Source: http://www.grecogrecolaw.com/blog?start=15
Timestamp: 2019-04-26 01:47:44+00:00

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As shown by this press release, FINRA barred two JP Morgan Chase Securities brokers for taking $300,000 in annuity proceeds from an elderly widow.
Although the firm paid the monies back to the customer, in many instances securities brokerage firms claim they are not responsible for the theft or wrongful acts of their brokers. However, multiple legal theories mandate liability for a firm for the wrongful acts of its brokers/agents even if the firm claims it did not know of the activity. If you are a victim of a similar scheme and wish to discuss your rights with an attorney, please contact Greco & Greco for a free consultation with one of our attorneys.
The securities industry self-regulatory body, FINRA, recently required JP Turner & Company to pay $700,000 in restitution to customers who lost money in unsuitable leveraged and inverse exchange traded funds (ETFs).Press Release here.
NASAA (the North American Securities Adminstrators Association) has released its 2013 list of top financial product and practice threats to investors here.
These private offerings are often high risk investments. Be wary should your stockbroker or investment advisor recommend them to you as safe or low risk.
Other potential threats listed by NASAA include real estate investment schemes, high yield investment and ponzi schemes, affinity fraud, self directed IRAs, Oil and Gas Drilling Programs, and digital currency.
If your stockbroker or investment advisor has sold you a product without disclosing the risks involved, or if you think you are a victim of a fraudulent investment scheme, please contact Greco & Greco for a free consultation.
The Securities Commissioner of Maryland entered a Consent Order against former FINRA registered representative Joseph A. Giordano in May, 2013. The Order can be found here.
According to the Consent Order, Giordano violated the Maryland Securities Act by “misrepresenting or omitting to disclose material facts to investors, and making unsuitable recommendations.” The investments at issue were Empire bonds and debentures.
Giordano was a FINRA registered securities salesperson with Capital Investment Group, Inc. from October, 1992 to June, 2012. Mr. Giordano’s FINRA Brokercheck report states that he was terminated for cause by Capital Investment Group for “selling away and making false and misleading statements to the firm.” The Consent Order states that Capital Investment Group raised issues of concern regarding Empire Corporation debentures in 2006.
Greco & Greco regularly represents investors in “selling away” cases such as this where the broker sells unauthorized securities away from his firm. Customers may attempt to recover their losses in FINRA arbitration by demonstrating firms’ failures to supervise, failure to follow up on red flags, and by arguing the firm is responsible for the acts of its agent under the legal theories of respondeat superior and vicarious liability. Federal and state securities laws also mandate liability of control persons (such as brokerage firms) if certain requirements are met. If you are the victim of a fraudulent sale of securities by a FINRA registered broker, please contact one of our attorneys for a free consultation.
As shown by this FINRA Order, FINRA sanctioned David Lerner and Associates for sales of Apple REIT Ten and markups related to municipal bonds and CMO’s. Of the $14 million in fines and restitution, approximately $12 million is to be paid to affected customers.
The wrongful conduct alleged by FINRA includes the following: 1) failure to do proper due diligence on Apple REIT Ten prior to approving its sale to customers, many of whom were elderly and unsophisticated, 2) misrepresentations of the REITs performance, value, and returns, 3) false statements in sales seminars and letters describing the REITs, 4) improper markups, and 5) supervisory violations.
Details of the restitution program may be found here. As stated, the remediation plan does not prevent investors from pursuing additional losses through arbitration. If you suffered losses in REITs and you would like to discuss your case for free with one of our attorneys, please contact Greco & Greco.
Greco & Greco is currently pursuing claims on behalf of investors relating to wrongful conduct in life insurance sales, life settlement sales, and variable annuity withdrawals by Neil Winterrowd. Mr. Winterrowd was formerly a FINRA registered representative of Crown Capital Securities LP and J.P. Turner & Company LLC. According to FINRA’s Brokercheck, J.P. Turner discharged Mr. Winterrowd for “Improper handling of customer funds” related to variable annuities. If you believe that you may have been a victim of the above conduct, please contact one of our attorneys for a free consultation.
DRG Hendersonville TIC 13 LLC, et al. v. Behrends, Capstone Financial, CapWest Securities, et al.
Renaissance Meadowlands Hotel and the Arbors on Main Apartments. The Panel issued an award to Claimants for $338,000 plus interest against Capwest and two individuals. Unfortunately, Capwest is no longer licensed with FINRA so the collectibility of the award is questionable.
Castro v. Capwest Securities, et al.
, FINRA Arbitration # 10-02633, Los Angeles, California. This is another LA FINRA arbitration against CapWest and invididuals. The TICs involved were Water Song Apartments (CWC Water Song S&H LP), and Cabot Turfway Ridge Acquisition, LLC. The panel awarded $156,250 plus interest to the Claimants against Capwest and the individual Respondents.
McLean v. Great Northern Financial Securities, Inc.
, FINRA Arbitration #11-03787, Seattle Washington. Once again, another customer award but against a defunct Brokerage Firm. This case involved a DBSI TIC as well as other private placement investments. The panel awarded $424,553 which included damages, interest, treble damages, and attorneys fees.
Greco & Greco is currently pursuing multiple TIC claims against Broker-Dealers and registered representatives in FINRA Arbitration. To read more about the duties of brokers selling TIC’s, please click here through to our website. If you wish to speak to one of our attorneys about a possible claim, please contact usfor a free consultation.
Pursuant to the Dodd-Frank Act, the Securities and Exchange Commission (SEC) was required to conduct a study identify the financial literacy of retail investors in the U.S. The study can be found here.
Despite most individuals’ lack of financial literacy, and the fact that most individuals rely on investment professionals due to their own lack of investment knowledge, a standard defense raised by brokerage firms in FINRA arbitrations is to blame the victim and claim that the investor understood the risks involved in following the broker’s advice. This study refutes the common defense that almost every individual is a “sophisticated investor” capable of understanding the risks involved. If you suffered losses due to the wrongful acts of a broker, advisor, or brokerage firm, please contact one of our attorneys for a free consultation.
As of July 9, 2012, FINRA’s new suitability Rule (Rule 2111) takes effect to replace the old NASD/FINRA Rule 2310. The new Rule can be found here.
The new suitability Rule, and its supplemental material, contains several clarifications which are important for investor protection. First, the Rule clearly states that recommendations of investment strategies as well as transactions fall under the rule. The supplemental material further states that “investment strategy” is to be interpreted broadly, including recommendations to hold securities.
The new Rule also sets out more specifically investor financial information that a registered representative must consider when making recommendations. Specific information includes: “customer’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, risk tolerance, and any other information the customer may disclose to the member or associated person in connection with such recommendation.” The Rule also sets out a standard to be applied in regard to the representative’s efforts to discover customer suitability information: “reasonable diligence” is required to discover the customer’s investment profile.
The supplemental material to the Rule further clarifies FINRA standards regarding three kinds of suitability: reasonable-basis suitability, customer-specific suitability, and quantitative suitability. Reasonable basis suitability is required due diligence on a security before it can be recommended to customers - this issue can arise in private placement or TIC situations where the security is not on a national exchange. Customer specific suitability is, as described above, recommending a security only if it is suitable for a customer’s specific situation. Quantitative suitability is in essence a ban on churning - representatives cannot recommend (or trade with discretion) if the number of trades is excessive in light of the customer’s financial situation and investment profile. Turnover rates and cost-equity ratios are often used to demonstrate the lack of suitability of churned accounts.
Greco & Greco regularly represents investors in “selling away” cases such as these where the broker engages in ponzi schemes or outright steals funds from customers. Customers may attempt to recover their losses in FINRA arbitration by demonstrating firms’ failures to supervise, failure to follow up on red flags, and by arguing the firm is responsible for the acts of its agent under the legal theories of respondeat superior and vicarious liability. Federal and state securities laws also mandate liability of control persons (such as brokerage firms) if certain requirements are met. If you are the victim of a ponzi scheme or broker theft by a FINRA registered broker, please contact one of our attorneys for a free consultation.
As noted in this press release from FINRA, Wells Fargo, Citigroup, Morgan Stanley, and UBS were fined for failing to supervise sales of leveraged and inverse ETFs. FINRA also alleged failures of a reasonable basis to recommend the securities (i.e. suitability).
Many inverse and leveraged exchange traded funds, including some by Proshares and Direxion, were designed to seek multiples of the exchange they were designed to track. However, many of these ETFs were designed to reset daily, thereby creating drastic differences in their performance over time compared to the index they were designed to track. We have seen many situations where many of the risks of these funds were not disclosed to customers.
As set out in this recent FINRA Press Release, a FINRA hearing officer expelled a member firm (Pinnacle Partners Financial) and its President. The decision stated that Pinnacle operated a “boiler room” that placed thousands of cold calls per week soliciting investments in oil and gas drilling joint ventures. Furthermore, the decision found the investments to be “fraudulent,” and determined that the monies raised were misused to pay back previous offerings and to pay personal expenses. In addition to the expulsion from FINRA, the firm was ordered to offer full rescission to its customers.
1. Hardt, et al. v. LPL Financial LLC. No. 11-00347. The arbitration panel in this San Diego, California arbitration awarded $1,367,000.00 in compensatory damages, interest, and costs. Claims against two other Broker-Dealers were dismissed by Claimants. The claims related to investments with Direct Invest LLC which included investments in Heron Cove. LLC and Braintree Park, LLC.
2. Lightfoot, et al. v. Pacific West Securities, et al. No. 11-00230. A Seattle, Washington panel submitted another multi-million dollar award: $1,862,960,65 plus $200,000 in attorneys fees for violations of the Securities Act of Washington. The panel found a violation of the standard of care by Respondents for “the disavowal by Respondents of any obligation to conduct a suitability analysis for the sale of TICs in the circumstances of a Section 1031 - like kind assets exchange for tax deferral purposes.” Multiple TICs were involved: TSG Midwest, Evergreen Springs, Argus TriWest, Passco River Park and Passco Promenade.
3. Griswold v. Burch & Company, Inc., et al. No. 10-02477. In this Alaska case, the panel awarded almost all of the compensatory damages requested ($350,000), plus interest for a claim related to Beamer Place Apartments.
Indian Woods Circle), and a request for $410,000 in damages. The panel awarded $301,875.00 which included interest, and $27,000 of discovery sanctions.
5. Wiborg, et al. v. Pacific West Securities, Inc. No. 10-02818. In another arbitration involving Pacific West (this one in San Francisco), the Panel awarded $300,000 plus $50,000 in punitive damages. In awarding the punitive damages, the panel described the basis for its finding that Respondent “failed to supervise” the broker involved. The Claimant alleged damages from two TICs - DBSI Offices at Brookhollow Tenant-in-Common securities and Garlock & Company Museum Park Garage Tenant-in-Common securities.
Tenant in Common (TIC) claims against the brokerage firms that sold them have recently resulted in multiple large FINRA arbitration awards, according to this this Investment News article.
The use of Tenant-in-Common (TIC) real estate investments in conjunction with IRS 1031 exchanges greatly increased after the 2002 issuance of IRS Rev. Proc. 2002-22 which clarified issues related to the uses of TICs in like-kind exchanges.
TICs since that time have been typically sold as securities by securities salespersons registered with FINRA which is a self-regulatory organization overseeing the securities industry. These salespersons (registered representatives) are required to be registered with a Broker-Dealer (brokerage firm) also regulated by FINRA. The sale of TICs by Broker-Dealers and their representatives is very lucrative. Selling commissions can be 7% or higher, and sponsors also would pay additional percentages to Broker-Dealers for “due diligence” expenses and marketing / selling expenses.
The failure of securities salespersons and their firms to perform due diligence on the TIC deals they recommend, and on the sponsors of the TIC deals, can result in disastrous outcomes for their customers. In addition, salespersons must engage in a suitability analysis prior to recommending TIC deals to their customers to ensure that these illiquid investments are suitable for the customer?s financial situation. Federal and State Securities laws also prohibit the misrepresentation or omission of material facts in conjunction with the sale of a security. Many state Acts provide for the recovery of losses, attorneys fees, and interest.
TICs are typically leveraged with a bank loan, and such leverage can unfortunately result in customers’ investments being wiped out should the bank foreclose on the property. If you have lost monies in an illiquid or foreclosed upon TIC, and believe you may have a claim against the salesperson and firm, please contact one of the attorneys at Greco & Greco for a free consultation. Greco & Greco regularly represents investors on a contingency basis.
As set out in this Washington Post article, federal prosecutors in Virginia have set up the Virginia Financial and Securities Fraud Task Force. This task force is comprised of members of the FBI, the Postal Inspection Service, the Securities and Exchange Commission, the Commodities Futures Trading Commission and the Virginia State Corporation Commission.
As set out in the story, the task force’s efforts have already resulted in multiple criminal convictions. A criminal conviction, however, does not always recoup losses for investors wronged by financial fraud. If you are the victim of a financial crime in which the salesperson or others involved in the scheme were registered to sell securities through a FINRA brokerage firm, you may be able to seek recovery of your losses through FINRA’s arbitration system.

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