California Securities Fraud Lawyer Blog

San Diego-based First Allied Securities has agreed to pay $1.95 million in a settlement with the Securities and Exchange Commission (SEC) relating to the firm's failure to supervise the activities of former broker Harold Jaschke who was the subject of a related SEC action for churning, conducting unauthorized trades and giving unsuitable recommendations.

According to the SEC, Jaschke had engaged in a high-risk short-term treasury bond trading strategy for two municipalities who were his clients, the City of Kissimmee, Florida and the Tohopekaliga Water Authority. Jaschke reaped commissions of more than $14 million while trading for the two municipalities who had combined unrealized losses of approximately $60 million. When Jaschke's unusual trading activity raised red flags and generated an exception report, First Allied did not follow its customary practice of sending the customer a "negative response letter" to notify them of the suspicious activity. As its name implies, a negative response letter does not require a response from the customer unless they want to question the activity. After a nine-month delay, the firm became concerned enough that it ultimately decided to send a "positive response letter," which requires a written confirmation from the customer. However, according to the SEC's order, First Allied's letter failed to adequately alert the customers about the suspicious activity and falsely stated that the letter was being sent as part of First Allied's "annual review" process. No one at the firm, other than Jaschke, spoke with the customers about the situation. The customers signed and returned the letter based on misinformation given to them by Jaschke.

First Allied terminated Harold Jaschke on August 13, 2008. The SEC's action against him is still pending.

Today, the Securities and Exchange Commission (SEC) filed a securities fraud lawsuit against Sean David Morton of Manhattan Beach, California, alleging that Morton falsely claimed he would use his psychic expertise to provide investment guidance. The SEC also alleged that Morton lied to investors about his investing track record.

The SEC's complaint includes a lengthy and detailed analysis showing that Morton's predictions over the years have proven to be wildly inaccurate. Below are a few examples of the false claims that the SEC has accused Morton of making:

• In his July 20,2006, newsletter Morton wrote: "I have called ALL the highs and lows of the market, giving EXACT DATES for rises and crashes over the last 14 years."
• During a November 21,2001, radio broadcast, Morton said: "I'll give you the exact date...April 2002...[B]etween April and June of 2002 [the DJIA] is going to be the steady rise in the market. That's where it's going to really pick up and pick up stability. By December of next year,...it'll be back up into the realm [of] high 11,000, 12,000 or so..." In reality, the DJIA ended the year at 8,431.
• Morton's Website touts the "ASTONISHING PSYCHIC HITS" he has made in predicting "The EXACT dates for prices of GOLD" from 2004 to 2007" and that he "predicted exact dates for the post 90's decline of the [DJIA] and NASDAQ,and has given the exact levels--and timing--of their subsequent rise and fall."

According to a UPI news report, Morton claims that he predicted the stock market crash but his trader refused to act on his advice saying it would be irresponsible. Morton also said that all the money was gone and the he was filing for personal bankruptcy. As of today, his website www.delphiassociates.org is still active.

Today, the Securities and Exchange Commission (SEC) filed a securities fraud lawsuit in Sacramento federal court charging two Sacramento-area men with the misappropriating approximately $10 million from over 100 investors who were falsely promised that the funds were safe, liquid, high-yield investments that were secured by deeds of trust. Charged in the complaint were Lawrence "Lee" Loomis, John Hagener, Loomis Wealth Solutions, LLC ("LWS"), and Lismar Financial Services, LLC.

The SEC has requested monetary penalties, disgorgement of ill-gotten gains and injunctive relief. Click here to download the SEC's complaint.