On July 30 Robert Russel Tweed of Glendale, California appealed an Office of Hearing Officers (OHO) decision to the National Adjudicatory Council (NAC) in which he was fined $50,000 and barred from association with any FINRA member in all capacities for allegedly in violating FINRA Rule 2010 and Sections 17(a)(2) and (3) of the securities act of 1933. The sanctions are not in effect, pending review of the OHO decision by the NAC. Continue reading →
Cetera Advisor Networks, LLC, headquartered in El Segundo, CA, submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) for failing to adequately supervise the sales of variable annuities, specifically L-share variable annuities.
Registered with FINRA since 1983, Cetera Advisor Networks currently has 3,048 registered representatives and 1,209 branch offices. FINRA found that from January 2013 to December 2014, Cetera Advisor Networks failed to establish, maintain, and enforce an adequate supervisory system to identify red flags related to the sale of L-share variable annuities. Additionally, FINRA found that Cetera Advisor Networks failed to provide its registered representatives with proper training and guidance on suitability considerations for these variable annuities. According to FINRA, the L-share annuities are a complex investment product that is only suitable for a narrow class of investors and that Cetera Advisor Networks allegedly failed to provide its registered representatives with appropriate guidance to discern this class of investor. Continue reading →
The Financial Industry Regulatory Authority (FINRA) is scrutinizing the sales of variable annuities, noting that they are complex products typically marketed to seniors. This follows a record fine of $25 million FINRA slammed MetLife Securities, Inc. (MetLife) with for negligent misrepresentations and omissions of fact regarding the costs and guarantees relating to variable annuities and variable annuity replacements.
At a recent Insured Retirement Institute (IRI) conference, FINRA associate vice president and enforcement chief counsel James Day stated that variable annuities “… are at the sweet spot of complex products marketed to retirees and people about to retire.” Also noted at the IRI conference as a specific area of FINRA’s scrutiny were L-share variable annuities. These products offer increased liquidity and a shorter surrender-penalty period, typically three years rather than seven. Continue reading →
Stuart Horowitz, a former registered representative with the Coral Springs, Florida branch of Securities America, Inc., submitted a letter of Acceptance, Waiver, and Consent in which he consented to, but did not admit to or deny, the Financial Industry Regulatory Authority’s (FINRA) sanction and findings that he made unsuitable recommendations and trades in CSMIF preferred notes of an unregistered limited partnership investment fund despite numerous red flags that the fund was not a viable investment.
FINRA found that Stuart Horowitz requested that his member firm, Securities America, quickly approve the CSMIF preferred notes fund so he could begin selling them. While awaiting a third-party due diligence report, the firm agreed to allow Mr. Horowitz to offer the CSMIF preferred notes for sale to existing fund investors. Mr. Horowitz emailed his customers with an interest in the fund and recommended they move forward with an investment conversion. FINRA noted that recommendations were made despite the fact that Mr. Horowitz was aware of numerous red flags, including that his previous member firm had decided not to allow the sale of the CSMIF preferred notes due to concerns about the fund’s ability to generate income for investors. Continue reading →
Master limited partnerships (MLPs) in oil and gas have been a highly recommended investment over the past few years. Many brokerage firms and financial advisors have advised clients to invest in these oil and gas energy stocks for the high yield or income potential. Touted to investors as secure, high quality income generating investments with only a moderate risk, these investments were anything but. Oil and gas MLPs are, in fact, risky and speculative because of their connection with oil prices. The massive slides in oil prices have caused these MLP investments to lose substantial value, which has resulted in substantial investment losses for many investors.
Brokerage firms and financial advisors should never have sold these risky investments to investors with conservative or moderate investment objectives. Unfortunately, these MLPs were often recommended to retirees and conservative investors who needed to protect their principal or earn income. Continue reading →
The Financial Industry Regulatory Authority (FINRA) has ordered Wells Fargo Advisors, LLC (Wells Fargo) to pay a $500,000 fine and $241,974.34 plus pre-judgment interest in restitution to customers for allegedly making unsuitable recommendations to customers to purchase structured repackaged asset-backed trust securities (STRATS).
From approximately 2005 to 2012, Wells Fargo made unsuitable STRATS recommendations to its retail customers, selling nearly $12 million worth of the complex structured products. According to FINRA, Wells Fargo failed to properly educate its registered representatives about the risks associated with STRATS and that the customers had the potential to suffer significant losses. FINRA also found that Wells Fargo’s internal-use STRATS brochures were not fair and balanced and neglected to provide an appropriate basis for evaluating the risks and therefore the suitability of the STRATS. Wells Fargo did not admit to or deny FINRA’s findings. Continue reading →
According to the U.S. Securities and Exchange Commission (SEC), from February 2012 through January 2014, Christopher A. Novinger and Brady J. Speers, and their company NFS Group, LLC d/b/a Novers Financial (collectively the “Defendants”) fraudulently offered and sold life settlement interests. In so doing, the SEC claims that Mr. Novinger and Mr. Speers made false and misleading representations to prospective investors about their purported business experience and financial expertise and that the Defendants misrepresented the investments.
The SEC alleged that Mr. Novinger and Mr. Speers also constructed fake, meaningless titles for themselves to make investors believe that they were experienced and sophisticated financial advisers. The SEC alleged that Mr. Novinger and Mr. Speers used terms such as “licensed financial consultant,” “licensed consultant,” and “licensed financial strategist” toward that end. In truth, they had no training relating to securities and non-insurance related financial products, including life settlements. The SEC also alleged that the Defendants told investors that the life settlement investments were “safe,” “risk free,” “safe as CDs,” “the most secure, safe method for growing funds,” “federally insured,” and finally comprised of “polices insured with large, A-rated companies and backed by Federal Reserves.” Continue reading →
The U.S. Supreme Court made its decision on a key 401(k) lawsuit, Tibble v. Edison. This suit was initially filed in 2007 by employees against their employers for having mutual funds with excessive fees in the 401(k) plan.
Their retirement plan had a selection of 40 funds, six of which were retail share class funds and are more costly than institutional share class funds. The U.S. District Court granted the plaintiffs a judgment of $370,732 from the high fees in three of the retail share funds. The other three funds appealed to the ninth U.S. Circuit Court of appeals and eventually to the Supreme Court. Continue reading →
Oriental Financial Services Corp. (Oriental) was fined $245,000 by the Financial Industry Regulatory Authority (FINRA) for failing to maintain a proper supervisory system to comply with Federal securities laws, namely, that its supervisory system failed to identify and review concentrated purchases of Puerto Rico municipal bonds and closed-end funds; and failing to disclose on customer confirmations the markups and markdowns for riskless principal transactions in Puerto Rico closed-end funds.
Without admitting or denying the findings, Oriental consented to FINRA’s sanctions and findings that if failed to disclose approximately $2.9 million in markups and markdowns on customer trade confirmations. According to FINRA, Oriental’s registered representatives continued selling the municipal bonds and closed-end funds even after the municipal bond rating had been downgraded to junk status. Consequently, Oriental Financial Services has agreed to submit to FINRA the procedure of how it intends to properly identify, review and correct any unsuitable, concentrated Puerto Rico bond purchases. Continue reading →
The U.S. Commodity Futures Trading Commission (CFTC) has ordered Florida resident Anthony Lauria and his Fort Lauderdale, Florida based company, Gold Coast Bullion, Inc., to pay nearly $10 million for committing illegal off-exchange precious metals fraud.
The CFTC Order states that Gold Coast Bullion used telemarketers to solicit customers to invest in financed precious metals transactions. According to the CFTC Order, Anthony Lauria and the Gold Coast Bullion telemarketers represented to investors that in order to purchase the precious metals, they needed to deposit about 25% of the total metal value, that Gold Coast Bullion would arrange for the investor to receive a loan for the remaining 75%, and the investor would pay a finance charge on the loan. Continue reading →