Recently in Medical Capital Category

April 26, 2013

Securities America Fined $100,000 Over IMH Secured Loan Fund & Medical Capital Sales Practices

Thumbnail image for Thumbnail image for Thumbnail image for FINRA-1.gifSecurities America, Inc. has entered into a settlement with the Financial Industry Regulatory Authority (FINRA) and will pay a fine of $100,000 in connection with the sale of two private placements. As part of the settlement, Securities America agreed to the following findings:

  • The firm failed to have a supervisory systems in place designed to identify misrepresentations or misleading statements made to customers regarding two private placements: (1) the IMH Secured Loan Fund and (2) Medical Provider Funding Corporation (aka "Medical Capital").

  • Securities America's email monitoring system failed to identify several emails that misrepresented the liquidity and safety of the IMH Secured Loan Fund.

  • One particular email exaggerated the safety of IMH by describing it as a "very safe, sleep at night investment."

  • Other emails used the words "principal protection" in describing the risk to principal for both IMH and Medical Capital.

In addition to the $100,000 fine, Securities America must conduct a comprehensive review of its supervisory system and make necessary revisions to prevent similar violations.

September 10, 2010

Medical Capital Movie "The Perfect Game" Strikes Out

Investor hopes of recovering some of their Medical Capital securities fraud losses were dashed today when the court appointed receiver made the following announcement in his Fourteenth Status Report:

The film asset "The Perfect Game" was released in Mexico on April 2, 2010, and on April 16, 2010 in the United States and Canada. Box office receipts have not met projections and the Receiver does not expect a return from the theatrical sales of the film. The Receiver has terminated the distribution agreement for cause, and has taken various actions to protect the receivership's interest in the film.

Latest box office receipts for the movie have totaled approximately $1.1 million since the movie's release in April.

homestretch.jpgUpate: On September 23, 2010, the Medical Capital receiver sought court approval to sell a yacht named "Home Stretch" for $1.8 million. No word yet on whether there will ever be a sale of MedCap's ownership interest in Vivavision Inc., whose only product was a live video feed of a hamster in a cage.

Click here for all Medical Capital blog postings.

August 24, 2010

Montana Securities Regulators Take Disciplinary Action Against Securities America Over Medical Capital Fiasco

Thumbnail image for Montana_Seal.pngOn August 4, 2010, the Montana Securities and Insurance Commissioner filed a disciplinary action against Securities America and several of the firm's top executives alleging securities fraud in connection with the sale of the failed Medical Capital private placement. The Montana lawsuit seeks the imposition of fines and restitution on behalf of four different groups of investors identified in the lawsuit and also to provide appropriate restitution to all Montana participants. Montana's disciplinary action is similar to the lawsuit filed by the Commonwealth of Massachusetts against Securities America back in January 2010.

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July 19, 2010

FBI Reports 105% Increase in High Yield Investment Fraud Investigations

Thumbnail image for FBI Seal.pngAccording to an FBI report on Securities Fraud before the Senate Judiciary Committee, there was a 105% increase in High Yield Investment Program investigations by the Bureau in 2009. My California securities law firm has also experienced a similar surge in investor complaints involving high-yield investments like Medical Capital Notes, which were sold through a network of brokerage firms such as Securities America, a firm that is now the subject of numerous securities fraud lawsuits and class action lawsuits.

High Yield Investment Programs ("HYIP") may seem like the ideal investment for retirees seeking greater income. However, for most investors, the acronym HYIP really stands for "Hazardous to Your Investment Portfolio." Promising large returns with seemingly no risk, these high yielding investments have raised millions of dollars from unsuspecting investors. In reality, many of these to-good-to-be-true investments turned out to be nothing more than Ponzi Schemes that needed to bring in new investor money in order to continue paying existing investors. During the recent financial crisis, many of these Ponzi schemes ultimately fell apart when the pool of available investors evaporated.

High yield investments are often sold through private placements that can only be purchased by "accredited investors." Because private placements are typically high risk investments with limited liquidity, they are only suitable for wealthy and sophisticated investors who can bear the risk of loss.

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April 29, 2010

It's Time to Change the Accredited Investor Rule for Private Placements

play at risk.JPGMy California securities law firm has been inundated with inquiries from small investors who were sold unregistered private placements even though they were clearly not wealthy or financially sophisticated. Some of these private offerings--such as those issued by Medical Capital Holdings and Provident Asset Management--turned out to be outright frauds.

The private placements that are causing the most trouble were widely sold by stockbrokers who were only allowed to target wealthy individuals that have the financial capability to bear the risk of investing in unregistered and illiquid securities. These qualified investors are referred to as "accredited investors" under the federal securities laws. As discussed in a previous blog posting about accredited investors, an individual will be considered "accredited" if they have a net worth of $1 million or an annual income in excess of $200,000 (or $300,000 when combined with a spouse). The financial threshold for "accredited investors" was established under "Regulation D" which was adopted back in 1982. These requirements have not been updated since they were implemented 28 years ago. According to an analysis conducted by Businessweek, if adjusted for inflation, the accredited investor net worth requirement would increase from $1 million to $2.25 million and the income requirement would increase to $449,000 (single) and $674,000 (married). It is estimated that there were approximately 1.5 million "accredited investors" back in 1982. By 2008, the estimated number of households that were "accredited" swelled to as much as 7.2 million.

With such a low barrier to entry, many small investors were allowed to unwittingly put their retirement savings at risk--often lured by assurances from their stockbroker of high returns, safety and liquidity. An increase in the accredited investor qualification requirements is necessary to curtail the sale of private placements to individuals who can least afford to lose their investment.

See related blog posting:

UPDATE: Investor Home Equity to be Excluded from $1 Million Minimum Net-Worth Requirement for Accredited Investors

Even for Accredited Investors, Stockbroker Recommendations to Buy Private Placements Are Subject to the Suitability Rule

April 12, 2010

Medical Capital Update: Stockbroker's License Revoked for Violating the Prohibition Against General Solicitations

Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for medcap.jpgOn April 12, 2010, the Colorado Division of Securities revoked the securities license of stockbroker John B. Guyette for his role in the sale of Medical Capital Notes to a number of Colorado investors in violation of Rule 502 of Regulation D, which prohibits general solicitations or advertisements in connection with the sale of private placements. Under Regulation D, sales agents may only target potential investors with whom they have a substantial pre-existing relationship.

The types of general solicitations that are prohibited under Regulation D typically include: (1) newspaper advertisements; (2) radio or television broadcasts; and (3) seminars or meetings. Only when there is a substantive and pre-existing relationship, can a stockbroker target a particular investor to purchase a private placement. One of the purposes of the "preexisting relationship" requirement is to ensure that the selling agent is reasonably certain that the targeted investor is sufficiently sophisticated in financial matters to participate in the offering. According to the Securities and Exchange Commission (SEC), the mere fact that sales are directed only to accredited investors does not mean that the solicitation is in compliance. The Alcala Law Firm is pursuing securities arbitration claims on behalf of Medical Capital investors who were improperly targeted by stockbrokers through general solicitations. Many of these investors were financially unsophisticated and/or did not qualify as accredited investors.

See related blog posting:

Even for Accredited Investors, Stockbroker Recommendations to Buy Private Placements Are Subject to the Suitability Rule

March 23, 2010

Medical Capital Executives Face Criminal Investigation

DOJseal.jpgThe Orange County Register reports that court records filed with the federal court in Orange County, California, reveal that Sidney Field and Joseph Lampariello, two former top Medical Capital Holdings executives, are currently under federal criminal investigation for their involvement in the troubled company whose private placement offerings were allegedly part of a massive Ponzi scheme. Former Medical Capital CEO Field and President Lampariello filed an emergency request with the court seeking permission to use $150,000 per month in frozen assets to defend themselves in parallel investigations by the SEC and the United States Department of Justice. Judge David O. Carter denied the request.

Click here for all Medical Capital blog postings.

March 22, 2010

Massachusetts Securities Regulators Subpoena Six Brokers Over Sale of Medical Capital Holdings and Provident Royalties

mass-quarter.jpgThe Bay State has stepped up its investigation into the fraudulent sale of private placements by securities brokers. Today, the Massachusetts Securities Division announced that it issued 6 subpoenas to National Securities; QA3 Financial; CapWest Securities; Independent Financial Group; Investors Capital; and Centaurus Financial seeking information related to the sale of Medical Capital Holdings Inc. and Provident Royalties. Earlier this year, the Commonwealth of Massachusetts filed a securities fraud lawsuit against Securities America charging the firm with misleading investors in the sale of Medical Capital Notes. [See Massachusetts Regulators Charge Securities America With Securities Fraud]

Although the Commonwealth of Massachusetts is primarily concerned with the sale of Provident Royalties and Medical Capital Notes to residents of that state, the fraudulent sale of risky private placements has affected thousands of investors across the nation and is now the subject of intense scrutiny. Several of the brokers that were subpoenaed by Massachusetts have been subjected to an influx of customer arbitration claims and securities class action lawsuits. [See: Medical Capital Class Action or Arbitration: Investors Should Consider Their Options and related blog postings discussed therein.]

March 3, 2010

Even for Accredited Investors, Stockbroker Recommendations to Buy Private Placements Are Subject to the Suitability Rule

In my California-based securities law practice, most of my clients that own a home qualify as "accredited investors" within the meaning of Regulation D which exempts private placements from federal securities registration requirements. Rule 501 of the Securities Act of 1933 defines an accredited investor as any person with a net worth (or joint net worth with a spouse) in excess of $1,000,000 at the time of purchase.

danger sign.jpgFinancial advisors or stockbrokers who sell private placements are subject to the rules and standards promulgated by the Financial Industry Regulatory Authority (FINRA). According to FINRA, stockbrokers who act as selling agents for private placements are required to conduct a due diligence investigation of the offering so that they understand the nature of the investment and its risks. Also, before recommending a private placement to a particular customer, the stockbroker must perform a suitability analysis by examining the customer's overall financial situation and investment objectives. Because a home can represent an investor's largest asset, net worth alone should never be used to determine whether an investment is suitable. A customer's status as an accredited investor does not release a stockbroker from the suitability requirements.

Recently, there has been a surge in investor complaints involving private placements that were sold by broker-dealers who were acting as selling agents. Private placements that are creating a lot of investor complaints include: Medical Capital, IMH Secured Loan Fund, Provident Asset Management, Striker Petroleum and DBSI. Some of the broker dealers who actively sold one or more of these private placements are Securities America, QA3 Financial, National Securities, CapWest, Independent Financial Group, just to name a few. Please contact us if you have any questions about unsuitable private placements.

Related Blog Posts:

Investor Home Equity to be Excluded from $1 Million Minimum Net-Worth Requirement for Accredited Investors

It's Time to Change the Accredited Investor Rule for Private Placements

February 24, 2010

Medical Capital Securities Fraud Lawsuit Update

Thumbnail image for Thumbnail image for medcap.jpgOn February 24, 2010, a federal judge granted a motion to dismiss filed by Sidney Field and David Lampariello in the securities fraud lawsuit filed by the Securities Exchange Commission ("SEC"), SEC v. Medical Capital Holdings, Inc., et al., before the U.S. District Court for the Central District of California. Field was the CEO of Medical Capital Corporation and Lampariello was the company's COO. The motion to dismiss was granted with leave to amend. This means that the SEC has the opportunity to file an amended complaint in the next 14 days in order to clarify certain allegations regarding how the private placement memorandum and other offering documents were distributed to investors.

As noted in previous blog postings, Medical Capital Notes were sold to investors through a nationwide network of broker-dealers who acted as selling agents for the company. Many investors have filed securities arbitration claims against broker-dealers alleging fraud, misrepresentation and unsuitability. Brokerage firms that have been targeted by Medical Capital investors include Securities America, QA3 Financial, National Securities, CapWest and others. Click here for more Medical Capital blog postings.

February 22, 2010

Is Mass-Arbitration in the Client's Best Interest?

Yesterday's article in Investment News confirms my opinion about the disadvantages of pursuing mass-arbitration claims before the Financial Industry Regulatory Authority (FINRA), which I try to avoid in my California securities law practice. On the heals of the Medical Capital class action lawsuits, law firms have begun filing mass-arbitration claims against broker-dealers such as Securities America and Capital Financial Services, often grouping as many as 15 individual Medical Capital investors into a single arbitration case in what almost amounts to a "mini-class action." In response, broker-dealers have vowed to vigorously defend these claims.

sheep_herd.jpgMass-arbitrations can be very profitable for law firms hoping to earn large contingent fees by aggregating as many clients as possible into a single arbitration. Unfortunately, the best interest of the individual investor/client may suffer as a result. The challenge of taking a mass-arbitration claim to hearing and proving that each client is independently entitled to an award can be great. As part of their defense strategy, broker-dealers are filing motions to sever these claims into separate individual arbitrations which will undoubtedly delay and disrupt the entire process. When clients start getting separated from the herd, will mass-arbitration attorneys still be interested in representing those clients who had marginal claims to begin with? Undertaking a mass-arbitration raises a number of ethical issues for attorneys attempting to jointly represent a diverse group of unrelated clients who may have varying levels of commitment to pursue their claims. A client recently showed me a proposed contingent fee agreement given to them by a mass-arbitration law firm that would essentially force them to accept a settlement if 60% of the other clients agreed to settle.

Combining customer claims into a single arbitration often makes sense from a practical and economic standpoint, such as when the clients are related or are customers of the same financial advisor. However, individuals with strong cases may be better off going it alone rather than joining a mass-arbitration and being lumped together with other investors who may have weaker facts. Before deciding to become part of a mass-arbitration claim, clients should explore their options with a great deal of care.

Related Blog Post:

Medical Capital Class Action or Arbitration: Investors Should Consider Their Options

Are Securities Arbitration Cases More Financially Rewarding for Investors than Class Actions?

[For California Residents] Why Having a California Licensed Securities Arbitration Lawyer is So Important

February 11, 2010

Medical Capital Securities Fraud Update

Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for medcap.jpgOn February 10, 2010, the court-appointed receiver in the Medical Capital fraud case, Thomas Seaman, filed his seventh status report in the matter of Securities and Exchange Commission vs. for Medical Capital Holdings, Inc. et al. that is pending in the U.S. District Court for the Central District of Northern California. As of January 31, 2010, the receivership has collected cash in the amount of $24,023,994.25 and disbursed funds in the amount of $5,602,179.15, leaving funds on hand in the amount of $17,306,596. The receiver plans to continue disposing of assets and raising funds for the benefit of investors; however, with investors owed approximately $1.079 billion, the $17,306,596 currently on hand still leaves investor's about $1.061 billion short.

There are additional legal remedies available to Medical Capital investors to recoup their losses, which can be pursued simultaneously with the court-appointed receiver's efforts, including class action lawsuits and arbitration before the Financial Industry Regulatory Authority (FINRA).

Related Blog Posts:

Medical Capital Class Action or Arbitration: Investors Should Consider Their Options

Is Mass-Arbitration in the Client's Best Interest?

Are Securities Arbitration Cases More Financially Rewarding for Investors than Class Actions?

January 30, 2010

IMH Secured Loan Fund Securities Lawsuit Alert

The Alcala Law Firm was recently contacted by several California investors who invested in the IMH Secured Loan Fund, LLC, a private placement managed by Scottsdale based Investors Mortgage Holdings, Inc. The Financial advisors who sold the IMH Secured Loan Fund to these investors also sold them other private placements, including Medical Capital and Provident Asset Management, two speculative investments that turned out to be ponzi schemes and are now the subject of numerous securities fraud lawsuits.

Before recommending any investment, particularly risky and speculative private placements, financial advisors have a fiduciary duty to adequately disclose the risks involved and also to exercise due diligence in determining whether such investments are suitable for the customer. The Alcala Law Firm is in the process of investigating the possibility of filing securities arbitration claims before the Financial Industry Regulatory Authority (FINRA) to recover investment losses related to these private placements.

Click here for all IMH Secured Loan Fund Blog Postings.

January 29, 2010

Medical Capital Update: Massachusetts Regulators Charge Securities America With Securities Fraud

Thumbnail image for medcap.jpgOn January 26, 2010, Securities America, the beleaguered brokerage firm that is already subject to a multitude of securities fraud lawsuits, including a pending class action in California, was charged by the Commonwealth of Massachusetts with misleading investors in the sale of notes issued by companies owned by Medical Capital Holdings, Inc. The regulatory complaint alleges that Securities America ignored red flags and deliberately failed to disclose the risks involved when selling $697 million worth Medical Capital Notes to unsophisticated investors. According to the complaint, investors were told that the notes were secured and low risk when, in reality, the notes were "unregistered, speculative, high risk securities, which were draped in the mantle of safety."

Our securities law firm has been contacted by investors who purchased Medical Capital Notes from stockbrokers at Securities America, National Securities Corporation, CapWest, QA3 Financial and others. We are in the process of filing securities arbitration claims before the Financial Industry Regulatory Authority (FINRA) seeking to recover Medical Capital losses from these brokerage firms, pending further investigation.

Related Blog Posts:

Medical Capital Class Action or Arbitration: Investors Should Consider Their Options

Is Mass-Arbitration in the Client's Best Interest?

Are Securities Arbitration Cases More Financially Rewarding for Investors than Class Actions?

For more blog posts, select a category below.

December 7, 2009

SEC Strikes at Striker Petroleum for Securities Fraud

Striker debentures can now be added to the growing list of private-placement offerings that were marketed through a network of stockbrokers that have recently become embroiled in securities fraud lawsuits. This week, the SEC alleged that Striker Petroleum, LLC deceived approximately 540 investors into purchasing $57 million worth of fraudulent debentures. The SEC is alleging that Striker was selling the debentures to pay off prior debenture holders and to pay fixed returns to investors who had invested in Legacy oil and gas properties.

According to one industry news source, the Striker debentures were sold through a nationwide network of stockbrokers, including CapWest Securities. As a result, many investors who purchased Striker debentures may also have been sold interests in Provident Asset Management and Medical Capital--two private placements that are already the focus of SEC and investor lawsuits. As we noted in a recent blog posting on this very subject: Brokers who recommended these investments have a lot of explaining to do.

Click here for related blog postings.