Articles Posted in Investors Rights & Alerts

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Newbridge Securities Corporation (Newbridge) of Boca Raton, Florida submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly failing to apply sales charge discounts to certain customers’ eligible purchases of unit investment trusts (UITs) in violation of FINRA Rule 2010.

A UIT is a type of Investment Company that issues securities and holds a fixed portfolio. UITS typically offer “break points” which reduce client fees based on the amount invested. FINRA requires that all UIT transactions take place “on the most advantageous terms available to the customer.” FINRA investigators found that Newbridge failed to apply sales discounts to customers resulting in clients paying excessive charges.

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WFG Investments, Inc. of Dallas, Texas submitted a Letter of Acceptance, Waiver and Consent to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly failing to apply sales charge discounts to curtain customers’ eligible purchases of Unit investment Trusts (UITs). WFG was subject to a similar FINRA complaint in December 2014 which alleged the firm failed to supervise a representative in connection with false statements received by clients.

A UIT is a type of Investment Company that issues securities, typically called “units,” representing undivided interests in a fixed portfolio of securities. UIT units are redeemable securities that are issued for a specific term, and entitle an investor to receive his or her proportionate share of the UIT’s net assets on redemption or at termination. One way to reduce the sales fee charged on a UIT purchase is through “breakpoints” which reduce client fees based on the amount they invested.

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Oriental Financial Services Corp. (OFS) of San Juan, Puerto Rico submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Market Regulation of the Financial Industry Regulatory Authority (FINRA) for allegedly purchasing municipal securities for its own account from customers and then selling those municipal securities to other customers at prices that were not fair or reasonable.

Between July 1, 2013 and September 30, 2013 FINRA investigators found multiple transactions in which OFS was not fair or reasonable to its customers. FINRA alleged OFS failed to take into consideration all relevant factors, including the best judgment of the broker as to the fair market value of the securities at the time of the transaction and of any securities traded in connection with the transaction. Additionally, FINRA alleged that OFS didn’t account for the expense involved in effecting the transaction, the fact that the broker is entitled to a profit, and the total dollar amount of the transaction.

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Investors often hire a financial advisor to manage their money professionally because they lack the knowledge themselves and trust that their advisor will act in their best interest and uphold the industry rules and regulations set forth by the Financial Industry Regulatory Authority (FINRA), lest they be disciplined or even barred from the financial industry.  Unfortunately, as Senator Elizabeth Warren (D-Mass) writes in a letter she and Sen. Tom Cotton (R-Ark) sent to the chairman of FINRA, Richard G. Ketchum, “…FINRA is not doing nearly enough to fulfill its investor protection mission.”

A recent study of data from FINRA’s BrokerCheck database, conducted by the National Bureau of Economic Research (NBER), concluded that financial advisor misconduct is “broader than a few heavily publicized scandals” and that “one in thirteen financial advisers have a misconduct-related disclosure on their record” (See http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2739170).  Financial advisor misconduct disclosures include such things as bribery, forgery, and fraud.  The NBER study noted that only about half of the advisors who committed misconduct lost their job and 44% of those obtained a job at a different broker dealer within one year.  One of the more disturbing findings of the NBER study is that approximately one-third of all financial advisors with misconduct records are repeat offenders. Continue reading →

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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 →

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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. Continue reading →

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The Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) have issued an alert to warn investors of fraudulent penny stock scams touting what may essentially be stocks of dormant shell companies which have little to no business operations or non-cash assets and pose the threat of substantial financial losses for those who invest in them.

The SEC’s alert notes that fraudsters use dormant shell companies in what are known as pump-and-dump schemes. These schemes involve the buying of shares in the shell company, claiming the company to be a great investment opportunity, even hyping up the company with aggressive marketing and the announcing of new management or re-incorporation, possibly under a new name. All of these tactics are meant to “pump” the company stock back to life, thereby creating more trading and getting the stock prices to shoot up. Continue reading →

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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. Continue reading →