Library - Law Offices of Robert Wayne Pearce

Red River Securities and CEO Expelled/Barred by FINRA for Fraudulent Oil and Gas Offerings

A FINRA hearing panel has expelled Red River Securities, LLC and barred its CEO, Brian Keith Hardwick, for fraudulent sales in five oil and gas offerings. They have also been ordered to pay $24.6 million in restitution to investors. According to FINRA, over the course of four years, Red River Securities and Brian Hardwick made misrepresentations and omissions in connection with the sales of interests in oil and gas joint ventures issued by Regal Energy, LLC, a close affiliate of Red River Securities. FINRA found that Red River Securities and Brian Hardwick fraudulently misrepresented and omitted facts relating to the risky offerings. For example, they allegedly misrepresented the amount of income distributed to investors, failed to disclose material facts regarding the risk involved, and omitted information about the fees involved. The FINRA panel referred to this aforementioned misconduct as egregious and noted the “extent of the respondents’ monetary gain,” in which investors received total distributions less than $50,000 from the more than $25 million they invested in the offerings.

May 8, 2017

NEXT Financial Representative Suspended for Misrepresenting a Variable Annuity Investment

Dion Rey Padilla, of San Antonio, Texas, submitted an Offer of Settlement to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly making an unauthorized purchase of a variable annuity for a customer and misrepresenting to the customer on numerous occasions that it was not a variable annuity. FINRA found that, while employed by NEXT Financial Group, Inc., Dion Padilla misrepresented a variable annuity investment to his customers, who stressed to him that they did not want any of their funds invested in a variable annuity due to the fees and their desire for liquidity. Mr. Padilla allegedly presented a variable annuity application to the customer, assuring him that it was not for a variable annuity, but a type of managed money investment. Mr. Padilla’s misrepresentations, however, were false and misleading.

May 3, 2017

Edward Jones Broker Named in FINRA Complaint for Converting Funds of Elderly Client with Dementia

Austin Wayne Morton, a previously registered broker with Edward D. Jones & Co. L.P. (Edward Jones), was named a Respondent in a Financial Industry Regulatory Authority (FINRA) complaint alleging that he converted $36,000 from his former customer, an elderly man suffering from dementia. According to the FINRA complaint, Austin Wayne Morton, of Spiro, Oklahoma, allegedly kept $22,000 in cash that his elderly customer, whom Mr. Morton apparently knew since childhood, had withdrawn from his closed IRA account. Mr. Morton is alleged by FINRA to have used those funds for his own benefit.

May 1, 2017

The SEC Charges MA-Based Portfolio Manager with Diverting Millions to Personal Account

The Securities and Exchange Commission (SEC) has charged a Massachusetts-based portfolio manager, Kevin J. Amell, with fraud amid allegations that he diverted nearly $2 million from an account over which he had trading authority (the Fund) to his personal brokerage account. In a parallel action, the U.S. Attorney’s Office for the District of Massachusetts has also filed criminal charges against Mr. Amell. According to the SEC complaint, Kevin Amell abused his trading authority at least 265 times by pre-arranging the purchase or sale of call options between his personal brokerage account and the Fund’s brokerage accounts. The complaint alleges that Mr. Amell matched trades wherein he profited by either buying call options at artificially lower prices and selling them shortly thereafter at higher prices to third parties; or by purchasing call options from third parties and selling them shortly thereafter to the Fund at artificially high prices. In one example, the SEC’s complaint alleges that, in a series of trades involving Amazon securities, Mr. Amell allegedly generated a profit of $23,000 for himself in less than 23 minutes at the Fund’s expense.

Apr 26, 2017

FINRA Bars Wells Fargo Advisors Broker for Unsuitable and Excessive Trading

Matthew Maczko, a former registered representative with Wells Fargo Advisors, LLC, submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he was barred from association with any FINRA member in all capacities amid allegations that he made unsuitable recommendations and excessively traded four brokerage accounts held by an elderly customer. According to FINRA, Matthew Christopher Maczko, of Downers Grove, Illinois, was the registered representative for his now 93 year old customer’s four brokerage accounts. According to FINRA, Mr. Maczko allegedly controlled the four brokerage accounts. During the relevant period, January 2009 to April 2016, FINRA found that Mr. Maczko effected over 2800 transactions in this customer’s accounts. FINRA stated that Mr. Maczko’s excessive trading strategy generated approximately $581,650 in commissions, $84,270 in fees, and allegedly caused his customer $397,000 in trading losses. Without admitting or denying the findings, Mr. Maczko was barred from association with any FINRA member in any capacity.

Apr 24, 2017

LPL Financial Broker Suspended for Unsuitable Recommendations to Elderly Customers

Adam Fritzsche, a stockbroker formerly registered with LPL Financial Corporation (LPL Financial), submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he was suspended for one year for allegedly making unsuitable recommendations of a speculative, illiquid investment to three elderly retirees. According to FINRA, Adam Stuart Fritzsche, of Canterbury, Connecticut, recommended that three of his customers purchase an investment in a business development company, which was a speculative, illiquid investment that was suitable only as a long-term investment for those with no need for liquidity. His customers were ages 81, 89, and 61 at the time of Mr. Fritzsche’s recommendations.

Apr 19, 2017

FINRA Bars Former Financial West Group Broker for Unsuitable and Excessive Trading

Kelly Clayton Althar, a former registered representative with Financial West Group, submitted an Offer of Settlement to the Financial Industry Regulatory Authority (FINRA) in which he was barred from association with any FINRA member in all capacities amid allegations that he made unsuitable recommendations and excessively traded two accounts held by an elderly customer. According to FINRA, Mr. Althar, of San Pablo, California, was the registered representative for an elderly customer with hopes of retiring in a few years. Without admitting or denying FINRA’s findings, Mr. Althar consented to FINRA’s findings that he exercised de facto control over two of his customer’s accounts and utilized that control to place frequent trades without consulting his customer in order to generate increased commissions for himself. FINRA found that Mr. Althar often purchased, sold, and subsequently repurchased the same security in his customer’s accounts in order to generate commissions while his customer suffered substantial losses. During the relevant period, FINRA stated that Mr. Althar generated approximately $91,000 in commissions from his excessive IRA trades, and an additional $48,000 in commissions in his customer’s individual. His customer, who was close to retirement and purportedly only wanted low-risk investments, suffered extensive losses in the value of her two accounts, which dropped by more than 50%.

Apr 17, 2017

Former Transamerica Financial Advisors Representative Suspended for Numerous Violations

Gary Saitowitz, of Marietta, Georgia, submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he was fined $10,000, suspended for 18 months, and ordered to pay $11,455 plus interest in restitution to a customer for several violations related to the sale of non-traded real estate investment trusts (REITs). Gary Saitowitz, a former registered representative with Transamerica Financial Advisors, Inc. (Transamerica) was found by FINRA to have recommended that four customers, including a senior citizen, allocate unsuitable amounts of their assets in non-traded REITs. As a result of Mr. Saitowitz’ recommendations, the customers’ accounts were allegedly overconcentrated and therefore unsuitable in light of their investment goals and risk tolerances. FINRA also alleged that Mr. Saitowitz tried to circumvent the firm’s concentration limits on the amount of a customer’s liquid assets that could be invested in non-traded REITs by overstating the liquid net worth of certain customers.

Apr 12, 2017

FINRA Suspends Ultralat Capital Markets Broker for Unsuitable and Overconcentrated Bond Recommendations

Mauricio Jaramillo, a stockbroker formerly registered with Ultralat Capital Markets, Inc., submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he was fined $7,500 and suspended for four months. Without admitting or denying FINRA’s findings, Mauricio Jaramillo, of Bogota, Colombia, consented to the entry of findings that he recommended unsuitable and overconcentrated short-term trading in bonds in the accounts of three customers. Ultralat Capital Markets (Ultralat) provides retail brokerage services for customers based in Latin America referred by Ultrabursatiles S.A. Comisionista de Bolsa. While registered with Ultralat as a foreign associate, Mr. Jaramillo allegedly engaged in short-term bond trading which included bond swap transactions. According to FINRA, due to Mr. Jaramillo’s recommendations, the customers’ accounts were almost totally (98%) concentrated in bonds denominated in Brazilian Reais. Further, FINRA alleged the customers had significant margin balances in their accounts as well. Mr. Jaramillo allegedly had no basis for such short-term, unsuitable, and overconcentrated bond recommendations, especially in light of the fact that two of the three customers involved had conservative investment objectives. Consequently, Mr. Jaramillo was assessed a deferred fine of $7,500 and suspended for four months. The suspension is in effect from January 17, 2017 through May 16, 2017.

Apr 10, 2017

FINRA Suspends LPL Financial Broker for Unsuitable Mutual Fund Trading

Steve Dale Heath, of Newport News, Virginia, submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) for allegedly executing unsuitable mutual fund trades, including switches, in the account of an elderly customer with conservative investment goals, causing the customer to suffer losses of approximately $7,207. FINRA alleged that Steve Heath recommended and effected short-term mutual fund trades in the account of an elderly customer. Mutual funds are intended as longer-term investments. However, Mr. Heath allegedly recommended selling after only 249 days on average. Further, some of the trades involved mutual fund switches, which were allegedly unsuitable for his customer in light of the customer’s conservative investment objectives. Mutual fund “switching” is simply the process of transferring an investment from one mutual fund to another, sometimes for good reasons and other times to defraud clients. Some brokers attempt to effect numerous switches in client accounts in order to generate commissions.

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