Wells Fargo Advisors Fined for Unsuitable STRATS Recommendations

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.

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Complaint Filed by the SEC for Fraudulent Life Settlement Investments

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.”

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U.S. Supreme Court Rules on Duty to Monitor 401(k) Plans

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.

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FINRA Fines Oriental Financial Services for Failing to Supervise Puerto Rico Bond Fund Investments

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.

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Gold Coast Bullion and Anthony Lauria Ordered to Pay CFTC Nearly $10 Million for Precious Metals Fraud

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.

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Former LPL Financial Broker Jodie Miller Suspended for Sales of Unregistered Tri-Med Securities

Jodie Linn Miller, a former broker with Tampa, Florida based LPL Financial, Inc. (LPL) and VALIC Financial Advisors, Inc. (VALIC), submitted a letter of acceptance, waiver, and consent in which she consented to, but did not admit to or deny, the Financial Industry Regulatory Authority’s (FINRA) findings that she participated in unauthorized sales of unregistered Tri-Med securities to 14 investors. FINRA found that Jodie Miller, of St. Petersburg, Florida, participated in the sale of unregistered Tri-Med notes to 14 investors. The Tri-Med notes ranged from $10,000 to $150,000 and Ms. Miller allegedly received approximately $38,225 in commissions from Tri-Med for the sales. According to FINRA, Ms. Miller neglected to tell both LPL and VALIC about her involvement with Tri-Med, nor did she obtain the necessary approval from the member firms to sell the unregistered Tri-Med notes.

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The Pearce Law Firm Investigation Summary of the Tri-Med Ponzi Scheme

In the last month, the Law Offices of Robert Wayne Pearce has gathered clients and facts from the Pinellas County Circuit Court files relating to the Tri-Med Ponzi Scheme. It appears that the Tri-Med Lawsuit Defendants and others, including sales agents who worked outside the Tri-Med organization as stockbrokers, investment advisors, accountants have schemed or unwittingly assisted and profited from the scheme to offer and sell at least $13 million in unregistered securities in the form of “notes,” “evidence of indebtedness” and “investment contracts” in violation of the registration and anti-fraud provisions of Chapter 517, Florida Statutes. The perpetrators of the scheme made false claims and purported above market rates of return to lure investors, including the Plaintiffs, into making purported investments in medical practice related account receivables securitized by so-called letters of protection (“Letters of Protection”). Only a small portion of the at least $13 million raised from investors has been used to purchase medical practice accounts receivable. Instead, the Tri-Med Lawsuit Defendants used the majority of the funds to pay off earlier investors, pay for other items not disclosed to investors, or to disburse among themselves.

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Tri-Med Under Investigation for Alleged Fraudulent Sales of Unregistered Securities

The Florida Office of Financial Regulation (FL-OFR) filed a complaint on March 5, 2014 against Tri-Med Corporation; Tri-Med Associates, Inc., and Jeremy Anderson, Anthony N. Nicholas, III, Eric Ager, Irwin Ager, and Teresa Simmons Bordinat, a/k/a Teresa Simmons (collectively referred to as “Defendants”) alleging that Tri-Med and the Defendants fraudulently offered and sold more than $13 million in unregistered securities.

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Richard Morello, Junior Alexis, and Florida Company Vertical Integration Group Charged With Illegal Precious Metals Transactions

Lake Worth, Florida-based company Vertical Integration Group, LLC, along with its Managing Members Richard V. Morello, also of Lake Worth, and Boynton Beach, Florida-based Junior Alexis have been ordered by a Federal Court to pay monetary sanctions for their part in illegal, off-exchange precious metals transactions. According to the Order of Default Judgment by the U.S. District Court for the Southern District of Florida, Vertical Integration Group, by and through Richard Morello and Junior Alexis, solicited investors to engage in off-exchange leveraged, margined, or financed precious metals transactions, executed through Hunter Wise Commodities LLC. The precious metals included gold, silver, platinum and palladium. The Order states that approximately 39 customers of Vertical Integration Group invested over $1 million and ended up losing $893,859 of their monies to trading losses, commissions, fees and other charges. The Order further states that Vertical Integration Group received commissions and fees totaling $554,566 for these precious metals transactions.

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Uncapped Indexed Annuities Are Not the Next Big Thing for Investors

Indexed annuities sales have grown exponentially over the last couple of years as agents and brokers are recommending them as fixed income or guaranteed lifetime withdrawal components of investors’ portfolios. In fact, first quarter sales of indexed annuities hit $10.9 billion, which is up by approximately 39% from the year-ago period, according to investment news sources. Now, as broker-dealers unveil “uncapped indexed annuities,” a product that purports to give conservative clients a way to benefit from surging equity markets without limitations while protecting downside risk, investors are urged to remain wary in order to detect misrepresentations and avoid misunderstandings related to the product.

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