Investor Lawyers Blog

Financial Firms Settle with FINRA: ES Financial Services Resolves Solicitation of Non-US Investors Allegations and Lincoln Financial Securities Consents to Entry of Findings Alleging Inadequate Supervision

Published on: March 11, 2013 | by Shepherd Smith Edwards & Kantas, LLP

ES Financial Services Resolves Solicitation of Non-US Investors Allegations

E.S. Financial Services, Inc. has turned in a Letter of Acceptance, Waiver, Consent to the Financial Industry Regulatory Authority over allegations that it acted as a placement agent and solicited specific non-US investors to get involved in a commercial paper program that a foreign-based affiliate was offering. The firm is accused of providing misrepresentations in certain materials, including that like other commercial products, the program was a cash component of the customer’s portfolio, and also, that the investment was a low-risk, conservative proposition.

ES Financial is also accused of not sufficiently describing the risks involved and for close to four years failing to conduct the proper due diligence for the commercial paper program sales. FINRA’s findings note that the financial firm did not adopt, implement, or enforce written due diligence procedures customized for these instruments. Fortunately, investments were paid back in a timely manner and no investor lost funds. However, this does not mean that ES Financial succeeded in conducting a proper investigation into various issues.

US Courts & Securities Roundup: Arbitration Award in Citi’s Favor is Approved & Investors’ Claims Against An Oppenheimer Private Equity Fund Are Dismissed

Published on: March 9, 2013 | by Shepherd Smith Edwards & Kantas, LLP

District Court Approves Citigroup’s Arbitration Award in Securities Case Against the Abu Dhabi Investment Authority

A judge held that a tribunal did not behave in manifest disregard of the law and that its refusal to provide two documents that the Abu Dhabi Investment Authority had asked for did not make the proceedings “fundamentally unfair.” The court confirmed an award issued in Citigroup Inc.’s (C) favor, which found that the ADIA did not succeed in showing that the arbitration panel’s New York choice of law decision and evidentiary rulings warranted that the award be vacated.

The securities case is Abu Dhabi Investment Authority v. Citigroup Inc.

Plaintiffs Can Pursue Narrowed Claims Against Private Equity Firms

Published on: March 9, 2013 | by Shepherd Smith Edwards & Kantas, LLP

According to the U.S. District Court for the District of Massachusetts, plaintiffs should be able to pursue narrowed claims against large private equity firms accused of colluding to keep competition away. In Dahl v. Bain Capital Partners LLC, Judge Edward Harrington noted that although the bulk of the securities lawsuit focused on PE firm’s routine business practices, there was evidence that showed an inference of conspiracy in regards of some of the claims.

Also, Harrington refused to grant an “omnibus” motion for summary judgment requested by several of the defendants, including Bain Capital Partners LLC, Carlyle Group LLC, and Kohlberg Kravis Roberts & Co. LP. JPMorgan Chase and Co.’s (JPM) own motion for summary judgment, however, was granted, on the grounds that evidence did not support that the financial firm had taken part in the alleged “narrowed overarching conspiracy.”

The plaintiffs previously owned shares in different public companies that private equity firms later acquired. They contend that between 2003 and 2007, the defendants were involved in an “overarching” conspiracy to artificially manipulate securities prices in specific transactions. The plaintiffs believe that the private equity firms knew that by working together they could keep the competition down and prevent prices from going up.

Harrington, however, decided to narrow the plaintiffs’ claims, finding that a lot of the lawsuit had to do with practices in the industry that were considered “appropriate” and “established.” He noted that rather than depicting a portrait of an “overreaching conspiracy,” the evidence of transaction appears to demonstrate interactions among defendants that were “ever-rotating and overlapping.”

Dahl v. Bain Capital Partners LLC https://www.securities-fraud-attorneys.com(PDF)

More Blog Posts:
Investment Fraud Lawsuit Against BlackRock Over Exchange-Traded Funds Could Shed More Light on Securities Lending, Institutional Investor Securities Blog, February 18, 2013

Texas Courts Show Preference for Arbitration to Resolve Securities Fraud Claims and Other Business Disputes, Stockbroker Fraud Blog, February 15, 2013

Financial Representatives Settle with FINRA Over Allegations Related to Excessive Commissions, Elder Financial Fraud, and Funneling Client Funds for Personal Gain

Published on: March 8, 2013 | by Shepherd Smith Edwards & Kantas, LLP

Without denying or admitting to the allegations, the following financial representatives have turned in their Letter of Acceptance, Waiver, and Consent in the securities cases made against them by the Financial Industry Regulatory Authority:

New York Registered Rep. Fined $7,500 for Charging Excessive Commissions

Enver Rahman Alijaj has been suspended for two months from associating with any member of FINRA. He is accused of charging excessive commissions in equity security trades that took place in a member firm’s client account. The trades involved the buying of common stocks. The commissions for them ranged from 4.3% to 4.9% per trade.

Texas Securities Fraud: IMS Securities Settles FINRA Case Alleging Inadequate Supervision of Wholesale Representatives

Published on: March 7, 2013 | by Shepherd Smith Edwards & Kantas, LLP

IMS Securities Inc. has settled a Financial Industry Regulatory Authority case accusing the Houston-based brokerage firm of inadequately overseeing its wholesale representatives. Per the SRO’s claims, IMS Securities allegedly failed to customize its supervisory system to its business in a manner that could allow it to be in compliance with securities laws and FINRA rules. However, despite agreeing to the $100,000 fine and censure, the financial firm is not admitting to or denying the findings.

Per FINRA, IMS Securities failed to supervise several wholesale representatives for nearly the first four years of their employment and had insufficient WSP’s detailing the steps for assessing certain securities products (even though the financial firm sold number of direct participation plans and privately-traded real estate investment trusts (REITs)). The regulator also said that there was one year when the financial firm did not conduct annual audits at two of its OSJ branches, and, for close to two years IMS Securities failed to properly maintain sales/purchase blotters, checks forwarded/received blotters, and other receipts and financial records.The SRO believes that not only did IMS Securities’ wholesale representatives send securities business-related electronic communications through outside email addresses but also, the firm did not keep the emails.

Texas Securities Fraud

NASAA Wants Investment Advisers To Be Banned From Forcing Clients Into Mandatory Arbitration

Published on: March 7, 2013 | by Shepherd Smith Edwards & Kantas, LLP

The North American Securities Administrations Association Inc. wants Congress to put into place a law to bar investment advisers from making clients go through arbitration to resolve their securities claims. They also want lawmakers to make either the SEC propose a rule that would get rid of the pre-dispute arbitration clauses currently found in broker firm contracts or push for similarly purposed legislation. The association recently unveiled its legislative priorities, which includes getting a discourse going about a recent FINRA panel ruling that found that the self-regulatory organization could not prevent Charles Schwab Corp. (SCHW) from using agreements that include mandatory pre-arbitration clauses to bar clients from taking part in class action securities cases.

NASAA President Heath Abshure has spoken about how giving investors options when it comes to settling claims is key to making them feel more confident about the financial markets. He said that when seeking relief they should have the option of going to the forum of their choice. The association also wants there to be legislation that would let the SEC impose user fees when investment advisors take exams (The group’s members believe this would enhance adviser oversight), as well as a law that would let crowdfunding victims file class action securities lawsuits. Crowdfunding involves using the Internet to sell securities in small batches to nonaccredited investors.

NASAA is hoping that the significant turnover that occurred in both the House and the Senate will give the organization a chance to generate new support.

Securities Roundup: Venecredit Fined $25K for Working with Foreign Finders, Ex-Merrill Lynch/LPL Financial Rep. Faces Fraud Charges, & BrokersXpress Broker is Suspended Over Private Placement-Related Misconduct

Published on: March 5, 2013 | by Shepherd Smith Edwards & Kantas, LLP

Venecredit Fined $25K for Working with Foreign Finders to Generate Retail Investor Business

According to the Financial Industry Regulatory Authority, Venecredit Securities must pay a $25,000 fine for allegedly using foreign finders to get new retail investor business. The financial firm has now been censured for two years.

The SRO says that the foreign finders served as the primary contacts between Venecredit and the clients and had access to account information via the clearing firm’s platform. These finders worked for a foreign brokerage firm that shares directors and officers with Venecredit and its wholly owned entity. FINRA contends that not only did Venecredit fail to create and put into effect proper supervisory measures that would have allowed it to look at customer complaints about the employees at the foreign brokerage firm, but also it failed to keep electronic correspondence from both the foreign traders and the personal email accounts of its registered representatives.

Ameriprise Fined $750,000 for Inadequate Supervision of Wire Transfer Requests

Published on: March 4, 2013 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has fined Ameriprise Financial Services Inc. and American Enterprise Investment Services Inc. $750,000 for failing to properly supervise wire-transfer requests and customer fund transmissions to third parties. Also, the SRO has barred Jennifer Guelinas, an ex-Ameriprise broker, for allegedly forging the signatures of two clients on wire-transfer requests and moving about $790,000 to her bank accounts. Ameriprise is an American Financial Inc. (AMP) unit.

FINRA said that Ameriprise had gone on to pay full restitution to its clients and that it was the latter’s affiliate clearing firm, American Enterprise Investment Services, that failed to put in supervisory systems for monitoring funds when they were transferred from client accounts to third parties. The SRO contends, however, that it was Ameriprise that did not detect that Guelinas wrongful actions even though there were a number of red flags. For example, she turned in three requests to send funds from a client’s account to bank account that appeared to belong to her. Amerirpise went ahead and put through the forged requests and moved the funds without asking questions. A third wire-transfer request by Guelinas also went through, says FINRA, but this time Ameriprise caught the wrongdoing before she could get to the money.

Amerirpise says that the since these incidents, which occurred several years ago, the financial firm has improved its related procedures, policies, and technology. By settling, Ameriprise and American Enterprise Investment Services are not admitting to or denying the securities allegations.

New Stream Capital LLC Hedge Fund Executives Face Criminal Securities Fraud Charges

Published on: February 28, 2013 | by Shepherd Smith Edwards & Kantas, LLP

The United States has charged Bart Gutekunst, Richard Pereira, and David Bryson, all New Stream Capital LLC hedge fund executives, with securities fraud, wire fraud, and conspiracy. Pereira is New Stream’s former CFO. According to US Attorney David Fein, the defendants ran a securities scam to fool investors so they could get and keep up investments partially because they were afraid they would lose their largest fun investor.

New Stream unveiled new feeder funds in November 2007. It told investors they would have to transfer their investments from a Bermuda-based fund that they were closing to these new ones. However, contend prosecutors, when New Stream’s biggest investor, Gottex Fund Management, intended to redeem its investment in the fund in Bermuda rather than transfer its money to the newer funds, the New Stream executives allegedly came up with a scam to keep the fund going so that the redemption would be reversed.

They are accused of restructuring New Stream’s structure to make sure Gottex Fund Management was prioritized. 2011, the fund and its affiliates petitioned for bankruptcy protection when their multiple restructuring efforts failed. After the US Bankruptcy Court in Delaware approved the firm’s liquidation plan last year, the funds’ investors were able to recover 7 to 19% of their monies.

SEC Needs to File Securities Fraud Lawsuits Sooner, Rules the US Supreme Court

Published on: February 28, 2013 | by Shepherd Smith Edwards & Kantas, LLP

In Gabelli v. SEC, the US Supreme Court has decided that in some securities fraud cases, the SEC needs to move faster when it comes to filing its case. The ruling could affect agencies nationwide.

In a unanimous decision, the justices sided with two officials of Gabelli Funds LLC, who sought to stop the regulator’s claim contending that they acted improperly by allowing a client to take part in market timing. The Commission sought civil penalties from them for illegal activities that allegedly took place leading up to August 2002.

Per the Investment Advisers Act, it is against the law for investment advisers to defraud clients and the regulator is allowed to seek penalties for such actions. However, the Commission only has five years from when the window opens to file. The regulator had argued that Gabelli and Alpert had let Headstart Advisers Ltd. take part in “market timing” in the fund while failing to disclose this and banning others from engaging in the same practice even as statements were issued noting that this was not allowed.

Alpert and Gabelli had argued that the SEC filed its securities complaint about these allegations after the statute of limitations for filing for penalties had passed. They said that under the appeals court decision, which said that the securities fraud lawsuit could go ahead because the statute of limitations doesn’t start with litigation involving fraud until the Commission has grounds to know that there was a violation, the SEC could then make an ancient claim just on the allegation that prior to that it hadn’t and couldn’t have found out about the violation sooner.

The Second Circuit’s ruling, reverses a District Court’s decision to throw out the SEC’s lawsuit against the two men because it said the civil penalty claim was time barred. The Second Circuit, however, disagreed, and accepted the Commissions contention that the discovery rule could be applied, which means that the five-year window to file didn’t start until the regulator found out (or could have reasonably discovered) the fraud.

Now, the US Supreme Court is saying that it never applies the Discovery Rule in a case where the government is the plaintiff bringing an enforcement action that seeks civil penalties in contradistinction to a victim that has been defrauded and wants compensation.

Shepherd Smith Edwards and Kantas, LTD, LLP represents securities fraud victims throughout the US. Your first case evaluation with one of our stockbroker fraud attorneys is free.

Securities fraud robs investors of their money every year. We work with institutional and individual investors seeking to recoup those losses. Call us today. Working with an experienced securities firm increases one’s chances of recovery.

Related Web Resources:
Gabelli v. SEC

Investment Advisers Act of 1940 (PDF)

More Blog Posts:
Judge that Dismissed Regulators’ Claims Against Morgan Keegan to Rule on ARS Lawsuit Again After His Ruling Was Reversed on Appeal, Institutional Investor Securities Blog, November 27, 2012

Court Upholds Ex-NBA Star Horace Grant $1.46M FINRA Arbitration Award from Morgan Keegan & Co. Over Mortgage-Backed Bond Losses, Stockbroker fraud Blog, October 30, 2012

Plaintiff Must Arbitrate Faulty Investment Advice Claim With TD Ameritrade But Can Proceed With Litigation Against Oakwood Capital Management, Stockbroker Fraud Blog, October 29, 2012