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.
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.
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 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.
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 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.
Moloney Securities Co, Inc. of Manchester, Missouri 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). According to FINRA, Moloney Securities permitted its representatives to recommend and sell non-traditional ETFs to customers even though the firm neglected to provide its supervisors or its representatives with training or guidance as to whether these complex and risky investments were suitable for the investors. FINRA’s findings stated that Moloney Securities neither utilized nor made available to supervisory personnel reports or other tools to monitor length of time the ETFs were held or the losses which occurred in those hold positions. Consequently, Moloney Securities was censured and fined $20,000.
Infinex Investments, Inc. (Infinex) of Meriden, Connecticut 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 neglected to perform reasonable due diligence regarding the sale of non-traditional exchange-traded funds (ETFs). According to FINRA, Infinex failed to properly review non-traditional ETFs prior to offering them for sale to customers. FINRA found that the firm allowed its representatives to recommend the ETFs to customers even though those representatives had minimal training on the risks and features of non-traditional ETFs, thereby making unsuitable recommendations and putting customers at unnecessary risk for investment losses. Consequently, Infinex Investments was censured, fined $75,000 by FINRA, and ordered to pay more than $287,000 in restitution to customers.
Dawson James Securities, Inc. (Dawson James) of Boca Raton, Florida 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’s written supervisory procedures (WSPs) did not meet the minimum requirements in several areas, resulting in a $75,000 fine by FINRA.
Brevard, North Carolina-based Carolina Financial Securities, LLC (Carolina Financial) 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 supervise the sale of an unregistered private placement offering to investors with investments of approximately $1.1 million. FINRAs findings stated that Carolina Financial neglected to follow its procedures with regard to the review and verification of statements made in private placement offering documents. Furthermore, FINRA found that the brokerage firm failed to conduct adequate due diligence prior to the approval of the offering for sale to its investors.