Failure to Supervise

Jason McBride

August 13, 2018 | Silver Law Group

Broker Jason McBride (CRD #1875972) is a registered broker and investment advisor employed by Presidential Brokerage, Inc. (CRD #28784) of Greenwood Village, CO. He has been with Presidential since 1995. His previous employers include VTR Capital, Inc. (CRD #21404) of New York City, Chatfield Dean & Co., Inc. (CRD #14714) also of Greenwood Village, CO, Venture Trading, Inc. (CRD #21404) of New York City, Marshall Davis, Inc. (CRD #16278), Donald & Co. Securities Inc. (CRD #7776) of Tinton Falls, NJ, Pacific Rim Securities, Inc. (CRD #13155) and Power Securities Corporation (CRD #15527). He has been in the industry since 1988.

McBride has been the subject of five customer disputes in his career. The most recent was filed on 5/1/2018, by a client alleging “unsuitability, breach of fiduciary duty, negligence, failure to supervise, misrepresentation, omission, and breach of contract in the purchase of 2 non traded REITs and a limited partnership between February 2006 and August 2008.” The client is requesting damages in the amount of $251,317.00. Presidential denies the claims, and McBride isn’t actually a named party in the complaint. The firm is defending itself against the claims.

A prior complaint was filed on 12/15/2015 by a disgruntled former employee and her husband. McBride, again, was not a named party in the complaint. The clients alleged “breach of fiduciary duty, breach of contract, negligence and unlawful termination and retaliation.” The wife was employed by Presidential as a Series 7 representative, studying for her Series 7 exam, and working as an assistant to McBride.

Suspect You (or a Loved One) are a Victim of Elder Financial Fraud?

July 25, 2018 | Silver Law Group

Here’s what you need to do now

Elder financial fraud continues to be a lucrative scheme in America, which is why seniors and their loved ones always need to keep their guard up. We have previously discussed how to spot fraud and what some financial institutions are doing to prevent it, and this piece serves as a guide on what to do about the fraud that has occurred.

Victims, their family members, or caregivers should follow these steps to help limit the damage:

Silver Law Group is Investigating Alan New of NYLife Securities LLC

June 29, 2018 | Silver Law Group

Alan New has been registered with NYLife Securities LLC in Fort Wayne, IN from 2004 to August 2016.

According to his BrokerCheck Report, New has been the subject of five customer complaints in 2018.

April 2018. “Plaintiff alleges that material facts and the risks associated with an unregistered investment purchased in Woodbridge Mortgage Investment Fund in December 2013 were not disclosed. Claimant seeks recovery of damages in the amount of at least $400,000.00.” The customer is seeking $400,000 in damages and the case is currently pending.

Silver Law Group is Investigating Frank Dietrich of Quest Capital Strategies, Inc.

June 29, 2018 | Silver Law Group

Frank Dietrich was registered with Quest Capital Strategies, Inc. in Lake Forest, California from March 2013 to April 2018, when he was terminated regarding, “Failure to fully disclose outside business activities and sale of unapproved product.” Dietrich sold Woodbridge notes to multiple investors.

Dietrich has been the subject of six customer complaints between 2013 and 2018, according to his CRD report. The complaints include:

April 2018: Client states that she purchased a Woodbridge Wealth Promissory Note through Frank Dietrich in January of 2017, outside of Quest Capital Strategies. The customer is seeking $200,000 in damages and the case is currently pending.

NYSE Brings Action Against Edward Wedbush and Wedbush Securities

June 8, 2018 | Silver Law Group

Wedbush Securities is in hot water with the SEC, FINRA, and the New York Stock Exchange for a scheme involving its owner and founder, Edward Wedbush. Mr. Wedbush was allegedly employing a manipulative trading scheme involving over 70 accounts at Wedbush Securities. The trading practice, often referred to as “cherry-picking,” occurs when “traders choose to allocate the best performing trades to their own or preferred accounts.”

According to the NYSE’s complaint, Mr. Wedbush’s scheme involved instructing an employee to execute trades in a general account, and then he would later allocate the trades to various accounts that he controlled. No other employees at the firm were permitted to make these “post-execution allocations.” Mr. Wedbush also executed these trades on a separate trading platform that was not used by other traders at the firm.

The firm allowed Mr. Wedbush to exercise this discretion and had no procedures in place to ensure that the allocations were not made for improper purposes, like steering the more profitable trades into Mr. Wedbush’s controlled accounts. NYSE alleges this lack of supervision violated both SEC and NYSE rules. The firm failed to establish and maintain adequate written supervisory procedures, and failed to retain adequate books and records. The firm’s Co-Chief Compliance Officer even raised concerns over Mr. Wedbush’s trading activity, yet the firm still “took no meaningful action.”

Silver Law Group is Investigating Wedbush Securities, Inc.

June 8, 2018 | Silver Law Group

Wedbush Securities, Inc. (CRD # 877) is a financial services and investment firm based out of Los Angeles, California. Wedbush currently has three pending regulatory actions against the firm.

One such action was initiated by the Securities & Exchange Commission in March 2018. The SEC alleges that Wedbush failed to reasonably supervise one of its registered representatives who engaged in manipulative trading for several years. The SEC also alleges that the firm learned of the representative’s activity, but did not have the systems in place to properly investigate it. Specifically, the firm received an email detailing the representative’s role in the fraudulent activity and was aware of multiple customer complaints brought against her, among other red flags alerting Wedbush to her conduct.

The New York Stock Exchange also has a pending action against Wedbush initiated in 2017. The NYSE claims that Wedbush failed to supervise the trading activities of its president. FINRA rules require member firms to create and maintain a system “that is reasonably designed to achieve compliance with applicable securities laws and regulations.” FINRA also requires that its members refrain from engaging in fraudulent or deceptive practices with their customers.

FINRA’s Failure to Supervise Rule

June 8, 2018 | Silver Law Group

Financial Industry Regulatory Authority (“FINRA”) is the non-governmental organization that regulates stockbrokers and brokerage firms. FINRA rules set out the appropriate conduct for its members. This includes several rules detailing member firms’ requirement to supervise their brokers and advisers.

FINRA Rule 3110 is the main rule discussing supervision. It requires firms to “establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance” with both FINRA rules and state or federal securities laws. FINRA requires these procedures to be in written form. A copy of the procedures must be kept in every location where supervisory activities are conducted.

Once a brokerage firm establishes a supervisory system, it must routinely check that the system works properly. To ensure this, FINRA requires firms to assign a qualified principal to each registered person at the firm. The principal is responsible for supervising the registered person’s actions.

Securities Regulatory Authorities Were Well Aware of Problems with Wedbush Securities

June 8, 2018 | Silver Law Group

Wedbush Securities is facing discipline from the SEC, NYSE, and FINRA for a manipulative trading scheme involving its founder, Edward Wedbush. According to a recent article by InvestmentNews.com, however, all three agencies were well aware of problems within Wedbush for many years, but handed down no real, meaningful punishment to the firm. This allowed Mr. Wedbush to continue his scheme for years, hurting many investors along the way.

The complaint filed by the NYSE details a history of Wedbush’s run-ins with the three agencies. In 2015, Wedbush was fined by both the SEC and NYSE for “extensive and widespread supervisory deficiencies,” among other things. Before 2015, the firm “was fined over $2,000,000 by regulators in more than a dozen separate actions involving supervisory failures.”

The NYSE and FINRA’s Department of Market Regulation also conducted an investigation of Wedbush concerning violations of supervisory obligations, books and records keeping, trade mismarking, and other issues. FINRA then referred the investigation to its Legal Section of FINRA Market Regulation; NYSE finally took over the investigation in 2016. This extensive regulatory history shows that all three agencies were on notice of Wedbush’s repeated supervisory failures.

Royal Alliance Associates Arbitration Lawyer

June 1, 2018 | Silver Law Group

The recent arrest of former broker Gary Basralian (CRD #14385) for defrauding two clients of $2.1 million also raises allegations of failure to supervise about his brokerage firm, Royal Alliance Associates (CRD #23131.) According to news reports, Basralian embezzled money from two elderly women and used the funds for his own expenses. When the discrepancies were discovered, the elderly victims’ attorney notified both the FBI and DOJ. Both agencies took immediate action, and Basralian was arrested May 23, 2018 on charges of wire and investment adviser fraud. He could face as much as 25 years in prison.

The stockbroker in question allegedly deliberately sought out vulnerable victims who might not notice that he was stealing funds directly from their accounts. Basralian is, himself, 70 years of age—so he likely embezzled from his contemporaries. When the law firm representing the two victims contacted Royal Alliance, Basralian was not immediately terminated, but allowed to resign. He signed a FINRA agreement and was barred from being a broker or affiliated with any broker firms.

But what about the brokerage firm, Royal Alliance, that failed to stop him? And why didn’t Royal Alliance notice or stop Basralian’s unethical activities over a ten-year period? Allegations against Royal Alliance in this case include inadequate supervision of brokers and lax anti-money laundering compliance that allowed this to not only happen, but continue. But this is not the first time Royal Alliance has been host to broker misbehavior, with several instances of “failure to supervise” kinds of sanctions.

Centaurus Financial

June 1, 2018 | Silver Law Group

Centaurus Financial has been the recipient of multiple FINRA actions, including 11 regulatory events and 8 reported arbitration claims. Not all of these are major issues, but they could be relevant to an investor doing business with Centaurus.

The SEC has strict rules about how a broker-dealer operates, runs their business and keeps records; any variation from these rules can trigger a sanction or other regulatory process. Centaurus has been the subject of multiple sanctions for various infractions and disputes filed by customers. For these regulatory sanctions, the company has paid $532,156.62 in penalties, fines and fees over the years. In some cases, there were no financial products involved or sold, only regulatory violations.

Centaurus has paid out $3,064,930.66 in securities arbitration awards and judgments.