Failure to Supervise

FINRA Files Disciplinary Charges against Global Strategic Investments, LLC

January 14, 2015 | Silver Law Group

Global Strategic Investments, LLC, of Miami, Florida, was named a respondent in a FINRA complaint alleging that it failed to investigate or report, where appropriate, unusual activity related to bond transactions and subsequent money transfers relating to a new business line. The FINRA complaint alleges that the firm launched a new business line that was immediately successful, facilitating currency exchanges through the liquidation of over $650 million worth of Venezuelan bonds for correspondent accounts of foreign financial institutions located in high-risk jurisdictions, Venezuela and Curacao. The firm failed to establish supervisory policies and procedures that can be reasonably expected to detect and cause the reporting of transactions required under the law and failed to establish and implement policies, procedures, and internal controls reasonably designed to achieve compliance with the Bank Secrecy Act. The firm failed to identify red flags associated with the Venezuelan bond accounts, its two largest customers, and their anticipated activity, and failed to adjust its procedures to account for the high-risk nature of this new endeavor. Instead, the firm primarily relied upon its new clients’ representations about the legitimacy of the transactions without further reasonable risk-based review to corroborate such representations. The firm’s over-reliance upon the client’s representations led to failures to detect red flags that should have required additional due diligence on the part of the firm. The firm did not have a sufficient infrastructure (policies, systems and procedures) to adequately monitor this business. The firm was or should have been aware of numerous red flags related to its customers’ Venezuelan bond liquidations. (FINRA Case #2011025676501)

Silver Law Group represents investors in securities and investment fraud cases. Our lawyers are admitted to practice in New York and Florida and represent investors nationwide to help recover investment losses due to stockbroker misconduct. If you have any questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

FINRA Files Disciplinary Charges against Bradley Claus Relating to an Oil and Gas Company

January 14, 2015 | Silver Law Group

Bradley Claus, of Castle Rock, Colorado, was named a respondent in a FINRA complaint alleging that he participated in private securities transactions with three investors, in an oil and gas company, without receiving authorization from his member firm. The complaint alleges that the firm did not permit Claus to solicit or sell investments in the private securities transaction of the oil and gas company. The complaint also alleges that Claus made material misstatements of fact to a customer in emails regarding a potential investment. Claus knew or was reckless in not knowing that his statements were false or misleading. Claus’ firm did not offer or authorize him to solicit or sell the investments. Claus was previously registered with World Group Securities. FINRA further alleges that Claus avoided his firm’s supervisory system and procedures by using an unauthorized outside email account. Despite the firm’s prohibition, Claus routinely used the personal outside email account to conduct securities business. Claus improperly used the firm’s name, firm address and firm phone number in emails from his outside email account. Claus never notified the firm of this email account and prevented his firm from supervising his communications with the public from that email account. (FINRA Case #2012033520801)

If you invested money with Bradley Claus, you may be entitled to recover some of your investment losses. Oil and gas investments can be very speculative and is not suitable for all investors. Many oil and gas investments have collapsed in recent months exposing investors to large losses. Please call our securities law firm toll free at (800) 975-4345 to speak to an attorney to find out how we may be able to help you recover some of your investment losses.

FINRA Files Disciplinary Charges against Cantella & Co., Inc.

January 2, 2015 | Silver Law Group

Cantella & Co., Inc., of Boston, Massachusetts, submitted an AWC with FINRA in which the firm was censured, fined $50,000 and required to pay $81,973.65, plus interest, in restitution to customers for allegations relating to excessive commissions. Without admitting or denying the findings, Cantella consented to the sanctions and to the entry of findings that it charged customers excessive commissions on equity and options transactions. The findings stated that in connection with certain purchases and sales of primarily low-priced securities, the commissions the firm charged were not fair and reasonable. The transactions resulted in approximately $120,000 in excessive charges. The firm has already repaid customers approximately $42,000 of these excessive commissions related to equity transactions. The firm also charged $4,658.22 in excessive commissions in connection with options transactions. The findings also stated that the firm failed to create or follow an adequate supervisory system for the review of commissions charged. The firm blindly followed an automated commission schedule instead of reviewing each trade for fairness. (FINRA Case #2011025431801)

Silver Law Group represents investors in securities and investment fraud cases for claims including stockbroker misconduct, excessive fees or commissions and penny stock fraud. Our lawyers are admitted to practice in New York and Florida and represent investors nationwide to help recover investment losses due to stockbroker misconduct. If you have any questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

FINRA Files Disciplinary Charges against Aon Douglas Miller

January 2, 2015 | Silver Law Group

Aon Douglas Miller, of Chattanooga, Tennessee, was named a respondent in a FINRA complaint alleging that he participated in private securities transactions with various entities in which four of his member firm’s customers invested a total of $1,550,000. The complaint alleges that at no time were any of the entities in which the customers invested on the list of approved investment products at Miller’s firm. Miller did not provide prior written notice or a full and detailed description of the investment to his firm about any of the transactions. Aon Miller allegedly sold investments in the CDP real estate investment, a chemical company referred to as KBI and promissory notes in a company called CTL.

Miller was registered with several brokerage firms in the last several years including Benjamin F. Edwards & Co., Inc., Wells Fargo Advisors, LLC and Purshe Kaplan Sterling Investments. (FINRA Case #2012034393801)

If you invested money with Aon Douglas Miller, you may be entitled to recover some of you investment losses from his employers. Broker-dealers have a duty to supervise the activities of their advisors. Many broker-dealers turn a blind eye or ignore questionable red flags which can lead to liability. Please call our securities law firm toll free at (800) 975-4345 to speak to an attorney to find out how we may be able to help you recover some of your investment losses.

Silver Law Group is Investigating NSM Securities, Inc.

December 3, 2014 | Silver Law Group

NSM Securities, Inc. (CRD #134357, West Palm Beach, Florida) and Niyukt Raghu Bhasin (CRD #2282048, Wellington, Florida) submitted an Offer of Settlement to FINRA in which NSM Securities (“NSM”) was expelled from FINRA membership. Bhasin was barred from association with any FINRA member in any capacity. NSM and Bhasin consented to the FINRA sanctions and that the firm, acting through and at the direction of its founder, owner, President and Chief Executive Officer (CEO) Bhasin, derived most of its revenue from actively and aggressively trading stocks in the commission-based accounts of its retail customers. This practice is frequently referred to as churning. Bhasin allegedly put his firm’s profits over the duties owed to its customers and chose not to enforce a supervisory system effective for the firm’s business. NSM, through Bhasin, failed to establish, maintain and enforce a system, including written supervisory procedures (WSPs), to supervise its core activity, an active and aggressive investment strategy. The firm, through Bhasin, failed to monitor for, detect and prevent churning, excessive trading, related violations of Regulation T, and unsuitable investment recommendations, and failed to adequately review e-mail, adequately handle customer complaints or place questionable brokers who were the subjects of multiple FINRA arbitrations or customer complaints and arbitrations on heightened supervision.

FINRA also stated that in implementing Bhasin’s active and aggressive trading strategy, and in order to generate commissions, the firm committed multiple margin violations and the related FINRA rules governing the extension of credit or margin. Specifically, the firm, acting through its brokers, made a practice of allowing customers to buy securities in cash accounts where the cost to buy the securities was met by the sale of the same securities, known as free-riding. All of these actions ultimately led to an environment which allowed brokers to churn customer accounts to make a profit for the firm. NSM specifically targeted Indian investors preying on sharing cultural similarities. This is frequently referred to as affinity fraud.

FINRA also found that the firm, through Bhasin, failed to institute adequate procedures for cold-calling prospective customers. As a result, the firm, through its brokers and other representatives, initiated telephone solicitations to persons whose numbers were on the firm’s do-not-call list and/or the national do-not-call list. (FINRA Case #2011027667402)

Silver Law Group Represents 93 year old Victim of Elder Financial Abuse

July 3, 2014 | Silver Law Group

According to the Sun Sentinel, the Palm Beach County Sheriff’s Office has charged Sultaine Valcius of Boynton Beach with fraud after taking $1.4 million from a 93 year-old man that hired her as a medical aide.

The Sun Sentinel reports Sultaine Valcius, 48, is charged with organized scheme to defraud for taking the money from her employer for at least five years. Ms. Valcius requested the money for various reasons, including, nursing school tuition, purchasing a home as an investment property, repairing a home in Haiti that had been destroyed by an earthquake and for general financial assistance due to her husband purportedly losing his job. However, Ms. Valcius was allegedly never enrolled in school, the house that was purchased was used as the primary residence by Ms. Valcius and her husband was never laid off from the job she claimed he had.

Ms. Valcius convinced the elderly gentleman to write her numerous checks ranging from a couple of hundreds of dollars to tens of thousands of dollars from two of his brokerage accounts maintained at two national broker/dealers. However, even if convicted, it is unlikely that Ms. Valcius will have the adequate resources to repay the victim.

Federal Appeals Court Upholds SEC Ban on Broker-Dealer Principal for Failing to Prevent Churning and Excessive Trading

June 19, 2014 | Silver Law Group

In July 2013, the U.S. Securities and Exchange Commission (“SEC”) issued a lifetime ban upon Carl Birkelbach, the founder and principal of Birkelbach Investment Securities (headquartered in Chicago, Illinois), which prevents him from participating in any working capacity in the securities industry. Mr. Birkelbach appealed the SEC’s ban, claiming in part that the SEC exceeded its authority in imposing such a severe penalty upon him. Earlier this month, the U.S. Court of Appeals for the Seventh Circuit in Chicago denied his appeal and upheld the SEC ban, stating that Mr. Birkelbach’s offenses were sufficiently egregious to warrant the sanction imposed by the SEC.

As the head of Birkelbach Investment Securities, Mr. Birkelbach was required to supervise the trading activities of the company’s registered representatives, including William Murphy. According to the SEC, Mr. Murphy engaged for years in unauthorized conduct, steering clients into unsuitable investments, and churning in client accounts — all of which Mr. Birkelbach was purportedly aware of. Despite Mr. Birkelbach’s alleged knowledge of the wrongdoing taking place at his company, he imposed no discipline upon Mr. Murphy, never disapproved of a single trade by Murphy, and never contacted the most egregiously harmed customer to discuss the high volume of trading in the customer’s account. During the years in question, the revenues from Mr. Murphy’s trading in that account, according to SEC calculations, represented nearly 20% of Birkelbach Investment Securities’ total revenue. Even when the Financial Industry Regulatory Authority (FINRA) requested that Mr. Birkelbach place Mr. Murphy on heightened supervision, Mr. Birkelbach failed to comply. As a result, FINRA imposed upon Mr. Birkelbach a punishment that ultimately became a lifetime ban from the securities industry in any capacity, which the SEC subsequently affirmed in its July 2013 ruling.

If you have questions about your legal rights, or have been the victim of investment fraud, please contact Scott Silver of the Silver Law Group for a free consultation at ssilver@silverlaw.com or Toll Free at (800) 975-4345.

Connecticut Securities Regulator Seeks to Bar Meyers Associates from Selling Securities in Connecticut

April 16, 2014 | Silver Law Group

If the Connecticut Department of Banking (the “Department”) has its way, Meyers Associates and its owner, Bruce Meyers, will be barred from selling securities in Connecticut. A February 2014 Order to Cease and Desist issued by the Department, charges Meyers Associates and Bruce Meyers (“Respondents”) with numerous violations of Connecticut securities laws. The Order states the Department’s intent to fine Respondents and revoke their registration to sell securities in Connecticut.

The present charges against Respondents stem from a 2012 examination by the Department, out of which the Department claims to have discovered multiple violations of the Connecticut Uniform Securities Act and FINRA rules. Notably, the Department alleges that Respondents failed to properly supervise employees with known disciplinary histories, violated an order from the Vermont securities regulator, and failed to completely respond to both the Department’s and FINRA’s requests for information and documents.

In seeking fines and revocation of Respondents’ licenses, the Department cites to Meyers Associates’ history of run-ins with the Department over allegations that it employed unregistered agents, offered and sold unregistered securities, engaged in fraud in connection with the sale of securities, engaged in dishonest and unethical practices, violated FINRA conduct rules, and failed to enforce and maintain adequate supervisory procedures. FINRA’s BrokerCheck report for Meyers Associates shows 14 final regulatory events, two pending regulatory events, and nine final arbitrations.

FINRA Revises Brokerage Firm’s Supervisory Rules

April 7, 2014 | Silver Law Group

FINRA rules establish the core supervisory system procedures which all broker-dealers must follow to protect investors. A broker-dealer or other FINRA member may be sanctioned by FINRA for violating these rules and an investor may bring a FINRA arbitration claim against a brokerage firm for failing to properly supervise a financial advisor or for failing to have in place a reasonable supervisory system in compliance with these rules. Although the systems may be different from one brokerage firm to another, the FINRA code establishes the minimum systems which must be addressed. FINRA Rule 3110 has been revised to address supervision requirements by all FINRA members. These rules codify rules addressing written supervisory procedures, designation of supervisory principals and customer complaints. The rule was published in FINRA Notice to Members 14-10 and can be viewed on FINRA’s website.

FINRA Fines LPL Financial Over Alternative Investments

March 26, 2014 | Silver Law Group

LPL Financial, the self-proclaimed “nation’s largest independent broker-dealer” was recently fined $950,000 by securities regulator FINRA for allegedly failing to supervise its brokers that sold alternative investments. In a letter of Acceptance, Waiver and Consent (“AWC”), signed March 24, 2014, LPL Financial (“LPL”) settled FINRA’s charges that it failed to implement an adequate supervisory system for the sale of alternative investments.

FINRA’s complaint focuses on LPL’s failure to have a suitable system in place to identify and determine whether purchases of alternative investments, such as equipment leasing programs, real estate limited partnerships, hedge funds, and managed futures, caused its customers’ accounts to be unsuitably concentrated in these types of investments. The allegations further state that LPL’s three-tiered supervisory system had deficiencies at each tier that allowed its customers to become overconcentrated in alternative investments from January 1, 2008 through July 1, 2012.

Alternative investments are complex, high-commission, investments frequently sold by investment banks as an alternative to investing in the stock market. The Securities and Exchange Commission issued a press release in 2014 to remind financial advisors of the compliance requirements related to the recommendation of alternative investments to investors. Despite this, few retail investors are advised that alternative investments can be illiquid, speculative, and rife with conflicts of interest. Unfortunately for investors, the $950,000 fine will not be paid to the victims. Instead, investors who have been damaged may pursue FINRA arbitration claims to recover damages.