Archives for General

FINRA Bars John Michael Kastelic Jr.

John Michael Kastelic Jr. (CRD #5836566, Hubertus, Wisconsin) submitted an AWC in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Kastelic consented to the sanction and to the entry of findings that he failed to respond to repeated FINRA requests for documents and information in connection with its investigation into allegations that he participated in a check-kiting scheme while associated with his member firm. (FINRA Case #2014043698901)

From 09/2010 – 12/2014 Kastelic was associated with WELLS FARGO FUNDS DISTRIBUTOR, LLC (CRD# 133366) of MENOMONEE FALLS, WI.

If you have suffered investment losses as a result of your broker’s or brokerage firm’s misconduct, contact the Law Offices of Place & Hanley, LLC to discuss your legal options.  The Law Offices of Place & Hanley, LLC is dedicated to helping investors nationwide.  If you have lost money as a result of your broker’s recommendations, you may be entitled to recover your investment losses.  Contact our office toll free at (866) 318-4725 for a complimentary initial consultation.

Categories: Broker Fraud, Broker Investigations, General, and Securities Broker Misconduct.

SEC warns of “Red Flags” when Making Investment Decisions

The Securities and Exchange Commission recently issued an Investor Alert to help older Americans identify signs that what is offered as an investment may actually be a fraud. The SEC’s Office of Investor Education and Advocacy warned that older Americans are often targets of investment fraud, and advised that there are five (5) “red flags” seniors should look out for when making investment decisions:

1. Promises of High Returns with Little or No Risk. A classic warning sign of investment fraud is the promise of a high rate of return, with little or no risk. The SEC advised that every investment carries some degree of risk, and the potential for greater returns generally comes with greater risk. The SEC warns investors to avoid putting money into “can’t miss” investment opportunities or those promising “guaranteed returns.”

2. Unregistered Persons. The SEC advises investors to check whether the person offering to sell you an investment is registered or licensed, even if you know him or her personally. Unregisterd/unlicensed persons who sell securities commit many of the securities frauds that target older investors. It is free to research the background of the individuals and firms selling you investments, including their registration/license status and disciplinary history. There are several way you can research the individuals selling you investments:

• Search the SEC’s Investment Adviser Public Disclosure (IAPD) online database.
• Search the Financial Industry Regulatory Authority (FINRA)’s BrokerCheck online database.
• Contact your state securities regulator.
• Contact the SEC’s Office of Investor Education and Advocacy directly at (800) 732-0330 to help research the person and firm selling you the investment.

3. Red Flags in the Financial Professional’s Background. The SEC advises investors to be aware of potential red flags in their advisor’s or broker’s background, including: (1) employment at firms that have been expelled from the securities industry; (2) personal bankruptcy; (3) termination; (4) being subject to internal review by an employer; (5) a high number of customer complaints; (6) failed industry qualification examinations; (7) federal tax liens; and (8) repeatedly moving firms. Investors can search the records of the SEC, FINRA, and state securities regulators to identify red flags.

4. Pressure to Buy Quickly. The SEC warns that if an investment professional attempts to pressures you into making an investment decision quickly, you should walk away as you could potentially be at risk for becoming a victim of investment fraud. The SEC cautions investors that no reputable investment professional should push you to make an immediate decision about an investment, or tell you that you’ve got to “act now.”

5. Free Meals. The SEC further warns investors to be cautious of “free lunch” seminars. The ultimate goal of investment professionals in offering free meal investment seminars is typically to attract new clients and to sell investment products. The SEC advises investors that even if the free meal does not come with a high-pressured sales pitch, investors should expect the “hard sell” during later contacts from the investment advisor or broker selling the investment.

If you have suffered investment losses as a result of your broker’s or brokerage firm’s misconduct, contact the Law Offices of Place & Hanley, LLC to discuss your legal options. The Law Offices of Place & Hanley, LLC is dedicated to helping investors nationwide. If you have lost money as a result of your broker’s recommendations, you may be entitled to recover your investment losses. Contact our office toll free at (866) 318-4725 for a complimentary initial consultation.

Categories: General.

Place & Hanley Investigating Claims Involving Fredrik Magnus Virgin and Merrill Lynch Pierce Fenner and Smith, Inc.

Place & Hanley is currently investigating claims against Fredrik Magnus Virgin (CRD No. 2743410) and Merrill Lynch Pierce Fenner and Smith, Inc. (“Merrill Lynch”) (CRD No.: 7691). The Law Offices of Place & Hanley, LLC recently filed a FINRA Arbitration claim on behalf of Claimants in which it was alleged that the broker, Fredrick Magnus Virgin, sold an elderly investor a single life Nationwide annuity. On the date of issuance, the investor was 77 years old and legally blind.

The Nationwide Annuity Application lists the investor’s nephew as the primary beneficiary. Furthermore, the application provides that the nephew is to receive 100% of the benefit, confirms that he is the annuitant’s nephew, and also confirms his social security number and birth date. Upon the investor’s passing, the nephew was denied any death benefit payment by Nationwide. Nationwide advised that the annuity contract had a single life payout option which guaranteed the payments for the lifetime of the annuitant only. In a single life payout option, all payments cease with the last payment due prior to the death of the annuitant. Claimants allege that the investor clearly intended to elect a beneficiary to his Nationwide annuity since he completed the beneficiary section on his annuity application and provided all necessary information to elect a beneficiary to his annuity.

The annuity contract at issued was entered into when the investor was 77 years old. The investor lost a significant portion of his originally invested principal, plus the loss of a reasonable return on his investment, because he did not live long enough for his monthly annuity payments to equal to the original purchase price of the annuity. In order for the investor to have broken even on his investment, he would have had to live to be over 85 years old. Claimants allege that there was no reasonable basis to recommend a single life payout annuity to a senior who was 77 years old at the time of purchase. Furthermore, it is alleged that the policy application clearly evidences that it was the investor’s intention to name a beneficiary to the annuity as all the necessary information to elect a beneficiary was provided on the annuity application.

Claimants have alleged that Respondent violated industry rules, including but not limited to FINRA’s customer suitability standard (Rule 2111) as well as FINRA rules 3110 and 2010. Thus, it is alleged that Merrill Lynch violated the duty of care and was negligent. Claimants further allege that Merrill Lynch breached the contract that was entered into and also breached the fiduciary duty that a securities firm and its employees/agents owe to their clients. Claimants alleged that Respondent’s misconduct constitutes common law fraud. Moreover, Claimants allege that the account at issue was handled negligently and Merrill Lynch was negligent in their supervision of Virgin. As such, Claimants allege that Merrill Lynch is liable for their conduct and the conduct of their employees by virtue of the doctrines of agency, respondeat superior, and vicarious liability.

If you were a client of Fredrik Magnus Virgin or Merrill Lynch Pierce Fenner and Smith, Inc. and have suffered investment losses, please contact the Law Offices of Place & Hanley, LLC to explore your legal options. The Law Offices of Place & Hanley, LLC is dedicated to helping investors who have been victims of securities fraud. If you have lost money as a result of securities fraud, you may be able to recover your financial losses. Contact us today toll free at (866)318-4725 for a free initial consultation.

Categories: Broker Investigations, FINRA Arbitration, Florida Securities Attorneys, General, Life Insurance, and Securities Broker Misconduct.

FINRA Permanently Bars Omaha, Nebraska Stockbroker Robert John Head

Robert John Head consented to a permanent bar from the Financial Industry Regulatory Authority. FINRA alleged that Head exercised discretion in the account of an elderly customer, who was diagnosed with dementia, without obtaining the customer’s prior written consent to do so. Head was prohibited from placing any trading that the customer had not explicitly and specifically approved. Head also recommended unsuitable investments given the customer’s financial need and medical condition.

Robert John Head was previously registered with:

08/2008 – 01/2014            STIFEL, NICOLAUS & COMPANY, INC.; OMAHA, NE

05/2004 – 08/2008            WELLS FARGO INVESTMENTS, LLC; OMAHA, NE

10/1997 – 06/2004            ROBERT W. BAIRD & CO. INC.; MILWAUKEE, WI

If you had an account where you suffered losses due to unauthorized trading, contact Place & Hanley, LLC for no cost initial consultation.  Call (866) 318-4725.

 

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Categories: General, Investor Protection, and Securities Broker Misconduct.

FINRA Issues New Investor Alert, Frontier Funds—Travel With Care

The Financial Industry Regulatory Authority (FINRA) issued a new Investor Alert called Frontier Funds—Travel With Care cautioning investors interested in funds that invest in frontier markets to carefully consider the heightened risks in these markets. While there is no precise definition of a frontier market, frontier funds generally invest in companies located in countries with developing securities markets such as Argentina, Lebanon, Nigeria, Slovenia and Vietnam.

“Investors seeking potentially higher returns in frontier funds should understand that the promise of higher returns always carries more risk—and the past performance of any fund is never a guarantee of future results,” said Gerri Walsh, FINRA’s Senior Vice President for Investor Education. “Before investing in a frontier fund, investors should consider whether and how such an investment might fit as part of a well-diversified portfolio.”

As with any investment, frontier funds have their pros and cons. Frontier Funds—Travel With Care, provides investors with a series of tips to avoid problems.

• Know which frontier markets the fund invests in. Risk factors vary by country—and no two countries share identical risk elements.
• Monitor changes in index components. If you are investing in a frontier ETF or index mutual fund, make sure you know and understand the index that the fund tracks and also the components of that index. The countries included in a frontier index can change over time.
• Geopolitical and currency risks are real. Be aware that some frontier markets are located in parts of the world with unstable political or market environments.
• Factor in costs and fees. Frontier fund costs and fees can be higher than their emerging market peers, and significantly higher than broadly diversified domestic and international managed funds.
• Consider Performance History. Frontier funds are relatively new, and most have limited performance histories.

Frontier Funds—Travel With Care
“Frontier funds” that invest in securities of companies in countries with developing securities markets—like Argentina, Lebanon, Nigeria, Slovenia and Vietnam—are gaining investor attention. Some see investing in frontier funds as a way to diversify assets—going beyond funds that invest in established international and other more developed emerging markets. Frontier funds are also sparking the interest of some investors who are lured predominantly by potential gains.

FINRA is issuing this alert to caution those interested in funds that invest in frontier markets to carefully consider the heightened risks in these markets. Frontier fund investments may provide potential diversification and periods of higher returns than can be obtained through more traditional investments. But products or asset niches that promise higher returns nearly always carry more risk—and the past performance of any fund is never a guarantee of future results.

Frontier Markets

There is no precise definition of a frontier market, or a country classified as such—but words like “small” and “illiquid” are often used to describe these markets.

Frontier economies tend to be smaller, and their markets for trading securities less developed, than emerging economies such as Brazil, Russia, India and China. In addition, compared to more established markets, the legal, financial accounting and regulatory infrastructure of frontier markets may be weaker or less developed, and political stability may be more of a concern. Financial market depth and breadth also may be more limited, and capital flows may be more restricted. Frontier markets may have less investor participation, fewer large global companies and limited international trade compared to established and emerging economies.

At the same time, frontier market countries are often characterized by populations that are making strides in education and entrepreneurship, an expanding economy and a rising standard of living.

Frontier Funds

Currently, there are a limited number of funds that focus specifically on frontier markets. Just as every frontier market is different, so is every frontier fund. Some funds invest in more than 30 frontier markets around the globe. Others invest more narrowly, perhaps focusing on only one region such as Asia, Africa or the Middle East—or even one country. Some mutual funds and exchange-traded funds (ETFs) may concentrate their holdings in a single or small number of economic sectors—such as banking, energy or agriculture—within various frontier markets. Others may track an index that encompasses virtually all of the countries in the frontier market universe. Still other funds invest in both frontier and the generally larger and more developed emerging markets, and some global or international funds may allow for sizable allocations to frontier markets.

A frontier fund that is registered under U.S. law—whether it is a mutual fund, ETF or closed-end fund—is required to provide investors with a prospectus that details the fund’s investment objective, major holdings or index that it tracks, historical returns and information about fees and risks. Think of this prospectus as your “frontier market guide,” complete with advisories and warnings. Read it carefully before you invest. Most frontier funds are designated for “aggressive growth” and described as high risk. Investors interested in frontier funds should carefully consider whether and how such an investment might fit as part of a well-diversified portfolio.

Before You Invest

Like any investment, frontier funds have their pros and cons. Before you invest, here are some tips to help you avoid problems:

• Know which frontier markets the fund invests in. Risk factors vary by country—and no two countries share identical risk elements. Read the fund’s prospectus to determine whether you are buying a fund that is or may become broadly diversified across many frontier markets, or that narrowly invests in only a few frontier markets, sectors or a single region or country.

• Monitor changes in index components. If you are investing in a frontier ETF or index mutual fund, make sure you know and understand the index that the fund tracks and also the components of that index. Be aware that the components or “constituents” of an index can change, potentially affecting the return of the fund. For example, components of the MSCI Frontier 100 Index are undergoing changes after Qatar and the United Arab Emirates—which accounted for more than 30 percent of the value of the MSCI index—were reclassified from “frontier” to “emerging” markets. Following a transition period over several months, these markets will no longer be represented in the index.

• Geopolitical and currency risks are real. Be aware that some frontier markets are located in parts of the world with unstable political or market environments. Regional conflict, civil unrest and regime change are all significant risk factors, as is the risk that currency exchange rates may fluctuate, resulting in changes in the value of a given fund.

• Factor in costs and fees. Frontier fund costs and fees can be higher than their emerging market peers, and significantly higher than broadly diversified domestic and international managed funds. Even small differences in expenses can make a big difference in your return over time, so it’s important to know just how much you are paying for your investment. Use FINRA’s Fund Analyzer to help you compare how sales loads, fees and other fund expenses can impact your return. ETFs have a fee structure that includes trading fees, which can add up if you plan to actively buy and sell.

• Learn as much as you can about the fund manager. Understanding frontier markets and managing investments is a specialized skill. Research the fund manager’s professional experience, including fund management tenure and performance record. Research the professional background of a fund manager and the broker selling you the fund using FINRA BrokerCheck.

• Performance History. Frontier funds are relatively new and most have limited performance histories. Like all investments, performance may fluctuate. You can lose money.

As with any investment that holds out the potential for greater returns, it pays to ask whether you are willing to take on the higher risk that comes with it. In short, are you comfortable with a higher risk of significant investment losses? If not, an investment in frontier funds may not be a destination you want for portfolio.

If you suffered investment losses, please contact the Law Offices of Place & Hanley, LLC to explore your legal options. The Law Offices of Place & Hanley, LLC is dedicated to helping investors who have been victims of securities fraud. If you have lost money as a result of securities fraud, you may be able to recover your financial losses. Contact us today toll free at (866)318-4725 for a free initial consultation.

Categories: General, Investor Protection, and Uncategorized.

Law Office of Place & Hanley Investigating Claims Involving Ronald Gavin and Common Wealth Financial Network

Place & Hanley is currently investigating claims regarding Ronald B. Gavin (CRD No.: 2486224) and Common Wealth Financial Network (CRD No.: 8032). The Law Offices of Place & Hanley, LLC recently filed a FINRA Arbitration claim on behalf of two investors in which it was alleged that Ronald B. Gavin engaged in risky and overly aggressive options trading strategies in the clients’ accounts. It was further alleged that the reason Gavin engaged in the overly aggressive options trading strategy is that he earned a commission per trade on options, in addition to his management fee. As a result of Gavin’s discretionary trading, the clients alleged that they suffered investment losses.

It has been further alleged that the investment strategy utilized by Mr. Gavin ensured that only he would benefit from the trading strategy he employed in the Claimants’ accounts. In fact, it has been alleged that while Mr. Gavin represented to the clients that the costs for trades were included in the management program fees, in actuality the majority of the trades Gavin executed were outside of the management trading strategy, and therefore were subject to an additional commission. It has been further alleged that Respondent Commonwealth Financial Network admitted in their Form ADV Part II that the fees and transaction charges on their managed accounts created a potential conflict of interest because Commonwealth advisors may have a greater incentive to recommend (or make investment decisions regarding) investments that provide additional compensation to Commonwealth and the advisor.

FINRA Rule 3010 requires each member to establish and maintain a system to supervise the activities of each registered representative and associated person in order to achieve compliance with the securities laws, regulations, and FINRA rules. Rule 3010 requires broker dealers to ensure that their associated persons adhere to FINRA’s suitability guidelines.

In the recently filed arbitration claim, the Claimants’ alleged that Respondent, Commonwealth Financial Network through its registered representative Ronald B. Gavin, violated industry rules, including but not limited to, FINRA’s customer suitability standard (Rule 2310) as well as FINRA rules 3010 and 2110, that Responded violated their duty of care and was negligent. Furthermore, it has been alleged that Respondent breached the contract that was entered into between Claimants and Respondent and that Respondent also breached the fiduciary duty that a securities firm and its employees/agents owe to their clients. Lastly, it has been alleged that Respondent’s misconduct constitutes common law fraud and that the Claimants’ accounts at issue were handled negligently and Commonwealth Financial was negligent in their hiring, retention, and supervision of their employees.

If you were a client of Ronald B. Gavin or Commonwealth Financial Network and have suffered investment losses, please contact the Law Offices of Place & Hanley, LLC to explore your legal options. The Law Offices of Place & Hanley, LLC is dedicated to helping investors who have been victims of securities fraud. If you have lost money as a result of securities fraud, you may be able to recover your financial losses. Contact us today toll free at (866)318-4725 for a free initial consultation.

Categories: Broker Investigations and General.

Mark Grimaldi and Navigator Money Management Charged by SEC

The Securities and Exchange Commission on January 30, 2014 charged a New York-based money manager and his firm with making false claims through Twitter, newsletters, and other communications about the success of their investment advice and a mutual fund they manage.

An SEC order against Mark A. Grimaldi and Navigator Money Management (NMM) finds that they selectively touted the past performance of the Sector Rotation Fund (NAVFX) and specific securities recommendations they made to clients.  They cherry-picked highlights but ignored less favorable recommendations and other data that would have made the facts complete.

Grimaldi and NMM agreed to settle the SEC’s charges.

According to the SEC’s order, Grimaldi is majority owner, president, and chief compliance officer at NMM, which is based in Wappingers Falls, N.Y.  Grimaldi particularly used a newsletter called The Money Navigator to solicit clients for NMM and investors for the Sector Rotation Fund.  The Money Navigator had more than 60,000 subscribers.  In 2008, the SEC conducted an examination of NMM and a fund it managed.  SEC exam staff notified NMM that the newsletters could be considered advertisements under Rule 206(4)-1, which generally prohibits false or misleading advertisements by investment advisers.  SEC staff also noted that the newsletters could be considered advertisements under Rule 482, which governs advertisements for mutual funds and other investment companies and has specific requirements for ads containing performance data.

The SEC’s order details several misleading advertisements made by NMM and Grimaldi in newsletters following that SEC examination.  For example, they misleadingly claimed in a December 2011 newsletter that Sector Rotation Fund was “ranked number 1 out of 375 World Allocation funds tracked by Morningstar.”  However, a time period of Oct. 13, 2010 to Oct. 12, 2011 was cherry-picked to broadly acclaim that ranking, and Sector Rotation Fund had a poorer relative performance during other time periods.  From Jan. 1 to Nov. 30, 2011, the day before Grimaldi published the ad, at least 100 other mutual funds in that same Morningstar category outperformed Sector Rotation Fund.

According to the SEC’s order, NMM was advertised as a “five-star (Morningstar) money manager” in the newsletters as well as on websites and in e-mail correspondence with potential investors.  This claim was materially misleading because Morningstar rates mutual funds not investment advisers.  And since February 2009, NMM has not been the investment manager of any mutual fund rated five stars by Morningstar.

The SEC’s order finds that Grimaldi also made misleading statements on Twitter.  He claimed responsibility for model portfolios in his newsletters that “doubled the S&P 500 the last 10 years.”  However, Grimaldi made the claim even though he had no involvement in the model portfolio performance for the first three years.

The SEC’s order finds that NMM violated Sections 17(a) of the Securities Act of 1933, Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rules 206(4)-1(a)(2), 206(4)-1(a)(5), 206(4)-7, and 206(4)-8 as well as Section 34(b) of the Investment Company Act of 1940.  Grimaldi violated many of the same provisions and aided and abetted and caused NMM’s violations.

Grimaldi agreed to pay a penalty of $100,000, and he and the firm agreed to be censured and comply with certain undertakings including the retention of an independent compliance consultant for three years.  Without admitting or denying the SEC’s findings, NMM and Grimaldi are required to cease and desist from future violations of these sections of the securities laws.

If you suffered investment losses, contact Place and Hanley at:

866-316-4725

Categories: General and Investor Protection.

Worst Performing Stocks in 2013

In 2013, the S&P 500 was up 29.6%.  However, even with the broad market index up considerably, some stocks fared much worse.  Below is a list of the worst performing stocks for 2013:

Rank
Name Symbol YTD % Chg
1 Prospect Global Resources PGRX -97.6
2 Desarrolladora Homex ADS HXM -90.63
3 NewLead Holdings NEWL -90.17
4 Golden Minerals AUMN -89.72
5 Celsion CLSN -89.45
6 Allied Nevada Gold ANV -88.22
7 Wright Medical Group Rt WMGIZ -88.21
8 Aastrom Biosciences ASTM -87.18
9 Loncor Resources LON -86.85
10 xG Technology XGTI -86.32
11 Coldwater Creek CWTR -84.5
12 Tandy Brands Accessories TBAC -83.47
13 Alvarion ALVR -82.53
14 Gyrodyne of America GYRO -82.36
15 Dolan DM -82.26
16 International Tower Hill Mines THM -81.11
17 Banro BAA -80.14
18 Sanofi Rts 12/31/2020 GCVRZ -80
19 Delcath Systems DCTH -79.27
20 Tower Group International TWGP -78.47
21 Cardium Therapeutics CXM -78.16
22 CEL-SCI CVM -78.08
23 AVEO Pharmaceuticals AVEO -77.27
24 Golden Star Resources GSS -76.09
25 Prosensa Holding RNA -75.74

If your financial advisor recommended a poor performing stock that was unsuitable for you, we may be able to help you recover your investment losses.

Contact Place & Hanley at (866) 318-4725.

Categories: General.

Suitability – A 2014 FINRA Priority

The Financial Industry Regulatory Authority (FINRA) recently published its 2014 regulatory priorities.  At the top of the list was suitability.  In its most simplistic form, suitability is a stockbroker or financial advisor’s responsibility to recommend or purchase appropriate investments for their clients.

According to FINRA’s Dispute Resolution website, the most widely cited reasons for arbitration claims in 2012 were:

Omission of Facts 1,128
Unsuitability 1,144
Breach of Contract 1,300
Failure to Supervise
1,364
Misrepresentation 1,398
Negligence 1,570
Breach of Fiduciary Duty 1,728

Thus, unsuitable recommendations was the sixth most widely cited reason for a dispute between a brokerage firm and their customers.  It is no wonder that FINRA has made suitability a top priority for 2014.

If you believe that your stockbroker or financial advisor invested your funds unsuitably, please contact The Law Offices of Place & Hanley at (866) 318-4725.

Categories: General.

JPMorgan to Pay for Ignoring Warning Signs in Madoff Fraud

JPMorgan Chase & Co. will pay over $2.5 billion for ignoring obvious warning signs of Bernard Madoff’s massive Ponzi scheme, authorities said Tuesday.

The bank will pay $1.7 billion to settle criminal charges and a $350 million civil penalty for what the Treasury Department called “critical and widespread deficiencies” in its programs to prevent money laundering and other suspicious activity.

It also will pay $543 million to settle other victim claims, according to settlements announced by Irving H. Picard, the trustee recovering money for thousands of Madoff’s victims.

Read more about it here:  http://money.ca.msn.com/investing/news/business-news/jpmorgan-to-pay-over-dollar25-billion-in-madoff-fraud-2

If you think you may have been the victim of a Ponzi Scheme, contact the Law Offices of Place & Hanley for a free initial consultation at (866) 318-4725.

Categories: General and Investor Protection.