Category: Stockbroker Misconduct

Insider Trading is illegal.

Former JPMorgan Banker Caught for Insider Trading

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Banker Accused of Insider Trading

A former JPMorgan Chase & Co. investment banker was convicted of insider trading after he was accused of passing confidential information to his father about certain deals not yet known to the public.

Sean Stewart is facing prison time plus home detention for his role in providing his father information on five separate deals between 2011 and 2015 involving Kendle International Inc., Kinetic Concepts Inc., Gen-Probe Inc., Lincare Holdings Inc. and CareFusion Corp.

Sean’s father, Robert Stewart, used a co-worker, Richard Cunniffe, to invest on his behalf. The two would then share the profits, which netted roughly $1.4 million in profits. Sean claimed that his father betrayed his trust by trading off information that came up in conversations about his job. The jury did not believe the younger Stewart, convicting him on all nine counts of insider trading-related charges.

The elder Stewart and Cunniffe also pled guilty, with the latter wearing a wire to a meeting with Robert Stewart, at which time Cunniffe gave him cash purporting to be the proceeds from a recent scam.

Sean Stewart also admitted to lying to JPMorgan compliance staff after his father was discovered on a list of names compiled by FINRA in connection with suspicious trading activity possibly related to insider trading.

Think You have Information on Insider Trading?

Despite what may seem to be innocent exchanges of information, trading on insider information not known to the public is illegal.

Call a Los Angeles Securities Attorney Today

If you have questions about information you’ve received or suspicious of insider trading, contact an experienced Los Angeles securities attorney today for a consultation to discuss your rights and options.

Investment Adviser pockets money in cherry-picking Scam.

Investment Adviser Pleads Guilty in Cherry-Picking Scam

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An investment adviser has pled guilty to SEC allegations that he made more than $1 million by pocketing profitable trades and funneling losing trades into client accounts.

Michael Breton, founder of Strategic Capital Management LLC, admitted he defrauded more than 30 clients over a six-year period by waiting until after the market closed to see if stock values increased or decreased before deciding to keep the trades himself or assign them to clients. This action is a breach of Breton’s fiduciary duty.

According to the SEC, Breton knew or should have known that he was not allowed to do what he did. The SEC further stated that he would invest in public companies on the day they were set to release earnings reports after market hours.

He then assessed the impact of the earnings reports, distributing stocks that increased in price into his account and spreading unprofitable stock trades among various clients. Breton “cherry picked” more than 200 lucrative trades for himself and placed more than 200 bad trades into client accounts, netting more than $1.3 million in profit. He also made misleading statements to his clients, assuring investors that his personal transactions would never put them at a disadvantage.

The SEC claimed that Breton “intended to lull clients into a false sense of security and prevent clients from learning that Breton and SCM routinely breached their fiduciary duties by conducting a fraudulent cherry-picking scheme.”

Call a Los Angeles Stockbroker Fraud Attorney Today

If you invested with Michael Breton or Strategic Capital Management LLC, or suffered a loss through a similar experience with your broker or brokerage firm in a possible cherry-picking scam, you may have certain legal rights that require your immediate attention.

Contact an experienced Los Angeles stockbroker fraud attorney today for a consultation to discuss your rights and options.

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Investment Manager Guilty in Commodities Fraud Case

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New York Investment manager Haena Park pled guilty in New York federal court to one count of commodities fraud after losing nearly $20 million. A large portion of the money in the commodities fraud case came from friends, family, and fellow Harvard alumni.

Between 2010 and 2016, Haena Park convinced investors, including her parents and other close family members, to invest in funds and investment pools she managed under one of her two firms, Phaetra and Argenta. According to prosecutors, her trading was “consistently unsuccessful,” so she generated phony account statements to cover up her mistakes. As is typical in Ponzi schemes, Park also tried to hide her losses by using new investor money to pay earlier investors.

When her initial strategy failed, Park claimed she made highly leveraged trades with the hope of making the money back; however, she ended up digging the hole even deeper.

Now, Haena Park faces up to 10 years in prison. In exchange for a plea agreement, the government has dropped a wire fraud charge that could have added another 10 years to her sentence. The plea agreement recuses Park from arguing for a sentence below the guideline range of 108-120 months.

Additionally, Park also has agreed to forfeit $23.19 million, which includes trading losses and another $3 million used to pay off investors to keep her scam afloat.

In addition to being the subject of the commodities fraud case, Park is also the subject of civil actions by the SEC and Commodity Futures Trading Commission, which is seeking to ban her from trading. Those cases were stayed, pending the resolution of her criminal case.

Contact a Commodities Fraud Attorney Today

If you suspect your broker or brokerage firm of malfeasance of any kind, you may have certain legal rights that require your immediate attention.

Contact a Los Angeles commodities fraud attorney today to schedule an appointment or consultation.

Business adviser offers an untrustworthy handshake.

Adviser Richard Wyatt Davis Charged in Multimillion Dollar Scam

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A federal grand jury has charged a North Carolina man with several counts of fraud and tax evasion over a scheme to defraud nearly 100 people, including some professional athletes, of $19 million.

Richard Wyatt Davis Jr. was charged with one count of wire fraud, two counts of securities fraud, and three counts of tax evasion. Davis is accused of scamming investors by lying about his background as a registered financial consultant to steer investors to funds under his control. He told investors that their money would be used to invest in low-risk real estate, precious metals, and natural resources, among other things. But most of the money was diverted to cover Davis’s own personal expenses and lifestyle.

Davis targeted people through his church, preying upon those with fears of the stock market, frequently speaking at or hosting events for survivalists and “preppers,” those who believe a catastrophic disaster will occur and have been preparing for such an occasion.

Between 2005 and 2009, Richard Wyatt Davis Jr. used his DCG Commercial Fund to defraud approximately 40 people of $4 million, telling investors their money would be used to invest in short-term debt. He transferred the money to other entities under his control and used some of it to pay earlier investors back, in classic Ponzi-scheme fashion.

Davis was accused of defrauding 60 investors of $8.5 million through his DCG Real Assets entity between 2008 and 2015, promoting the fund as a way to “weather and prosper” amidst the “national crisis” of escalating sovereign and personal debt. Documents sent to potential investors touted the fund as generating an average rate of return of 32 percent, when most investors had received no return at all. As with his other fund, investor money was used to repay prior investors and pay for personal expenses.

Call a Los Angeles Securities Fraud Attorney Today

If you invested with Richard Wyatt Davis Jr., or have suffered a loss because you relied on your broker who made false statements, you may have certain legal rights that require your immediate attention.

Contact an experienced Los Angeles securities fraud attorney today for a consultation to discuss your rights and options.

 

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Hedge Funders Arrested in Platinum Partners Fraud Scheme

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The founder of the New York-based hedge fund Platinum Partners was arrested this week, as prosecutors unveiled an indictment charging him and six others with orchestrating a $1 billion fraud.

Mark Nordlicht, founding partner and chief investment officer of Platinum Partners, was arrested after federal charges contained in an indictment were filed. Others arrested include David Levy, Platinum’s co-chief investment officer, and Uri Landesman, its former president.

According to the indictment, the Platinum Partners fraud scheme planned to defraud investors by overvaluing liquid assets held by their flagship fund. It caused a severe liquidity crisis that Platinum Partners tried to remedy through high-interest loans between its funds, selectively paying some investors before others – a hallmark of a Ponzi scheme.

The three men along with Jeffrey Shulse, former CEO of Platinum Partners majority-owned Black Elk Energy Offshore Operations LLC in Texas, also stand accused of defrauding the energy company’s bondholders.

Murray Huberfield, a Platinum Partners associate, was charged in federal court with orchestrating a bribe with Norman Seabrook, head of the New York prison guards’ union, to secure a $20 million investment.

Platinum Partners was founded in 2003, and had $1.7 billion under management as of this past year. The fund reported profits of more than 8% in 2015 and 7% from January through April 2016. They are now liquidating their hedge funds, and two funds have received bankruptcy protection already.

Call a Los Angeles Securities Fraud Attorney Today

If you think you may have a connection to the Platinum Partners fraud scheme or have a connection with one of their associates, or if you have suffered a loss because you relied on a hedge fund whose manager made false statements, you may have certain legal rights that require your immediate attention.

Contact an experienced Los Angeles securities fraud attorney today for a consultation to discuss your rights and options.

 

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FINRA Targets Firm For Failed Broker Supervision

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The Financial Industry Regulatory Authority (FINRA) started disciplinary proceedings against Arizona-based First Financial Equity Corp. (FFEC) and its chief compliance officer, for failed broker supervision. In its proceedings FINRA stated that the brokerage firm had supervisory deficiencies for more than three years, including failure to monitor a representative who was suspected of charging excessive commissions.

FFEC is accused of failing to establish an adequate supervisory system, failing to establish written procedures, and failing to follow existing procedures already in place between 2010 and 2013.

One FFEC representative allegedly charged a couple nearly $68,000 in commission – had he charged the standard $35 per transaction, the total would have amounted to only $5,900. Instead, FFEC and its COO, Melissa Strouse, did not require approval for discretionary transactions or conduct monthly reviews to identify possible churning or other inappropriate behavior.

FFEC also is accused of misrepresenting its supervisory system to FINRA. Each year, brokerage firms are required to report that their supervisory procedures manuals are up to date and indicate how activities are supervised. In 2010 and 2011, FINRA stated that FFEC submitted inadequate certifications in 2010 and 2011, and failed to submit anything for 2012 and 2013.

The company is also charged with miscalculating the threshold under which some producing managers are to be held to a higher standard of supervision.

Call a Los Angeles Stockbroker Attorney Today

If you invested with First Financial Equity Corporation, you may have certain legal rights that require your immediate attention.

Contact an experienced Los Angeles securities fraud attorney today for a consultation to discuss your rights and options.

 

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What is Churning, and How Do I Avoid It?

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In most brokerage accounts you are charged a commission each time you buy or sell a security (stocks, bonds, etc.). Churning occurs when a stockbroker buys or sells securities in your account for the primary purpose of generating a commission, rather than because the trade makes financial sense for the investor. Doing so violates securities industry rules, brokerage firm rules, and legal obligations owed to the investor. In short, brokers churn accounts in order to put extra income in their pockets, at the expense of the investor.

The commissions generated from excessive trading can make it difficult for an investment portfolio to be profitable, and contravenes the principle that the investors’ interests should first.

According to FINRA, “A member or an associated person must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile. A customer’s investment profile includes, but is not limited to, the 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.”

Tips to avoid churning of your portfolio:

  • Maintain control over your portfolio and require your authorization before any transaction.
  • Review each trade confirmation and your monthly account statements and seek and independent review of your account if you see frequent buys and sells of securities.
  • Consider using a fee-based account instead of a commission-based account.

Call a Los Angeles Securities Lawyer Today

If you believe you have been a victim of churning, you may have certain legal rights that require your immediate attention. Contact an experienced Los Angeles securities lawyer as soon as possible to discuss your rights.

What Should I Do If I Suspect Stockbroker Fraud?

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What is Stock Fraud?

Stockbroker fraud is any deceptive practice used to induce you to purchase or sell securities on the basis of misleading, false, or wrong information.

Types of Stock Fraud

Fraud comes in all types and forms, including activities that are not illegal per se, but whose cumulative activities make them fraudulent. For example, if your broker conducts a trade on your account which generates little or no profit, there may not be anything inherently improper or illegal. But if this becomes a repeated pattern, it is possible your broker is making trades or “churning” your account to generate commissions, without regard for whether the trades make sense for you.

Stockbroker fraud also likely occurs when your broker:  (a) offers you a “guaranteed winner,” (b) trades without your permission, (c) over-concentrates your accounts in a single security or industry, (d) is negligent, or (e) recommends unsuitable investments for your portfolio.

Brokers must follow your explicit instructions and recommend only those investments that are consistent with you risk profile and investment objectives. If you suspect your broker has failed to meet these obligations or has failed to provide you with accurate information regarding a transaction, you may be the victim of broker fraud.

What Can I Do?

Before you choose a broker check their disciplinary records by using FINRA’s Broker Check tool that will allow you to search by name and firm. Then if you suspect wrongdoing in your account, you should get a second opinion about your broker’s activity by calling a stockbroker fraud lawyer.

Call a Los Angeles Stock Fraud Attorney Today!

If you have lost money in your account and you suspect your broker misled you about the risks of an investment or an investment strategy or otherwise made unsuitable investments, you may have certain legal rights that require your immediate attention.

Contact an experienced Los Angeles stockbroker fraud attorney today for a consultation to discuss your rights and options.

Industry Groups Sue Over New DOL Fiduciary Rule

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Several industry and trade groups have filed suit in Texas federal court challenging the Department of Labor’s new fiduciary rule that would require financial professionals who advise retirement accounts to act in their “client’s best interest” when recommending investment products. We question why anyone would oppose such an obvious, common sense obligation.

The current standard only requires professionals to promote products that are “suitable” for the investor, rather than in the client’s best interest. Opponents of the new rule argue that the heightened standard would impose unjustifiable costs on small businesses and professionals who must implement it, claiming it is arbitrary and capricious, and contrary to the law. Of course, one could argue that if a company cannot afford to act in its client’s best interest, then that company should not be in business.

According to opponents, the requirements for the new DOL fiduciary rule  would violate the First Amendment by restricting advisers’ ability to advise clients and by barring firms from including class action waivers. Opponents also claim that the new rule would subject investment advisors to potentially costly litigation in the future. We believe that investment advisors should be exposed to litigation if they fail to act in their clients’ best interests.

Proponents of the new rule argue that the heightened standard would help protect investors’ retirement accounts by making sure that brokers adhere to products that are in clients’ best interest.

Under the DOL fiduciary rule, brokers would be exempted and may continue to earn commissions from sales of investment products, provided they pledge to act in their client’s best interests going forward. The rules also exempt a broader class of retirement plan sponsors from owing a fiduciary duty to investors.

Call a Los Angeles Stock Fraud Attorney Today

If you suspect your broker has recommended unsuitable investments in your retirement account and you have suffered investment losses as a result, you may have certain legal rights that require your immediate attention.

Contact an experienced Los Angeles stock fraud attorney today for a consultation to discuss your rights and options.

Los Angeles Securities Attorney: Are Mutual Funds Right For Me?

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Before you invest, it is important that you know what you are investing in. Any good stockbroker should be able to explain not only what you are investing in, but also the positives and potential negatives of any investment. In fact, brokers are obligated to provide you with a balanced presentation regarding recommended investments.

In a nutshell, a mutual fund is an investment vehicle that invests in and holds a basket of securities, such as stocks and bonds. Generally speaking, shareholders contribute the money used for investment, and the fund is professionally managed. The various securities that make up the mutual fund are known as “the portfolio,” and investors can buy or sell shares in the portfolio.

The Advantages of Investing in a Mutual Fund from a Los Angeles Securities Attorney

Mutual funds are popular among investors because of they typically offer a diversified portfolio of securities. One positive aspect of diversification is that if one of the stocks or bonds drops in value, the fund shares often maintain some price stability because the fund is comprised of many securities. Another advantage is that many mutual funds offer low minimum investments, making a mutual fund an attractive investment for someone looking to invest without large amounts of capital. In addition, mutual funds generally can be sold without much difficulty.

The Disadvantages of Investing in a Mutual Fund from a Los Angeles Securities Attorney

Investments carry risk. Even if your fund is diversified to mitigate risk, you could lose some or all of your money if the securities held in the fund drop in value. Market conditions also can play a factor. Importantly, just because a fund did well in the past does not guarantee its future performance. You also should be aware of the securities that comprise the fund: the more volatile they are, the greater the investment risk is.

Call a Los Angeles Securities Attorney Today

If you invested in a mutual fund and suffered significant losses or were not made aware of the risks of investing, you may have certain legal rights that require your immediate attention. Contact an experienced Los Angeles securities attorney today for a consultation to discuss your rights and options.