broker misconduct

Published on: November 4, 2011

FINRA Investor Alert: Taking Advantage of 401(k) Matching

One of the largest concerns of every American, at some point in their lives, is how they will be able to make ends meet when they retire. Why is it, then, that almost 30 percent of Americans aren’t contributing enough to their 401(k) to get their full employer match? FINRA’s new Investor Alert, “Why Leave Money on the Table — Make the Most of Your Employer’s 401(k) Match” deals with this question and encourages greater 401(k) contributions by those not taking full advantage of this match.

FINRA Investor Alert: Taking Advantage of 401(k) Matching

Part of the problem could be age, and the fact that many young employees aren’t yet looking at their retirement seriously. According to a recent study, 43 percent of young workers age 20-29 don’t put enough money into their 401(k) to get their employers’ full match. According to FINRA’s press release on the Investor Alert, “Millions of workers, especially younger and lower-income workers who need it most, are leaving money — free money — on the table.”

Another factor lowering employee 401(k) contribution may be the state of the economy. With less money to go around, it’s often hard to put away for the future. However, hard economic times should be incentive to put away more to protect your retirement. According to FINRA Vice President of Investor Education Gerri Walsh, “Even in tough economic times, all employees still need to prepare for their retirement. Taking full advantage of a company’s 401(k) match is a no-cost way for workers to boost their retirement savings.”

Published on: November 2, 2011

Fraud Suit Settlement: Florida Man Must Pay $275,000

by InvestorLawyers

Justin Solomon of Florida has consented to the Security and Exchange Commission’s decision to fine him $275,000 for his part in a federal securities fraud lawsuit. The lawsuit involved a scheme in which overseas investors put money into Texas oil and gas projects that was then misused. Solomon did not confirm that he oversaw the scheme. However, Solomon was the managing official of Seisma Oil Research, Permian Asset Management and Seisma Energy Research — three of the investment businesses involved in the scam.

Fraud Suit Settlement: Florida Man Must Pay $275,000

In June 2010, Solomon and his three businesses were sued by the Securities and Exchange Commission. According to the SEC’s allegations, high-pressure sales tactics, originating in Costa Rica and Thailand “boiler room” call centers, persuaded overseas investors to contribute $25 million into six Texas gas and oil projects.

Solomon settled the lawsuit by agreeing to pay disgorgement which accounts for his own “unjust enrichment” and prejudgment interest. The disgorgement total was $265,436.06, while the interest total was $9,564.94. Both Solomon and the SEC agreed to a 36-month payment plan which will begin in 6 months. Furthermore, all three of Solomon’s companies signed consent agreements that promised they would not violate United States securities laws. At the same time as these consent agreements were signed, Solomon posted a deposit in the amount of $92,500 that will go toward the $275,000 he must pay. According to the agreement, Solomon will pay $5,000 each month for 35 months, followed by a final payment of $7,500.

Published on: October 31, 2011

A New Tool for Investors: Securitized Product Tables Launched by FINRA

by InvestorLawyers

On October 18th, the Financial Industry Regulatory Authority (FINRA) announced that, together with Interactive Data Corporation, it has created market activity and pricing-related securitized product tables. These tables will provide market participants, including investors, valuable insight in investing in asset and mortgage-backed securities. The data from the table are the figures that have been reported to the Trade Reporting and Compliance Engine, or TRACE, a reporting and dissemination service that consolidates transaction data for fixed income real-time transactions.

Because the tables will be updated after market close every trading day, they offer an aggregate summary of the U.S. securitized products market by asset class on a daily basis. Included in the United States Structured Trading Activity Report are number of trades, number of unique securities transacted and volume of transactions. This information will allow investors to more ably gauge market sentiment and liquidity. Asset class categories within the tables include volume by trade size, buy or sell information, and average prices. Finally, aggregated price levels and volume of MBS pass-through securities and TBAs, CMBS, ABS, Agency and Non-Agency CMOS and CDOs are shown by the five pricing tables.

“For the first time, securitized products data, including pricing tables and a market activity table — based on actual, consolidated transaction information — will be available to the public,” according to FINRA executive vice president of transparency services Steven Joachim. “Dissemination of these tables is the first step FINRA plans to take toward increased transparency in the securitized product market.”

Published on: October 19, 2011

Your Nest Egg: Protect It With These Tips!

by InvestorLawyers

The biggest concern for many retired people, as well as those nearing retirement, is establishing and protecting their nest egg so that they are able to feel secure financially and enjoy their retirement. Market Watch recently featured an article that offered four tips for retirees and pre-retirees to protect their nest egg.

Your Nest Egg: Protect it with these Tips!

Taking a lump sum can be risky, so be cautious of a financial advisor that promises to maintain your principal and recommends a lump sum distribution.
When creating a portfolio, you should establish what types of investments you are willing to participate in. Many retirees tend to go with low-risk investments, in which their money most often is safer. If these types of investments are your goal and you see a questionable investment made by your broker or adviser, contact the firm immediately and question the purchase.

Published on: September 19, 2011

The Truth About Insider Trading

by InvestorLawyers

“Insider trading” is one of the most widely-recognizable terms in the complex financial industry — but it is one that is often misunderstood, as well. Though some insider trading is a form of broker misconduct, it is also frequently committed by firms’ top management. An article published on August 18, 2011, “Insider Trading: CNBC Explains,” spells out the difference between legal and illegal insider trading, as well as cites major insider trading cases.

THE TRUTH ABOUT INSIDER TRADING

There are two types of insider trading: legal and illegal. Legal insider trading takes place when employees own stock or stock options in their firm that they are able to trade within a set time frame and at a set price. Because the public may not have access to all the information the employees have, it is considered insider trading but remains legal as long as the employees report their trades to the SEC within a certain time period following the trade and that the trade is made after some sort of press release or announcement makes the information on which the trade was based public. This type of insider trading can also be preformed by individuals who own at least 10 percent of a company’s stock.

Illegal insider trading takes place when any “insider” makes trades based on knowledge that the public doesn’t have. An “insider,” according to the SEC, is anyone who has access to “temporary” or “constructive” material information on a firm and is not restricted to employees of the company.

Published on: September 14, 2011

Insider Trading Lande Ex-Hedge Fund Trader in Prison

by InvestorLawyers

Galleon Group LLC ex-hedge fund trader Craig Drimal pleaded guilty to six counts of conspiracy and securities fraud in April. He has now been sentenced to five-and-a-half years in prison. Drimal admitted to insider trading based on information from lawyers at Ropes & Gray LLP, a firm based in Boston. The transactions involved Axcan Pharma Inc., 3Com Corp., Hilton Hotels Corp. and Kronos Inc.

Insider trading lands weston man in prison

Drimal personally profited $6.5 million from trades in 3Com Corp. and Axcan Pharma Inc., $4.3 million from trades related to Hilton Hotels Corp. and just over $950,000 from trades related to Kronos Inc., totaling more than $10 million in personal net profit as a result of his broker misconduct.

According to prosecutors, Federal Bureau of Investigation agents approached Drimal in 2009, seeking his cooperation. Contrary to the FBI’s instructions, Drimal contacted another Galleon Group trader, informing him of the government’s probe. In addition, Drimal lied to the SEC about his motivations for buying Axcan stock in a July 2008 interview.

Published on: September 5, 2011

HONOLULU STOCK BROKER SENTENCED FOR FRAUD

by InvestorLawyers

Ryan Kimura, a former Morgan Stanley Dean Witter stockbroker in Honolulu, Hawaii, was sentenced to 57 months in prison. In addition, he will pay $1.5 million to Morgan Stanley and over $500,000 plus interest to the Internal Revenue Service. Payment to the IRS will cover tax losses from 2000-2007. Kimura was charged with money laundering, bank fraud, wire fraud and filing a federal tax return that was incorrect.

Honolulu stock broker sentenced for fraud

Kimura was previously barred from associating with any member of FINRA in 2009. Kimura worked with Morgan Stanley until May 2006 and then with Sun Life Financial Distributors until December 2007.

Kimura’s former wife’s mother, her grandmother, her sister, her father and her father’s company were all victims of his fraud. Kimura took money from his father-in-law’s Japan-based company without permission and subsequently lost around $360,000 trading its stock. He also forged signatures on 206 checks, stealing a total of $1.5 million through these forgeries.

Published on: September 2, 2011

ENGLE, SCHUSTER SENTENCED IN NEBRASKA’S BIGGEST SECURITIES FRAUD CASE

by InvestorLawyers

Former Nebraska City brokers Rebecca Engle and Brian Schuster were sent to prison for bilking investors out of more than $20 million — an amount which is, according to the Nebraska Department of Banking and Finance investigation supervisor Thomas Sindelar, the biggest securities fraud case in history of the state. The broker misconduct of Engle and Schuster included more than 130 investors.

Engle and Schuster Sentenced in Nebrask's Biggest Securities Fraud Case in History

Engle and Schuster apparently sold high-risk securities to investors but failed to disclose the risks and warnings associated with the investments. Most of the victims of their broker fraud were retired or nearing retirement age. As such, high-risk investments were unsuitable for them. Engle and Schuster apparently had no private placement investment experience when beginning and could not keep track of where investorsâ€™ money was going. Two companies they invested in, LightStream and Sunshine — a utility company and broom making company, respectively — went bankrupt. Schuster and Engle then neglected to tell investors about the bankruptcies.

Reportedly, while Engle wanted to go to authorities about the situation in 2004, Schuster convinced her not to. The pair then went to investors for another $5 to $6 million to keep the investment company afloat.

Published on: September 1, 2011

NJ ADVISER SENTENCED TO PRISON

by InvestorLawyers

Carlo Chiaese, an investment adviser, has been sentenced to 58 months in prison and must pay restitution totaling $2.5 million for broker misconduct including failure to invest and falsified documentation. Rather than investing his client’s money, Chiaese used the money to pay for his extravagant lifestyle. Purchases included leases on a Land Rover, an Audi Q7 and a Porsche 911 Carrera totaling $40,000; country club fees; $16,000 in rugs; $25,000 in shopping trips to high-end department stores; and $800,000 which was transferred directly to his wife and in-laws.

NJ adviser sentenced to prison

Chiaese’s broker fraud began in 2008 and lasted roughly two years. To earn the trust of new clients, he flaunted the investment experience he earned at Merrill Lynch, Citibank and other firms. After earning his clients’ trust, he raised $2.4 million by promising to invest conservatively and traditionally. Not only did he fail to invest conservatively and traditionally, he did not invest the money at all. The majority of the money, $1.7 million, came from a union pension fund belonging to Local 333, United Marine Division, International Longshoreman’s Association. The bilked fund contained the pensions of 850 individuals. Of the total $2.4 million stolen, Chiaese spent $1.4 million on personal expenses. In addition, he used $280,000 to repay other investors.

Chiaese, 38, pleaded guilty to securities fraud and could have faced 20 years in prison and $5 million in fines. In addition to the final sentence, 58 months in prison and $2.5 million in restitution, Chiaese will submit to three years of supervised release once his prison sentence is served. Chiaese was sentenced by U.S. District Judge William Martini and was released on a $750,000 bond. However, provisions of his bail required that Chiaese must avoid working in finance and participate in a drug treatment program.

Published on: August 31, 2011

RESOURCES FOR INVESTOR PROTECTION

by InvestorLawyers

Though investors who have already been “burned” by stock broker fraud or broker misconduct may have a perfectly understandable fear of getting back into the securities game, there are ways investors can help protect themselves in the future. One of the most significant protective measures an investor can take is to look into the background and credentials of a potential stock broker or investment adviser before working with them.

Resources for investor protection

Any time a business hires a new employee, they run a background check — so why wouldn’t an investor do the same when hiring a stock broker or financial adviser? According to a Financial Industry Regulatory Authority (FINRA) survey, only 15 percent of investors perform a background check when hiring an adviser. In addition, just because they’re registered when you hire them doesn’t mean you’re finished. Investors should check broker registration yearly.

To find out if your broker has had any arbitrations, criminal records, investment-related investigation, bankruptcy or disciplinary actions, utilize FINRA’s BrokerCheck. Other information available through BrokerCheck includes employment history, licenses held and where the broker is registered. While not every stock broker or brokerage firm can be found in BrokerCheck, the database is extensive, including around 1.3 million brokers and 17,000 firms.