Articles Posted in Brokerage Firms

https://www.californiasecuritiesfraudlawyerblog.com/wp-content/uploads/sites/393/2016/11/sec-crest.bin_-300x202.jpgOn February 28, 2018, the Securities Exchange Commission (“SEC”) announced the settlement of charges against Ameriprise for recommending high-fee mutual fund shares to their customers when less expensive share classes were available from the same mutual fund.  As part of the settlement, Ameripise will pay a fine of $230,000 “without admitting or denying” the SEC’s findings of malfeasance.  According to the SEC’s investigation, more than 1,700 customer accounts were charged $1,778,592 in unnecessary mutual fund fees and charges.  Unfortunately, investors will not be entitled to any restitution under the terms of the SEC’s settlement.  Affected investors, however, are free to pursue their own remedies—usually through the filing of a securities arbitration matter before the Financial Industry Regulatory Authority (“FINRA”).

Ameriprise’s Conduct Amounted to Securities Fraud

As an investment advisor, Ameriprise is subject to both the Investment Advisers Act of 1940 and the Securities Act of 1933.  According to the SEC’s findings, Ameriprise willfully violated Sections 17(a)(2) & 17(a)(3) of the Securities Act by engaging in a course of business that operates as a fraud or deceit upon its customers and by omitting or failing to disclose material facts to its customers.  Specifically, Ameriprise failed to provide its customers with material information regarding the compensation they received for selling more expensive mutual fund shares such as Class A shares that carried up-front sales charges or Class B and C shares with contingent deferred sales charges (“CDSCs”) and higher internal fees and expenses.  More importantly, Ameriprise failed to disclose that the firm would earn increased revenue when customers these more expensive mutual fund shares. As noted by the SEC, “information about this cost structure would accordingly be important to a reasonable investor.”

For the past ten years, I have had the pleasure of serving as the supervising attorney for the University of San Francisco School of Law Investor Justice Clinic (IJC). The IJC provides free legal services to financial consumers who wish to pursue a securities arbitration claim against their stockbroker or investment advisor. Nearly all arbitrations handled by the IJC are held before the Financial Industry Regulatory Authority (FINRA). The IJC accepts clients with a family income under $75,000/year that have suffered financial losses that are less than $50,000.   However, these requirements are sometimes relaxed when a prospective client cannot find an attorney to take their case.

The IJC’s latest FINRA securities arbitration win involved a claim by a resident of Olympia, Washington, against LPL Financial LLC. The customer was awarded $25,000, which represented nearly all of her investment losses that occurred between October 2013 and December 2015. During this same period of time, a properly managed portfolio would have enjoyed a reasonable gain, rather than suffer a loss.

With summer almost over, the IJC students will be available to work on new and existing cases beginning August 20, 2017. However, anyone who believes they have a potential securities arbitration claim that meets the IJC’s guidelines should seek assistance without delay.  Click here for the IJC website.  For immediate assistance–or when school is not in session–use the Contact Us link on this website.

rusty barrel.jpgToday, the New York Stock Exchange (NYSE) announced their decision to proceed with delisting Magnum Hunter Resources Corporation (NYSE: MHR). Trading in MHR’s common stock will be suspended immediately causing irreparable harm to many main street investors who had invested heavily in MHR.

Related Story: ALF is investigating complaints by investors that suffered significant losses when two Wells Fargo brokers bet heavily on the small cap energy sector, including Magnum Hunter Resources.

symbol_hazard.pngBy now, readers of this blog are hopefully aware that we are very negative on the marketing and sale of leveraged and inverse exchange-traded funds (“ETFs”) to average investors. The New York Times recently published a news piece declaring that ETFs, like those offered by Direxion, were “Public Enemy No. 1.”

Still not convinced? Take a look at the year-to-date results for the worst performing Direxion ETFs through 10/7/2015 according to Morningstar–all of them triple-leveraged funds:

Direxion Daily Nat Gas Rltd Bull 3X ETF (GASL) -84.36%

Thumbnail image for lpl.jpgAs previously reported in this blog, LPL Financial has recently been faced with numerous fines from various regulators and also securities lawsuits from unhappy investors over the firm’s uncontrolled sale of non-traded REITs and leveraged ETFs.

Multi-State Task Force Concludes LPL Overly Sold REITs to Individual Investors

Today, LPL reached yet another million dollar settlement–this time with a Task Force of state regulators. The Task Force investigation determined that LPL sold non-traded REITS in excess of the requirements set forth in the REIT prospectuses, various state concentration limits and LPL’s own guidelines. The investigation also concluded that LPL’s supervisory system was inadequate. Under the settlement, LPL will remediate investor losses for all sales of non-traded REITs from January 2008 through December 2013 that exceeded the requirements of the REIT prospectuses, applicable state concentration limits or LPL’s own guidelines. The Task Formed by the North American Securities Administrators Association (NASAA) included securities regulators from California, Texas, Colorado, Nevada, Maine, Ohio and Virginia.

The Alcala Law Firm has filed a FINRA arbitration claim against LPL Financial LLC arising out of the actions of their registered representative/investment advisor Jane Everingham doing business as Everignham O’Malley in Larkspur, California. The claim, filed on behalf of a customer of Ms. Everingham, involves the following highly risky and speculative investments:

  • Proshares Trust Short 20+ Year Treasury [Symbol: TBF]. An Exchange Traded Fund (“ETF”) that seeks to achieve the inverse of the daily performance of the Barclays U.S. 20+ Year Treasury Bond Index. Because these ETFs are reset daily, this type of ETF is unsuitable for investors who plan to hold the fund for longer than one trading session due to the effects of compounding.
  • Federated Equity Funds Prudent Bear Fund [Symbol: BEARX]. A mutual fund that seeks capital appreciation primarily through short positions on domestic stocks. “Selling short” generally refers to the act of selling borrowed shares with the hope that the shares can be bought back at a lower price.

Charles Lynch, a financial advisor with Wells Fargo Advisors in Irvine, California, has one or more pending customer complaints alleging “unsuitable concentration in energy sector.”[1] ALF is currently conducting an investigation into related conduct by Mr. Lynch.[2] If you have any questions or information regarding these events, please use the “Contact Us” link above.

Disclosures:

[1] Customer complaint information was verified through FINRA’s BrokerCheck system.

Charles Frieda, a dully registered broker and investment advisor with Wells Fargo Advisors in Irvine, California, has one or more customer complaints alleging “unsuitable concentration in small cap energy sector securities.”[1] ALF is currently conducting an investigation into related conduct by Mr. Frieda.[2] If you have any information regarding this matter, please use the “Contact Us” link above.

Disclosures:

[1] Customer complaint information has been verified through FINRA’s BrokerCheck system.

On May 6, 2015, LPL Financial reached a settlement with the Financial Industry Regulatory Authority (“FINRA”) agreeing to pay FINRA a $10 million fine and make restitution payments totaling $1.7 million to a select group of customers who were sold leveraged and inverse exchange traded funds (“ETFs”).

Restitution Will be Limited to 327 Customer Accounts

Only customers who purchased certain ETFs are entitled to receive any restitution under the terms of the settlement with FINRA. A total of 327 customer accounts are covered under the restitution program. Payments will range from a high of $83,034.97 to a low of $1.02 per account. LPL has 120 days to provide regulators with proof that payment has been made.

Thumbnail image for lpl.jpgToday, the Financial Industry Regulatory Authority (“FINRA”) reached a settlement with LPL Financial LLC totaling $11.7 Million over multiple failures in the firm’s supervision of customer transactions involving non-traditional exchange traded funds (“ETFs”), variable annuities, mutual funds and non-traded real estate investment trusts (“REITs”).

As part of the settlement, LPL will be required to pay $1,664,592.04 million in restitution, plus interest, to customers affected by the firm’s failure to supervise the sale of non-traditional ETFs. FINRA has stepped up its enforcement efforts over the sale of non-traditional ETF such as leveraged and inverse ETFs, which are complex and risky investments that we have covered at length in several blog posts. Click here for more information about leveraged and inverse ETFs.

LPL has 120 days to locate and provide proof of payment to all affected customers. According to the settlement, a total of 327 unidentified customer accounts are entitled to receive payments ranging from $1.02 to $83,034.97 per account.