Scottrade Fined for Alleged Failure to Supervise $8.4 Million in Sales of Unregistered Stock

by InvestorLawyers on July 23, 2013

in Arbitration,FINRA,Securities Fraud,Unauthorized Trading,Unregistered Securities

Investment fraud lawyers are currently investigating claims on behalf of the customers of James W. Margulies and Scottrade Inc. in light of a recent Financial Industry Regulatory Authority decision. Reportedly, Scottrade has agreed to pay a fine of $100,000 to FINRA for failing to supervise Margulies, the former Industrial Enterprises of America Inc. chief financial officer, general counsel and board member.

Scottrade Fined for Failure to Supervise 8.4 Million in Sales of Unregistered Stock

Reportedly, Margulies was allowed to improperly sell unregistered stock to investors between February 2005 and October 2007. Securities arbitration lawyers say he reportedly sold $8.4 million worth of unregistered stock. According to FINRA, “Scottrade failed to conduct an independent inquiry to determine whether the shares deposited were freely tradable.”

According to investment fraud lawyers, Margulies was convicted in 2011 of stealing more than $20 million from investors and looting over $90 million in illegally-issued securities by the Manhattan district attorney. He reportedly used more than $7 million of that money for luxury items such as jewelry for his wife, a vacation club membership, expensive homes and travel on a private jet.

Margulies was sentenced to 7 to 21 years in prison. However, firms have a responsibility to properly supervise and monitor customer accounts for fraud and theft. If they fail to do so, they may be held liable for customer losses. Investors should carefully review their account statements for unauthorized transactions and other signs of fraud and theft.

WFG Investments Inc. reportedly settled a similar case in which Margulies was allowed to sell almost $18 million in restricted stock. In that case, WFG was ordered to pay a fine of $200,000 to the Financial Industry Regulatory Authority.

Investors who suffered significant losses because of a firm’s failure to monitor accounts for fraud and/or sale of unregistered securities may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C.  at (866) 966-9598 for a no-cost, confidential consultation.

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