SEC Category Archives — Page 9 of 13 — Investor Lawyers Blog Published by New York, New York Investor Attorneys

Published on: July 4, 2012

Broker Charged with Fraud Related to Astrology-based Investment Strategy

Investment fraud lawyers are currently investigating potential claims on behalf of customers of Gurudeo “Buddy” Persaud, an Orlando, Florida broker. A recent announcement by the Securities and Exchange Commission stated that the SEC has charged Persaud with defrauding investors. Allegedly, Persaud’s fraud involved the use of an investment strategy based on astrology.

Broker Charged with Fraud Related to Astrology-based Investment Strategy

According to the charges, which were filed in the U.S. District Court for the Middle District of Florida, Persaud allegedly persuaded investors to give him money for investments he promised were “safe” and that would return 6-18 percent on their investment. Persaud managed to raise $1 million from investors. However, SEC enforcers allege that Persaud’s market-timing service made forecasts that were based on gravitational pull and lunar cycles. The strategy is apparently based on the idea that mass human behavior and, as a result, the stock market, are affected by gravitational forces. Investors were not made aware of the alleged basis of Persaud’s strategy and most securities arbitration lawyers would agree that astrology is not a sound basis for an investment strategy.

Furthermore, Persaud allegedly misappropriated around $415,000 of investor money for his personal use and lost $400,000 as a result of the investment strategy.

Published on: July 2, 2012

Investors of Bank of America Structured Products Could Recover Losses

by InvestorLawyers

Securities fraud attorneys are currently investigating potential claims on behalf of customers who suffered losses as a result in their investment in a Bank of America-created structured product or products. In some cases, Financial Industry Regulatory Authority-registered brokerage firms may be held liable for having improperly sold structured products to their clients, such as those created by Bank of America.

Investors of Bank of America Structured Products Could Recover Losses

Typically, structured products are notes or debt instruments created by investment sponsors. These products are linked to assets such as stock, which are linked to another asset or assets. These investments are extremely complex and, as a result, are not appropriate for unsophisticated investors who are not capable of understanding the risks and complexity of the investment.

Because an income component is typically offered with structured products, they are appealing to fixed income individuals, such as retirees. Despite the fact the investment is not suitable for many individuals, they continue to be pushed by brokerage firms because of the high commissions offered in association with their creation and sale. Financial Industry Regulatory Authority rules have established that firms have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance. Furthermore, securities arbitration lawyers say that brokerage firms must, before approving an investment’s sale to a customer, conduct a reasonable investigation of the securities and issuer.

Published on: June 28, 2012

Investors Beware Retirement Account Fraud

by InvestorLawyers

Investment fraud lawyers are currently investigating potential claims on behalf of investors who suffered losses as a result of a breach of fiduciary duty related to their retirement accounts.

Investors Beware Retirement Account Fraud

Cofounder and director of Results One Financial LLC, Steven Salutric, was recently ordered to restore $1,211,902.25 to clients who held pension plans with him. The money was allegedly withdrawn from four pension plans between 2005 and 2009. This action violated the Employee Retirement Income Security Act. Allegations against Salutric stated that he misdirected client assets to entities such as a restaurant, a film distribution company, a real estate partnership and the church at which he served as treasurer. Salutric had a personal interest in all these entities, according to stock fraud lawyers.

“It is particularly egregious when those entrusted with protecting workers’ retirement assets jeopardize them by committing illegal acts for personal gain,” Hilda L.Solis, secretary of the U.S. Department of Labor, said.

Published on: June 25, 2012

Paladin Realty Income Properties REIT, Wells REIT Investors Could Recover Losses

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of investors who have suffered significant losses as a result of their investment in Wells or Paladin Realty Income Properties REITs.

Paladin Realty Income Properties REIT and Wells REIT Investors Could Recover Losses

Reportedly, investors were recently told by Paladin Reality Income Properties Inc. that its stock would cease to be sold next month because its current scale cannot cover expenses. This comes after it raised, in more than four years, $78.7 million. Reports about Wells Real Estate Funds state that, in an attempt to cut costs, the firm laid off its executive sales staff recently. This is not a good sign for investors, who are hoping their investment will rebound after dividend cuts and price drops.

Securities fraud attorneys have stated that as illiquid, non-traded investments, many REITs are not a suitable investment for all investors. Financial Industry Regulatory Authority rules have established that firms have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation. Furthermore, brokerage firms must, before approving an investment’s sale to a customer, conduct a reasonable investigation of the securities and issuer.

Published on: June 22, 2012

Customers of Benjamin Daniel DeHaan Could Recover Losses

by InvestorLawyers

Potential claims are currently being investigated by securities fraud attorneys on behalf of Benjamin Daniel DeHaan customers. The Securities and Exchange Commission filed a civil action on June 9, 2012, against Lighthouse Financial Partners LLC and Benjamin Daniel DeHaan in the United States District Court for the Northern District of Georgia. Lighthouse has been owned and operated by DeHaan since 2007.

Customers of Benjamin Daniel DeHaan Could Recover Losses

According to the SEC’s complaint, from January 2011 until early May 2012, DeHaan allegedly moved about $1.2 million of investor funds to a bank account under his control, in Lighthouse’s name. By moving the funds to this account from the client accounts that were held at a custodial broker-dealer, DeHaan was able to gain control and custody of the client assets. Allegedly, the customers were told that new accounts at another broker-dealer would be opened through the use of these funds. However, once the funds were in the Lighthouse account, at least some of them were moved to DeHaan’s personal account and other accounts used for Lighthouse business expenses.

Client funds totaling at least $600,000 are still unaccounted for. Furthermore, DeHaan allegedly provided false documents to the SEC’s staff and the State of Georgia’s examiner.

Published on: June 21, 2012

Victims of Burton Douglas Morriss Fraud Could Recover Losses

by InvestorLawyers

Securities arbitration lawyers are investigating potential claims on behalf of investors who suffered significant losses as a result of the alleged fraud committed by Burton Douglas Morriss. An announcement by the Securities and Exchange Commission stated that the SEC has obtained emergency relief, including the appointment of a receiver and an asset freeze, and has filed charges against several St. Louis, Missouri management companies and private investment funds. According to the complaint, the principal of these entities, Burton Douglas Morriss, allegedly misappropriated investor assets totaling more than $9 million.

Victims of Burton Douglas Morriss Fraud Could Recover Losses

The complaint, which was filed in the St. Louis federal court, states that between 2003 and 2011, Morriss, Acartha Group LLC and MIC VII LLC raised a minimum of $88 million from at least 97 investors. According to the SEC’s allegations, Morriss’ investors were told that their money would be invested in a portfolio of technology companies and financial services by his private management companies and investment funds. However, stock fraud lawyers say, investors were unaware that over the last several years, their money had been misappropriated by Morriss. Millions of dollars were allegedly misappropriated through fraudulent transfers to himself and an entity under his control, Morriss Holdings LLC. Securities arbitration lawyers say these funds were allegedly used for personal expenses including pleasure trips, household expenses, mortgage payments, alimony payments and personal loan payments. Allegedly, Morriss concealed his fraud by later disguising the fraudulent transfers as personal loans.

Another allegation included in the SEC’s complaint is that Morriss orchestrated a scheme to recruit investors to invest in membership interests in a private investment fund he owned, which would dilute the fund’s current investors’ investments, without the required unanimous consent of current investors.

Published on: June 20, 2012

Arbitration Claim Filed Against Securities America for Churning

by InvestorLawyers

Stock fraud lawyers are investigating potential claims on behalf of investors of Securities America who may have suffered significant losses as a result of life insurance investment twisting and churning.

Arbitration Claim Filed Against Securities America for Churning

Investment fraud lawyers say churning is a common problem in the securities industry. According to the S.E.C., “Churning refers to the excessive buying and selling of securities in your account by your broker, for the purpose of generating commissions and without regard to your investment objectives.” In short, churning is a form of broker misconduct in which the broker performs excessive trading to generate personal profit. For more information on churning, see the previous blog post, “Investment Churning: A Slippery Slope of Broker Misconduct.”

A Financial Industry Regulatory Authority arbitration claim was recently filed on behalf of an 81-year-old Peoria, Illinois resident. The claimant, a retired widow, was sold various life insurance policies and annuities. These investments were allegedly held for only a short period of time before being liquidated. According to the claim, the investments’ proceeds were then rolled into other annuity contracts and policies. Allegedly, most of these transactions incurred surrender charges and fees that were charged to the claimant. As an example detailed by the Statement of Claim, the funds of a Lincoln Annuity, purchased on August 20, 2003 and surrendered two years later, were rolled into a 15-month Fidelity Annuity. The proceeds of this transaction were rolled, on the same day of the sale, into a Hancock Annuity. The Hancock Annuity was held for just over two years. When it was sold, its proceeds were rolled into a Jackson Annuity.

Published on: June 13, 2012

Investment Fraud Red Flags for Elderly Investors

by InvestorLawyers

According to securities fraud attorneys, elderly and retired individuals are frequently the targets of securities fraud. While this is not likely to change, elderly investors can be aware of red flags that could indicate fraud has occurred. Some of these red flags include recommendations for investments that are typically unsuitable for elderly investors, unsolicited investment offers, unrealistically high return promises, promises of little or no risk, request for up-front payments, high pressure tactics, direct mail offerings and Internet offerings.

Investment Fraud Red Flags for Elderly Investors

In regards to suitability, FINRA Rule 2111 will replace NASD Rule 2310 on July 9, 2012. Factors determining an investment’s suitability for each investor will now include the customer’s age, tax status, financial situation and needs, liquidity needs, investment experience, investment objectives, risk tolerance, investment time horizon and other investments. A broker or adviser must consider these factors before making a recommendation after July 9.

According to securities fraud attorneys, because of an elderly investor’s age, asset allocations that are weighted in investments with a long time horizon or higher risk investments are often considered inappropriate. Potentially unsuitable investment products for elderly investors include:

Published on: June 1, 2012

Pacific Cornerstone Faces More Problems; FINRA Arbitration Offers Hope for Investors

by InvestorLawyers

Securities arbitration lawyers continue to file claims against Pacific Cornerstone Capital Inc. on behalf of investors. In a February Securities and Exchange Commission filing, Pacific Cornerstone stated that it was “involved with an arbitration proceeding before FINRA and one FINRA investigation.” Pacific Cornerstone did not, however, state any specifics about the investigation referred to in the filing, or in its Focus report, which is the firm’s annual report of audited financials.

Pacific Cornerstone Faces More Problems, FINRA Arbitration Offers Hope for Investors

Pacific Cornerstone is Cornerstone Real Estate Funds’ broker-dealer arm and manager of the devaluated REITs. According to stock fraud lawyers, Pacific Cornerstone’s SEC filing stated that it didn’t know what the results of the FINRA matters would be.

In 2009, Pacific Cornerstone was fined $700,000 by FINRA for allegedly misstating material facts related to private placement sales. Recently, Pacific Cornerstone saw severe devaluations of two non-traded REITs, or real estate investment trusts. Investors received word in March that Cornerstone Core Properties REIT’s value had dropped from $8 per share to $2.25 per share and it raised only $158 million, falling dramatically short of its target of $439 million. Last year, the Cornerstone Healthcare Plus REIT replaced the fund’s adviser and changed its name to Sentio Healthcare Properties Inc. Cornerstone Healthcare’s value has dropped from $10 per share to $9.02 per share. A third Cornerstone offering, CIP Leveraged Advisors, has also seen severe declines in value.

Published on: May 30, 2012

Healthcare Trust of America Investors Could Recover Losses

by InvestorLawyers

Securities fraud attorneys are investigating potential claims on behalf of investors who purchased the Healthcare Trust of America REIT and suffered significant losses as a result of their investment. In many cases, brokers improperly recommended the purchase of Healthcare Trust of America to investors for which the REIT was unsuitable, and marketed it as safe and secure despite its risky nature.

Healthcare Trust of America Investors Could Recover Losses

Healthcare Trust of America is a non-traded Real Estate Investment Trust (REIT). According to stock fraud lawyers, REITs typically carry a high commission which motivates brokers to make the recommendation to their clients despite the investment’s unsuitability. The commission on a non-traded REIT is often as high as 15 percent. Non-traded REITs, like Healthcare Trust of America, carry a relatively high dividend or high interest, making them attractive to investors. However, non-traded REITs are inherently risky and illiquid, which limits access of funds to investors.

Healthcare Trust of America is, according to its website, a “fully integrated, self-administered, self-managed real estate investment trust.” The REIT has invested around $2.5 billion, since it was formed in 2006, in real estate projects. According to a recent SEC filing, the REIT is seeking a $10.10 per share IPO price. However, it is possible that Healthcare Trust of America’s initial IPO share price will be lower than that, in light of what recently happened with Inland Western REIT’s IPO, in which the actual share price was considerably lower than the anticipated share price.