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Two different groups of investors were recently awarded nearly $9.3 million in their respective Puerto Rico bond fraud claims against UBS Financial Services (UBS). These are just the latest Financial Industry Regulatory Authority (FINRA) arbitration claims where the Swiss giant and its Puerto Rico-based brokerage firm have been ordered to pay customers after selling over $10 billion of closed-end funds that were heavily invested in the island’s municipal debt. To date, UBS has paid hundreds-of-millions-of-dollars to investors in either arbitration awards or settlements.

In one of these latest Puerto Rico investor fraud cases, the claimants are three investors and their related businesses and trusts. The customer claimants contend that UBS violated FINRA’s rules and the U.S. territory’s securities laws, as well as committed other fraudulent acts. Now, the FINRA arbitration panel has awarded them $4.25 million in compensatory damages, interest, and $170,000 for costs.

In the other Puerto Rico bond fraud claim, the claimants were customers alleging constructive fraud, common law fraud, breach of fiduciary duty, negligent misrepresentation, negligent supervision, breach of contract, and fraudulent concealment. The FINRA arbitration panel awarded them $4.8 million in damages.

In a settlement reached with the US Securities and Exchange Commission (SEC), Financial Sherpa and its principal James L. Beyersdorf will pay more than $232K of disgorgement, over $15K of prejudgment interest, and a $188K penalty for allegedly defrauding investment advisory clients by engaging in a cherry picking scam. The regulator contends that Beyersdorf allocated a disproportionate amount of option trades that were profitable to himself and his wife while distributing the unprofitable ones to the firm and his clients. Beyersdorf oversaw some $6.7M in assets for 13 individual investors.

According to the SEC, he purchased options in the firm’s omnibus trading account during the morning, distributing the trades later in the day. The regulator claims that because of the allegedly illegal trading, over six months– from October 2017 and April 2018– Beyersdorf and his wife ended up with a net positive one-day return of more than 45% on the options trades that were sent to their accounts. Meantime, the negative one-day return for the firm’s individual clients that received the unprofitable trades was also 45%. The Commission said that the odds of the “disparate performance” occurring by chance was under one-in-a million.

Also, while the registered investment advisory’s strategy for the majority of its clients involved placing about 90% of each of their assets in exchange-traded funds (ETFs) and 10% in short term options trading, the account of Beyersdorf’s wife traded nearly exclusively in options and did not hold any ETF positions.

Clients of UBS Group AG (UBS) who employed the firm’s Yield Enhancement Strategy (YES) are now filing investor fraud complaints after suffering at least $60M in losses to date. YES involves options trades and borrowing that was supposed to be “safe” and low risk while earning investors positive returns.

The complex investment strategy did just that while the market was stable but the volatility that ensued last year–the worst to hit the market in 30 years– caught investors by surprise. The Wall Street Journal reports investor losses of over 13% in one month alone. However, Seeking Alpha reports that losses have been as high as 20% for some investors.

For example, according to the WSJ, Sherrie Pellini, a 60-year-old UBS customer who financially supports her mom and three kids, invested $3M in the UBS YES Strategy and was charged 1.75%. She now claims her losses were $750K. Pellini is accusing UBS broker Robert Perlman of telling her that YES had not resulted in any losses for 17 years.

Two broker-dealers, Sagepoint Financial and Royal Alliance, recently made headlines after investors who bought GPB Capital Holdings private placements from them sued the alternative asset firm in a class action securities fraud case. GPB Capital Holdings, which invests in waste management and car dealerships, is accused of operating a $1.8B Ponzi scam.

The lead plaintiffs of the first class action securities lawsuit are Karen Loch of Georgia and Victor Wade of Texas. They invested in two GPB funds–$50K in GPB Holdings II for Wade that he purchased through Sagepoint Financial and $75K in GPB Automotive Portfolio for Lock through Royal Alliance Associates.

GPB Holdings II and GPB Automotive are GPB’s two largest funds, with both having  raised over $600M from over 6000 investors. The two funds are not listed or traded on any exchange. In May, InvestmentNews reported that their assets were over $10M and they had at least 750 shareholders, thus requiring them to be registered with the US Securities and Exchange Commission (SEC). Still, GPB failed to register both funds by their April 30, 2018 deadline and no annual reports have been filed since. This failure has kept Lock, Wade, and thousands of other investors from receiving even the most basic information about both funds and their money.

Marcus Boggs, a former Merrill Lynch investment adviser, is now facing US Securities and Exchange Commission (SEC) charges accusing him of using $1.7M of client monies to pay his own credit card bills. According to the regulator, Boggs, who was a Chicago-based RIA, illegally transferred funds from the accounts of three retail advisory clients on more than 200 occasions.

The firm fired him after finding out about the alleged misconduct, which would have taken place between 2016 and December 2018. Boggs was a registered investment adviser (RIA) with Merrill for 12 years, which was the entire time that he worked in the securities industry.

His job was to offer investment advice to clients, and Boggs didn’t have the authority or permission to liquidate the assets or trade in his alleged victims’ accounts. However, he allegedly went on to sell securities in said accounts and directly take money out of them for his own use.

Scott P. Strochak, an ex-broker, has pleaded guilty to criminal charges related to his involvement in the $3.8M Castleberry Financial Services Fraud. He is also now facing parallel civil fraud charges brought by the US Securities and Exchange Commission (SEC).

Prosecutors charged Strochak, who was the Director of Alternative Investments and a Senior EVP at Castleberry Financial Services Group, and two other firm executives earlier this year over the scam, which promised 8-12% yearly returns on bond-like investments while touting a robust business that was handling hundreds of millions of dollars in capital and had over 300 investors. The fraud raised almost $3.8M from at least 17 investors.

According to the SEC, Strochak, former Castleberry CEO Norman Strell, and ex-President T. Johnathan Turner made misrepresentations to prospective investors, including that its investments were insured and bonded by top insurers like Chubb Group and CNA Financial Group. They allegedly continued to make these representations even after some investors complained that they never received evidence of said insurance.

According to InvestmentNews, IFS Securities, a broker-dealer based in Atlanta, Georgia, may be facing at least $10M in losses after Keith Wakefield, the firm’s ex-municipal securities principal, allegedly executed unauthorized trades and shorted Treasury bonds. He was fired earlier in August 2019.

IFS Securities is owned by IFS Group Inc. The brokerage firm reportedly notified the Financial Industry Regulatory Authority (FINRA), the US Securities and Exchange Commission (SEC), and the Federal Bureau of Investigation (FBI) about the significant losses it sustained due to the unauthorized securities transactions that reportedly did not involve any customer assets. IFS Group works with institutional investors.

Wakefield was with IFS Securities since 2011. His BrokerCheck record cites allegedly making fake trades and fraud as the reasons for his termination. With 19 years as a registered broker, Wakefield was previously with Cabrera Capital Markets, LaSalle Financial Services, and ABM Amro Inc.

The first class action securities case against GPB Capital Holdings has been filed. The alternative asset management firm, which invests in waste auto management companies and car dealerships, is accused of operating a $1.8B dollar Ponzi scam that caused thousands of investors to suffer major losses. Now, investors of two of its funds are demanding that GPB fulfill its duty to provide yearly audited statements. GPB has not issued these statements since 2017.

The lead plaintiffs in the case, Victor Wade of Texas and Karen Loch of Georgia, both bought into the GPB funds as limited partnerships. Wade invested $50K in GPB Holdings II through Sagepoint Financial. Loch invested $75K in GPB Automotive via Royal Alliance Associates. Both brokerage firms are Advisor Group, Inc. subsidiaries.

Loch and Wade are suing on behalf of investors of the GPB Holdings II fund and the GPB Automotive Portfolio Fund. They have named the two funds, GPB Capital Holdings, its CEO David Gentile, COO Roger Anscher, CFO William Jacoby, and a number of Doe parties as the defendants.

The US Securities and Exchange Commission (SEC) is accusing Commonwealth Equity Services, also known as Commonwealth Financial Network, of not notifying clients that it had material conflicts of interest involving certain investments. This purportedly allowed the investment adviser and brokerage firm to earn more than $100M in revenue sharing involving certain mutual funds.

The SEC contends that since at least 2007, Commonwealth had a deal with National Financial Services and a Fidelity Investments affiliate that the majority of its Preferred Portfolio Service advisory clients were obligated to utilize when trading in their accounts. As part of the agreement, clients have to choose National Financial Services as its clearing broker for their investment accounts.

Whenever these advisory clients would invest in specific mutual fund shares, Commonwealth received a portion of the money that certain mutual fund companies paid National Financial Services to make trades on the platform. Also as part of the deal between National Finance Services and Commonwealth is that the clearing broker would share recurring mutual fund fees with the investment adviser. This was determined by the latter’s client assets that were invested in specific mutual fund share classes that didn’t charge a transaction fee.

The Texas State Securities Board is ordering William H. Lowell, the president of Lowell & Co., to pay a $40K fine after he allegedly failed to properly supervise one of his firm’s ex- financial representatives. The formerly registered broker and investment advisor, Jody Bryant Bowers, allegedly lost nearly all of the assets in two client accounts after holding onto an exchange traded fund (ETF) for too long.

According to the state’s disciplinary order, Bowers bought and sold Proshares Ultra VIX Short-Term Futures ETF (UXVY) shares, which she “exclusively” traded in in the accounts of certain clients. This type of fund makes money through S&P 500 Index volatility, benefiting when there is a drop in the index.

Because the UXVY ETF is a leveraged exchange-traded fund that is a high-risk and costly investment, it is intended for short-term trading and must be monitored every day. However, Bower allegedly disregarded the warnings that were in the ETF’s prospectus and proceeded to hold on to positions in UVXY in two client accounts for too long, including 11,000 shares in one client’s account that were held there for 987 days. This caused the loss of 93% of that client’s initial investment. Bower also allegedly held on to 2,000 UXVY shares in another client’s account for 356 days, causing a 93% loss on the initial investment.

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