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The Investor's Rights Law Blog

Former Aegis Capital Broker Malcolm Segal Under Investigation for Unauthorized Transfers

According to the Financial Industry Regulatory Authority (FINRA), former Aegis Capital Corporation (Aegis) stockbroker Malcolm Segal, of Langhorne, Pennsylvania and Boynton Beach, Florida, is under investigation for a Pennsylvania-based customer complaint alleging that $225,000 was transferred from his account without his authorization. According to FINRA records, "Mr. Segal failed to cooperate with an internal investigation into a customer complaint alleging that in December 2013, Mr. Segal, on an unauthorized basis, transferred monies via wire from the client's account." Malcolm Segal was discharged by Aegis on July 28, 2014.

In addition to alleged unauthorized transfers of funds, our law firm is also investigating whether Mr. Segal engaged in unauthorized sales of certificates of deposit to Aegis customers.

Novice Investor Wiped Out by Merrill Lynch Stockbroker

The Law Offices of Robert Wayne Pearce, P.A. has filed a claim against Merrill Lynch Pierce Fenner & Smith (Merrill Lynch) on behalf of an investor residing in Puerto Rico (the Claimant). A summary of the Claimant's allegations against Merrill Lynch is below.

This arbitration arises from a series of unsuitable recommendations by a Merrill Lynch financial advisor for the Claimant to purchase and hold overconcentrated, leveraged Puerto Rico bonds in a Merrill Lynch account. As a result of Merrill Lynch and its employee, the Claimant suffered substantial investment losses.

The Claimant is a 40 year old single mother of two, living in Puerto Rico, who earns less than $40,000 a year in a sales job to support her children. In 2012, Claimant received $250,000 from a third party. With no prior investment experience of any kind, her co-workers urged her to seek the advice of a financial professional to protect her gift.

Brookville Capital Partners and Anthony Lodati Named in FINRA Complaint for Alleged Fraud

Melville, New York-based Brookville Capital Partners LLC (Brookville Capital) and the firm's president, Anthony F. Lodati, were named in a Financial Industry Regulatory Authority (FINRA) complaint alleging that the firm and Mr. Lodati defrauded investors in connection with a private placement offering. According to the complaint, Brookville Capital and Mr. Lodati solicited customers to invest in a private placement offering that failed to disclose material facts about an individual involved in the offering. Anthony Lodati allegedly learned that the individual, who had effected transactions on behalf of the private placement, had been fined by the Securities and Exchange Commission (SEC) for securities fraud and had been convicted of a felony by the state of Florida. The FINRA complaint alleges that Mr. Lodati failed to inform any of the potential investors of the individual's involvement. Moreover, the private placement memorandum (PPM) allegedly made no mention of the individual or of his regulatory or criminal background.

According to the FINRA complaint, Brookville Capital failed to conduct adequate due diligence with respect to the private placement offering, alleging that the firm and Mr. Lodati "lacked a reasonable basis to believe that the recommendation of the private placement could be suitable for any customer."

Meyers Associates Broker Craig Josephberg Arrested

Last week, Craig L. Josephberg, a Meyers Associates, LP stockbroker, was arrested for engaging in a penny stock fraud scheme involving many securities including CodeSmart Holdings, Cubed, Inc., StarStream Entertainment, Inc. and The Staffing Group, LTD. He was indicted along with A.J. Discala, Marc E. Wexler, Kyleen Cane, Victor Azrak and Ira Schapiro for allegedly defrauding investors and potential investors in several public companies. The scheme in which Mr. Josephberg allegedly participated was "built on lies, deceit and manipulated trading activity to defraud the securities markets and investing public," according to the US Attorney's office for the Eastern District of New York. Mr. Joesphberg's alleged "pump and dump" scheme included false and misleading press releases and SEC filings, stock market manipulation techniques such as "wash trades," "matched trades," "marking the close," and unauthorized trading for clients who entrusted the stockbrokers with their life savings. As in all such schemes, the price of the various public corporations climbs for no real reason and then falls from the sky with the investors holding worthless stock. Mr. Josephberg's clients were allegedly on the dumping side of the scheme. According to the FBI, some of the victims had no idea that the stock was being purchased in their accounts by the stockbrokers. The fraudulent scheme purportedly took place in 2013 and this year.

Santander Securities Broker Switches Investors Into Unsuitable Closed End Funds

The Law Offices of Robert Wayne Pearce, P.A. has filed yet another arbitration claim against Santander Securities, LLC (Santander). A summary of the clients' allegations against Santander Securities is below.

This arbitration arises out of a Santander stockbroker's unsuitable investment decision with regard to the Claimants' Santander investment account which was reinvested and overconcentrated in Puerto Rico, resulting in the Claimants suffering substantial monetary losses.

The Claimants were retired and only suited for a diversified portfolio of conservative, income producing investments which would supplement their social security income. The Santander stockbroker first contacted the Claimants in November of 2010, presenting himself as their new financial advisor due to their previous advisor's leaving Santander to work with Merrill Lynch. The Claimants transferred nearly $600,000.00 in cash and securities to their new Merrill Lynch account, leaving one Santander closed-end fund, the First Puerto Rico Tax-Exempt Fund because it could not be transferred to Merrill Lynch. At the advice of their Santander broker, the Claimants simply held the First Puerto Rico Tax-Exempt Fund for several years.

After their Santander account had remained inactive for several years, the Santander broker decided to sell the Claimants' entire position in the First Puerto Rico Tax-Exempt Fund and to then purchase 3 speculative Santander closed-end funds: First Puerto Rico Tax Exempt Maturity Fund III, First Puerto Rico Tax Exempt Target Maturity Fund IV, and First Puerto Rico Tax Exempt Maturity Fund V. He neglected to explain to the Claimants the reason for the investment switch and failed to provide them with any prospectus, offering memorandum, or other documents to explain the nature of the newly purchased funds.

Former WFG Investments Broker Matthew Bell Arrested

Last week, Matthew A. Bell, a former WFG Investments, Inc. stockbroker was arrested for engaging in a penny stock fraud scheme involving many securities, including CodeSmart Holdings, Cubed, Inc., StarStream Entertainment, Inc. and The Staffing Group, LTD. He was indicted along with A.J. Discala, Marc E. Wexler, Kyleen Cane, Victor Azrak and Ira Schapiro for allegedly defrauding investors and potential investors in the 4 public companies. The alleged scheme was "built on lies, deceit and manipulated trading activity to defraud the securities markets and investing public," according to the US Attorney's office for the Eastern District of New York. The defendants alleged "pump and dump" scheme included false and misleading press releases and SEC filings, stock market manipulation techniques such as "wash trades," "matched trades," "marking the close," and unauthorized trading for clients who it entrusted the stockbrokers with their life savings. As in all such schemes, the price of the various public corporations climbs for no real reason and then falls from the sky with the investors holding worthless stock. According to the FBI, some of Mr. Bell's victims had no idea that the stock was being purchased in their accounts by the stockbroker.

Mr. Bell has a history of customer complaints. A recent FINRA report indicates over 25 customer disputes, some of which are still pending, and two terminations by stock brokerage firms. It appears that during the relevant period Mr. Bell was working for WFG Investments, Inc. and Securities America, Inc. However, Securities America reports that none of Mr. Bell's clients ever actually transferred their accounts to the brokerage firm and that he did no business there because the State of Texas did not approve him being licensed. Most of the customer complaints are for unsuitable recommendations, breach of fiduciary duty, misrepresentations, and unauthorized trading in many different securities products. Several complaints relate to the offer and sale of private placements known as California Proton Treatment Center, Maryland Proton Center, Virtus Student Housing, LP and Pamaz Scientific, Inc. which were of illiquid and unsuitable investments for many customers. The most recent claims, however, relate to purchases of small, high risk penny stocks, such as those stocks which are the subject of the indictment.

John Warren DuBrule Barred by FINRA for Misrepresenting Hedge Fund Values to Investors

John Warren DuBrule, a former Orlando, Florida registered principal employed by Altamonte Springs, Florida-based Merrimac Corporate Securities, Inc., submitted an Offer of Settlement in which he consented to, but did not admit to or deny, the entry of the Financial Industry Regulatory Authority's (FINRA) findings that he engaged in securities fraud by knowingly causing the distribution of summary quarterly statements that contained false information about the valuation of a hedge fund in willful violation of industry rules and regulations. FINRA found that Mr. DuBrule allegedly inflated the value of the fund's assets on its quarterly statements by including the face value and promised interest of defaulted promissory notes as assets of the fund. FINRA found that the quarterly statements falsely inflated the value of investors' interests in the fund. Further, that the summary quarterly statements contained false and misleading statements that the fund utilized the services of an independent firm to prepare statements and tax reports, and that they were prepared in accordance with generally accepted accounting principles (GAAP). According to FINRA, Mr. DuBrule allegedly failed to disclose that the valuation of the fund was also based on defaulted and cancelled promissory notes. Mr. DuBrule allegedly misappropriated investor funds by withdrawing the funds despite knowing that the promissory notes had been cancelled and the fund's value had decreased substantially. Mr. DuBrule allegedly made materially false and misleading statements and omissions to customers to entice them to invest $3.8 million into the fund. Consequently, John DuBrule was barred from association with any FINRA member in any capacity.

Weston Capital Asset Management and Albert Hallac Named in SEC Complaint for Misusing Investor Funds

The Securities and Exchange Commission (SEC) has charged hedge fund advisory firm Weston Capital Asset Management LLC (Weston Capital), of West Palm Beach, FL, and its founder and president, Albert Hallac, for allegedly shifting money from one investment to another without informing investors and investing contrary to the hedge fund's stated investment strategy. The SEC complaint states that Albert Hallac, with the assistance of Weston Capital's former general counsel Keith Wellner, allegedly drained over $17 million from a hedge fund they managed, Wimbledon Fund SPC Class TT Segregated Portfolio (TT Portfolio) and transferred the funds to Swartz IP Services Group, Inc. (Swartz IP), a consulting and investment firm.

According to the SEC's complaint, Weston Capital's TT Portfolio was required to invest all of the investor monies in a diversified hedge fund, Tewksbury Investment Fund Ltd. Weston Capital allegedly went against its stated investment strategy by transferring funds to Swartz IP and failed to disclose this to investors, who allegedly received false account statements portraying their investment as performing as well or even better than before. The SEC complaint states that Albert Hallac, Keith Wellner, and Mr. Hallac's son allegedly collectively received $750,000 in payments from Swartz IP. The complaint further states that Weston Capital and Albert Hallac allegedly wrongfully used $3.5 million to pay down a loan from another firm-managed fund.

Salomon Whitney Fined By FINRA For Failure To Supervise ETF Sales

Salomon Whitney LLC of Farmingdale, New York consented to, but did not admit to or deny, the described sanctions and to the entry of the Financial Industry Regulatory Authority's (FINRA) findings that it failed to establish a supervisory system with regard to the sale of non-traditional exchange-traded funds (ETFs), including leveraged, inverse and inverse-leveraged ETFs. FINRA's findings stated that despite the risks involved with holding non-traditional ETFs for longer time periods, numerous Moloney Securities customers held the ETFs for extended periods. Some even allegedly held the ETFs for several months. FINRA found that Moloney Securities failed to adequately train its registered representatives and supervisors with respect to the features, characteristics, and the risks involved with non-traditional ETFs, especially the risks associated with longer-term holds of the ETFs. According to FINRA, Salomon Whitney made unsuitable ETF recommendations and failed to conduct an adequate suitability analysis of the non-traditional ETFs before offering them to its customers. Consequently, Salomon Whitney was censured and fined $30,000.

Ricky Bell Named in FINRA Complaint for Soliciting Customers Into Outside "Lending Program"

Ricky Eugene Bell, a former Fayetteville, North Carolina-based registered representative with Cape Fear Securities, Inc., was named a respondent in a Financial Industry Regulatory Authority (FINRA) complaint alleging that he solicited firm customers to invest in an outside "lending program." Mr. Bell allegedly offered the investment opportunity to his "select customers and closest friends," according to the FINRA complaint. The complaint alleges that Mr. Bell received a total of approximately $247,500 from customer investments and that he also borrowed approximately $19,650 from firm customers without permission or firm approval.

According to the FINRA complaint, Mr. Bell told customers that the "lending program," referred to by Mr. Bell as HLT Investments, would use investor funds, which would be pooled together, to provide high-interest loans to small businesses. These high-interest loans would allegedly generate profits to the investors. FINRA's complaint states that Mr. Bell allegedly made interest payments to the customers by writing checks which he then asked customers to refrain from cashing, and to consider them as collateral in case the lending program failed. To date, Mr. Bell has not returned any of the $247,500 of principal received from investors.

Rated by Super Lawyers | Robert W. Pearce | visit superlawyers.com
LexisNexis | Martindale-Hubbell | AV PREEMINENT |For Ethical Standards and Legal Ability | 2013 | Robert Wayne Pearce

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