Articles Posted in Brokerage Firms

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.

The Alcala Law Firm, a California-based securities law firm, has filed a securities arbitration claim against LPL Financial before the Financial Industry Regulatory Authority (FINRA) involving the sale of risky and unsuitable investments in a managed account causing a customer to suffer significant losses between 2011 and 2013–a period of time when the overall stock market enjoyed positive returns. The customer’s investments included an inverse exchange traded fund (“ETF”), a bear fund that bet against the market and several gold funds.

In related news, on May 6, 2015, LPL was fined $10 Million by FINRA for widespread supervisory violations and ordered to pay $1.7 in restitution to customers who were sold leveraged and inverse ETFs. Click here for related blog post. LPL, headquartered in Boston, has grown from approximately 8,300 registered representative in 2007 to 18,433. However, LPL’s rapid growth has created problems with regulatory authorities who have repeatedly fined the firm for failure to supervise their growing legion of financial advisors. LPL paid disciplinary fines totaling $2.95 million in 2014 and $8 million (plus $2 million in restitution) in 2013 for supervisory lapses.

Related Blog Post:

The Alcala Law Firm has filed a securities arbitration claim before the Financial Industry Regulatory Authority (FINRA) against Cantella & Co., Inc. alleging elder financial abuse on behalf of a 68-year-old woman diagnosed with dementia. Also named as respondents in the arbitration proceeding where two other brokerage firms where the customer previously maintained accounts as she followed her stockbroker Dennis (“Deno”) Webb from firm to firm. The other respondents named in the claim include: MML Investors Services, Inc. and optionsXpress, Inc. (a subsidiary of Charles Schwab & Co. that was formerly doing business as brokersXpress LLC) This investigation is still ongoing. For further information, please contact us.

Today, Charles Schwab agreed to end a long standing dispute over their customer’s right to participate in securities class action lawsuits. In a settlement reached with the Financial Industry Regulatory Authority (FINRA), Charles Schwab agreed to pay a $500,000 fine and refrain from including language in its customer agreements that would prevent customers from participating in class actions. Click here for our earlier blog post on this subject.

Brokerage firms have always included language in their customer agreements requiring all disputes to be resolved through FINRA’s securities arbitration program–with one exception: Customers were allowed to skip arbitration if a related securities class action lawsuit had been filed. Schwab’s recent settlement with FINRA preserves the status quo and maintains a customer’s right to either pursue an individual arbitration claim or join a class action.

Arbitration vs. Class Action

Thumbnail image for lpl.jpgToday, LPL Financial LLC reached a settlement with the Financial Industry Regulatory Authority (FINRA) over the firm’s failure to adequately supervise the sale of non-traded REITs and other risky alternative investments. LPL’s settlement with FINRA specifically mentioned former LPL broker Gary J. Chackman for his role in selling “dozens” of alternative investments that were unsuitable and exceeded the firm’s guidelines, which he was able to conceal by using false customer financial information. Chackman has been the subject of numerous securities arbitration claims.

Last year, LPL agreed to pay a fine of $500,000 and approximately $2 million in restitution to Massachusetts investors for violating Massachussets suitability rules while selling non-traded REITs, including:

  • Inland American, Cole Property Trust II, Inc.

Thumbnail image for violators.jpgYesterday, Berthel Fisher & Co. Financial Services, Inc. entered into a settlement with the Financial Industry Regulatory Authority (FINRA) and agreed to pay a $775,000 fine stemming from sale of unsuitable investments, including non-traded REITs as well as leveraged and inverse ETFs. According to FINRA’s BrokerCheck system, Berthel Fisher has been the subject of multiple enforcement actions initiated by FINRA and state securities administrators.

Regulators Stepping Up Supervision of Alternative Investments

Berthel Fisher is the latest of several brokerage firms to get swept up in FINRA’s focus on the brokerage industry’s sale of risky alternative investments to financial consumers and the failure to properly enforce suitability standards for those investments. The risks associated with investing in non-traded REITs and leveraged/inverse ETFs have been extensively covered in previous blog posts. For more information, see below:

Two related brokerage firms–Stifel, Nicholas & Company, Incorporated and Century Securities Associates, Inc.–entered into a settlement with the Financial Industry Regulatory Authority (FINRA) over alleged misconduct in the sales of leveraged and inverse exchange traded funds (ETFs). As part of the settlement, Stifel and Century agreed to pay fines totaling $550,000 and to make restitution totaling $474,613 to a select group of 65 customers who were sold ETFs between January 1, 2009 and June 1, 2013. Presumably, the group of customers chosen to receive redemption consists of customers who had selected a conservative investment objective and had held the ETFs for an unreasonable period of time. In its written findings, FINRA provided a brief description of two customers that are entitled to redemption:

  • A Stifel customer with a primary investment objective of “income” who invested in a nontraditional ETF and held if for 18 months that lost $41,000.
  • A Century customer with a primary investment objective of “income” who invested in a nontraditional ETF and held if for 2 ½ years that lost $13,600.

On Wednesday, Adorian Boleancu, a former San Francisco Bay Area stockbroker was indicted and charged with 27 counts of fraud. The charges, which include allegations of elder financial abuse, stem from activities between 2007 and 2011 that resulted in Boleancu being permanently barred from the securities industry by the Financial Industry Regulatory Authority (“FINRA”) and ordered to pay restitution in the amount of $650,000 to an elderly widow he purportedly defrauded. Boleancu was disbarred by FINRA back in March 2013. The victim also filed lawsuits against the Boleancu’s former employers Wells Fargo Advisors and Morgan Stanley seeking damages in excess of $2 million. The lawsuits were ultimately referred to arbitration before FINRA. FINRA is the largest dispute resolution forum for securities complaints. For more information about FINRA arbitration, click here.