyer in 2007, is a pooled investment vehicle. Its records indicate that its assets under management have never gone over $45M. By the middle of 2009, about 40 investors had invested in the fund, which had lost almost 36% of its value as a result of trading losses.

However, Meyer reported high return rates for Arjun, which caused investors to jump on board. In 2015, Bloomberg News and other services even ranked Arjun as among the best performing hedge funds. Yet it was also at around this time that then-Georgia Secretary of State Brian Kemp, who is now governor, notified Bloomberg that his office was looking into “irregularities” involving Arjun and its owner. The following year, Bloomberg raised questions about Arjun’s performance. In 2017, the SEC opened its own probe into the hedge fund firm and its owner.

Finra Bars Fired Merrill Lynch Broker Accused of Falsifying Class B Mutual Fund Share Sales Orders

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

The Financial Industry Regulatory Authority (Finra) has permanently barred fired Merrill Lynch broker Bhenoy (Ben) Dembla. According to InvestmentNews, The former broker was let go from the financial firm in 2016 for “falsifying documents” related to mutual fund sales.

Dembla, who worked for Merrill the entire time he was a broker from 2001 to 2016, is accused of submitting fake sell orders to get around the firm ’s electronic order system protections. The protections should have stopped the submission of Class B share purchase orders once these had exceeded the accumulation limit.

According to FINRA, Dembla would submit the bogus sell orders, which the system would accept, and then he would cancel the orders. All of this made it possible for certain customers to go over Class B share thresholds with their purchases.

Investment Fraud: Capital Securities Must Pay Retired Teachers $3.8M and Investors Ask Court for Nearly $2.7M Judgment over High Risk Investment Losses

Published on: February 6, 2019 | by Shepherd Smith Edwards & Kantas, LLP

FINRA Panel Orders Capital Securities to Pay Retired Teachers $2.38M

A Financial Industry Regulatory Authority (FINRA) arbitration panel has awarded retired schoolteachers Beryl Lakin and Janice Patin $2.38M for losses they sustained while they were clients of Capitol Securities Management, which is based in Virginia. The two claimants, who are former coworkers, alleged excessive trading, fraud, and unauthorized withdrawals and fund transfers. They accused one of the financial firm’s former registered representatives of stealing money out of their Capitol accounts.

The financial rep. whom they are accusing was Patin’s nephew, who has since committed suicide. Finra documents name him as “Mr. T.”