Investor Lawyers Blog

Published on: July 20, 2018

CT Financial Advisors Temenos Advisory and George Taylor Charged By SEC

Money in Wastebasket On July 18, 2018, the SEC filed a lawsuit in the District of Connecticut naming Temenos Advisory, Inc. (“Temenos”) and George L. Taylor (“Taylor”) as Defendants and essentially alleging that Defendants made improper recommendations of certain private placement investments to their investment advisory clients. A copy of the SEC Complaint is accessible here: SEC v Temenos & Taylor

Temenos, founded by Taylor, is a Connecticut corporation headquartered in Litchfield, CT, with additional offices located in St. Simons Island, GA and Scottsdale, AZ. Temenos has been registered with the SEC as a registered investment advisor (RIA) since 1999, and is owned by Mr. Taylor and a trust that was purportedly established for purposes of benefiting Taylor’s former business partner.

As alleged by the SEC, prior to 2014, Temenos’ business was largely focused on the sale of traditional financial products to its clientele, including “[m]utual funds, exchange traded funds, variable annuities, and publicly traded stocks.” Like many RIAs, Temenos charged an advisory fee to its customers based upon a percentage of assets under management. However, as alleged in the Complaint, beginning in 2014 Temenos began recommending private placement investments to its clients: “Between 2014 and 2017, Defendants placed more than $19 million in investments by their clients and others in [the securities of] four private issuers … And they did so without ever sufficiently examining the marketing claims, financial statements, or business activities of those companies.”

Published on: July 19, 2018

American Finance Trust (AFIN) Lists on NASDAQ- Revealing Heavy Investor Losses

by InvestorLawyers

money whirlpool American Finance Trust, Inc. (“AFIN” or the “Company”) listed its shares on Nasdaq Global Select Market (“Nasdaq”) on July 19, 2018, with trading opening at $13.15 a share with. AFIN sold shares to public at $25.00 a share,. While the trading price of AFIN may fluctuate, it appears that pre-listing investors in the REIT have likely suffered substantial principal losses.

On June 29, 2018, the board of directors of AFIN, formerly known as American Realty Capital Trust V, Inc., announced the approval of a plan to list AFIN common stock on the Nasdaq under the symbol ‘AFIN’. In order to effectuate the Nasdaq listing and account for possible downward selling pressure upon listing, AFIN’s board also approved a phased liquidity plan, which includes the following important components through filing amendments to the Company’s charter:

2-to-1 reverse stock split: pursuant to this reverse split, every two shares of AFIN (par value $0.01) are to be converted into one share of common stock (par value $0.02);

Published on: July 19, 2018

Massachusetts Securities Regulator Targets Brokerages in Private Placement Sales

by InvestorLawyers

Financial Fraud As recently reported by the Wall Street Journal (WSJ), investments in so-called private placements have experienced a substantial upswing in the wake of the 2008 financial crisis. In fact, according to a May 7, 2018 WSJ article entitled, A Private-Market Deal Gone Bad: Sketchy Brokers, Bilked Seniors and a Cosmetologist, “In 2017 alone, private placements using brokers totaled at least $710 billion … a nearly threefold increase rise from 2009.” Of considerable concern, the article indicates that that financial advisors recommending private placements are “six times as likely as the average broker to report at least one regulatory action against them…” and, moreover, that 1 in 8 brokers recommending private placement investments have “three or more red flags on their records, such as investor complaint, regulatory action, criminal charge or firing… .”

In response to growing concerns about the many risks and pitfalls associated with private placements, some securities regulators have stepped up their efforts to combat the problem. For example, on July 2, 2018, the Massachusetts Securities Division (the “Division”) announced its investigation into sales practices linked to private placement investments. Pursuant to the Division’s investigation – which will be spearheaded by Mr. William Galvin, the Secretary of the Commonwealth of Massachusetts – a total of 10 broker-dealers will be subjected to regulatory inquiry. These brokerage firms, which have a demonstrated history of sales practice abuse surrounding private placement investments, include: LPL Financial, Arthur W. Wood Company, Santander Securities, U.S. Boston Capital, Bolton Global Capital, Advisory Group Equity Services, Moors & Cabot, Inc., Detwiler Fenton & Co., BTS Securities, and Winslow, Evans & Crocker.

In connection with its investigation, the Division is seeking to examine firms and advisors with disciplinary reports on file from 2 years ago, when the Division surveyed over 200 brokerage firms regarding their hiring and disciplinary practices. According to Mr. Galvin: “Private placements are risky investments that reward the salesperson handsomely with high commissions. Firms offering these to the public, especially seniors, have an obligation to see that they are sold to benefit the investor, not the broker. Individuals with a history of disciplinary actions magnify the risk of unsuitable sales in connection with private placements.”

Published on: July 2, 2018

Former Financial Advisor Kyusun Kim Barred From Securities Industry by FINRA

by InvestorLawyers

Money Maze As recently reported, former broker Kyusun Kim (a/k/a Kyu Sun Kim, a/k/a Kenny Kim) (CRD# 2864085) has consented to a “sanction and to the entry of findings [by FINRA] that he made unsuitable recommendations to numerous senior customers, who were retiring or had retired that they concentrate their retirement assets and liquid net worth in speculative and illiquid securities.” Pursuant to a Letter of Acceptance, Waiver & Consent (AWC) accepted by FINRA on June 26, 2018 — and under which Mr. Kim neither admitted nor denied FINRA’s findings — the former financial advisor voluntarily consented to a “bar from association with any FINRA member in any and all capacities.”

Publicly available information via FINRA BrokerCheck indicates that Mr. Kim first entered the securities industry in 1997, and most recently was affiliated with Independent Financial Group, LLC (CRD# 7717) from 2006 – 2016 and, thereafter, Sandlapper Securities, LLC (CRD# 137906) from March 2016 – April 2017. Furthermore, BrokerCheck indicates that Mr. Kim has been the subject of or otherwise involved in 23 customer disputes. With regard to these customer disputes, 13 of these complaints resulted in settlements, while 9 complaints remain pending (1 complaint was denied in October 2010). As to the pending customer complaints, the allegations raised center on Mr. Kim’s purported “… breach of fiduciary duty, breach of oral and written contract, violation of state and federal securities laws, violation of FINRA rules of fair practice … [and] unsuitable investments.”

As encapsulated within the June 26, 2018 AWC, it has been alleged that Mr. Kim “falsely inflated the net worth figures of several customers on their new account forms and other documents so that they appeared eligible to purchase certain speculative investments, in violation of NASD Rules 3110 and 2110 and FINRA Rules 4511 and 2010.” Moreover, as set forth in the AWC, Mr. Kim allegedly made unsuitable investment recommendations to senior customers in violation of NASD Rules 2310 and 2110, as well as FINRA Rules 2111 and 2010.

Published on: June 29, 2018

Former NY Life Broker Joel Flaningan Allegedly Sold Unregistered Woodbridge Investments

by InvestorLawyers

woodbridge mortgage funds Investors in Woodbridge upon the recommendation of former financial advisor Joel Vincent Flaningan (“Flaningan”) (CRD# 5664958) may be able to recover their losses in FINRA arbitration. According to FINRA BrokerCheck, Mr. Flaningan was discharged from employment with NYLife Securities LLC (“NYLife”) (CRD# 5167) on or about May 10, 2018, in connection with “allegations he was involved in the solicitation of New York Life (“NYL”) clients to invest in an unregistered entity named Woodbridge Mortgage Investment Fund… Mr. Flaningan failed to disclose any involvement with Woodbridge to NYL.” Furthermore, publicly available information via BrokerCheck indicates that Mr. Flaningan is currently the subject of one customer dispute concerning allegations that he purportedly failed to disclose the material risks “associated with an unregistered investment in Woodbridge… .”

According to BrokerCheck, NYLife has disavowed any prior knowledge of Mr. Flaningan’s business activity conducted away from the firm in selling purportedly non-approved Woodbridge investments. However, sales of unregistered securities by a financial advisor who engages in such “selling away” activity while still affiliated with his or her brokerage firm may result in the broker-dealer (such as NYLife) being held vicariously liable for the negligence and/or misconduct of its registered representative.

As recently reported, the Woodbridge Group of Companies, LLC (“Woodbridge”) of Sherman Oaks, CA, and certain of its affiliated entities, filed for Chapter 11 bankruptcy protection on December 4, 2017 (U.S. Bankruptcy Court for the District of Delaware – Case No. 17-12560-KJC). The SEC has alleged that Woodbridge, through its owner and former CEO, Mr. Robert Shapiro, purportedly utilized “more than 275 Limited Liability Companies to conduct a massive Ponzi scheme raising more than $1.22 billion from over 8,400 unsuspecting investors nationwide through fraudulent unregistered securities offerings.”

Published on: June 28, 2018

SEC Files Complaint against Suspended Broker John Piccarreto, Jr. in Connection With $102 Million Ponzi Scheme

by InvestorLawyers

Money in Wastebasket On June 19, 2018, the Securities and Exchange Commission (“SEC”) filed a Complaint against various individuals and entities — including former financial advisor John Charles Piccarreto, Jr. (CRD# 6276418) of San Antonio, TX — in furtherance of the SEC’s efforts to “stop an ongoing fraudulent scheme in which the Defendants have raised more than $102 million from at least 637 investors across the United States since 2011.” As alleged by the SEC, Defendants Perry Santillo and Christopher Parris of Rochester, NY purportedly orchestrated a fraudulent Ponzi-like scheme predicated upon first buying or taking over books of business from retiring investment professionals from around the country.

According to the Complaint, after acquiring new investors and assets, Messrs. Santillo and Parris (each formerly registered with FINRA) would coordinate their sales efforts with Defendants, including John Piccarreto, Jr., in order to allegedly persuade victims into withdrawing savings from traditional investments, in order to transfer the capital into issuers controlled by Messrs. Santillo, Parris, or certain of their associates. The SEC has alleged that the Defendants would “falsely claim that their investors’ money [would] be used to operate businesses in fields such as financial services, insurance, real estate development, and medical laboratories.” In actuality, however, the SEC has alleged that Defendants would transfer funds received into “multiple accounts held in the names of different entities” controlled by Defendants. While some of the funds were purportedly used to repay investors in typical Ponzi-fashion, the SEC has alleged that the bulk of the monies were misappropriated by the Defendants.

With regard to Mr. Piccarreto, the SEC has alleged that, in one instance, he met with an elderly investor from Austin, TX in February 2015. As alleged, Mr. Piccarreto convinced the 80 year old investor, who suffered from dementia, into putting $250,000 into an entity controlled by Defendants: Percipience. Mr. Piccarreto later emailed the investor’s daughter, in response to her concerns with the Percipience investment, that “I know this is scary for you and you are just looking out for dad but I promise you I will not let anything happen to any of the money.” In total, the SEC has alleged that Mr. Piccarreto misappropriated approximately $1.3 million in investor money.

Published on: June 28, 2018

Alan H. New Allegedly Sold Unregistered Woodbridge Investments While Employed By NYLife Securities

by InvestorLawyers

woodbridge mortgage funds Investors in Woodbridge Units or Notes, as further defined below, who purchased a Woodbridge investment based upon a recommendation by former financial advisor Alan Harold New (CRD# 2892508) may be able to recover losses through securities arbitration. Publicly available information through FINRA BrokerCheck indicates that Alan New was formerly affiliated with broker-dealer NYLife Securities LLC (“NYLife”) (CRD# 5167) in their Fort Wayne, IN office, from June 2004 – August 2016.

As recently reported, the Woodbridge Group of Companies, LLC (“Woodbridge”) and certain of its affiliated entities filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware (Case No. 17-12560-KJC) on December 4, 2017. Beginning as early as 2012, Woodbridge and its affiliates offered securities nationwide to numerous retail investors through a network of in-house promoters, unlicensed advisors, as well as various licensed financial advisors, including Mr. New. Woodbridge investments essentially came in two forms: (1) so-called “Units” that consisted of subscriptions agreements for the purchase of an equity interest in one of Woodbridge’s Delaware limited liability companies, and (2) “Notes” or what have commonly been referred to as “First Position Commercial Mortgages” or “FPCMs” that consisted of lending agreements underlying purported hard money loans on real estate deals.

As alleged by the SEC, Woodbridge and its owner and former CEO, Mr. Robert Shapiro, purportedly “used his web of more than 275 Limited Liability Companies to conduct a massive Ponzi scheme raising more than $1.22 billion from over 8,400 unsuspecting investors nationwide through fraudulent unregistered securities offerings.” According to Steven Peiken, Co-Director of the SEC’s Enforcement Division, the Woodbridge “[b]usiness model was a sham. The only way that Woodbridge was able to pay investors their dividends and interest payments was through the constant infusion of new investor money.”

Published on: June 28, 2018

Mass. Regulator: MetLife Allegedly Failed To Contact Retirees About Benefits

by InvestorLawyers

Piggy Bank in a Cage On June 25, 2018, the Enforcement Section of the Commonwealth of Massachusetts Securities Division (“Division”) filed an Administrative Complaint (“Complaint”) against Respondent MetLife, Inc. (“MetLife”) in connection with alleged violations of the Massachusetts Uniform Securities Act (the “Act”). Specifically, the Division has alleged that MetLife, through a line of business known as pension risk transfer, “negligently relied on inadequate procedures to contact certain retirees, many of whom may be completely unaware that their former employer has offloaded its pension responsibilities to MetLife.” MetLife purportedly failed to make a good faith attempt to contact certain Massachusetts retirees due group annuity benefits, and as alleged in the Complaint, the insurance company did not take reasonable steps, such as through certified mail, e-mail, or telephone calls, to contact numerous pensioners, including over 400 Massachusetts retirees.

As alleged in the Complaint, MetLife categorized numerous living retirees as “Presumed Dead.” Consequently, the Division has alleged that MetLife stopped making pension payments to certain Massachusetts annuitants (in some cases, dating back 10 years), and further, caused negligent material misstatements to be made in certain MetLife public disclosures as filed with the SEC. According to the Complaint: “MetLife’s negligent administration of its pension risk transfer business caused MetLife to make materially misleading misstatements in its public filings. The Division brings this action pursuant to the antifraud provisions of the Act, to ensure that MetLife identifies and locates those retirees to whom it owes benefits, and immediately effects all retroactive and continuing payments, plus interest, to Massachusetts retirees.”

According to the Division, MetLife only sent “two bureaucratic, perfunctory letters” to Massachusetts retirees, one at age 65 and one at age 70 ½. When retirees failed to respond to these letters, MetLife allegedly released the retiree’s benefit amount from its reserves (thus effectively transferring a liability to an asset on the company’s balance sheet), without confirming that the retiree was actually deceased. As alleged in the Complaint: “After two unsuccessful attempts to contact its annuitants, MetLife released the full liability based on the unreasonable presumption that these annuitants would never respond and had not become entitled to benefits based on certain contractual provisions.”

Published on: June 27, 2018

Financial Advisor Matthew Eckstein Charged with Grand Larceny and Fraud by Nassau County District Attorney

by InvestorLawyers

broker misappropriating client money Syosset, NY-based stockbroker Matthew Eckstein was recently charged with three counts of second-degree grand larceny, third degree grand larceny, and two counts of first-degree scheme to defraud by the Nassau County District Attorney. These charges stem from Mr. Eckstein’s business as a financial advisor in Garden City, NY, and more specifically, allegations that he “betrayed his clients’ trust when he stole their money in a multi-million dollar Ponzi scheme and even pilfered hundred of thousands from the estates of deceased clients” according to Madeline Singas, the Nassau County District Attorney.

FINRA BrokerCheck indicates that Matthew Evan Eckstein’s (CRD# 2997245) career in the securities industry dates back to 1998, when he first began working as a registered representative for Gould, Ambroson & Associates Ltd. (“Gould”) (CRD# 17412) in Garden City, NY. Since September 16, 2015, Mr. Eckstein has been registered at his own broker-dealer, Sisk Investment Services, Inc. (“Sisk”) (CRD# 19406), where he is chief executive and chief compliance officer. On April 27, 2018, FINRA Enforcement filed a Complaint naming Mr. Eckstein as Respondent. As alleged by FINRA, from December 2014 until December 2015, Mr. Eckstein purportedly sold over $1.3 million in supposedly safe private investments akin to CDs to numerous clients.

Publicly available information suggests Mr. Eckstein’s alleged victims are from Massapequa, Seaford, Smithtown, Melville, Staten Island, Brooklyn, Manhattan, Norwalk, CT, Jupiter, FL, and Redlands, CA. In January 2015, Mr. Eckstein allegedly convinced one customer to invest approximately $385,000 into a company, Conmac Funding (“Conmac”), that was touted as a safe, no-risk investment. Further, Mr. Eckstein purportedly assured the client that the investment principal would be returned in two years, with an additional four-percent interest, much like a certificate of deposit. However, as recently reported, when the client requested his money back two years later, he only received $26,699.

Published on: June 21, 2018

Former Securities America Broker Hector May Submits to Asset Freeze by the United States Attorney for the Southern District of New York

by InvestorLawyers

Piggy Bank in a Cage Investors who suffered losses due to the alleged misconduct of Rockland County financial advisor Hector A. May (CRD# 323779) may be able to recover their losses in arbitration before FINRA. A resident of Orangeburg, NY, Mr. May was most recently affiliated with the independent broker-dealer Securities America, Inc. (CRD# 10205) from 1998 until March 2018. As recently reported, on June 6, 2018, the United States Attorney for the Southern District of New York implemented an asset freeze pursuant to a Restraining Order against Mr. May and his wife, Sonia May, with their consent. According to publicly available information through FINRA, the Justice Department is “conducting an official criminal investigation of a suspected felony.”

Among the assets frozen under the terms of the government’s Restraining Order are those assets held by Executive Compensation Planners Inc. (“ECP Inc.”), the Registered Investment Advisory (“RIA”) firm owned and controlled by Hector May. In addition to freezing ECP Inc. assets, the government is also restraining numerous bank and brokerage accounts owned by the Mays, as well as monthly proceeds payable to Hector May through an Equitable Life Pension payment and social security. Finally, the government has frozen Mays’ real assets, including a house in Orangeburg, NY, a condominium in Vernon Township, NJ, as well as “all jewelry, fur products, antiques, and silver owned by Hector May or Sonia May.”

According to FINRA BrokerCheck, Mr. May was discharged from his employment with Securities America due to his alleged “misappropriation of client assets.” Acting through his RIA, Mr. May’s business as a financial advisor was supposedly predicated on selling certain wrap fee advisory programs through Securities America.