The Financial Industry Regulatory Authority (“FINRA”) entered into a Letter of Acceptance, Waiver and Consent (“AWC”) with First Allied Securities, Inc. (CRD #32444, San Diego, California) on August 21, 2017 arising from the firm’s practices with respect to mutual fund sales charges. FINRA censured First Allied and required the firm to provide FINRA with a remediation plan for eligible customers for mutual fund sales-charge waivers. First Allied also agreed in the AWC to pay restitution to eligible customers, which is estimated to total approximately $876,915 (the amount eligible customers were allegedly overcharged, with interest).

FINRA alleged that First Allied disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase Class A shares in certain mutual funds without a front-end sales charge. FINRA alleged that these eligible customers were instead steered toward Class B or C fund shares, or Class A shares with a front-end sales charge, resulting in the customers’ paying higher charges than necessary to purchase the shares.

FINRA also alleged that First Allied failed to apply available fee waivers to mutual fund purchases made by eligible customers. Finally, FINRA alleged that First Allied failed to establish and maintain a supervisory system sufficient to accurately determine the applicability of sales-charge waivers.

FINRA estimates that First Allied caused eligible customers to be overcharged by approximately $769,054 for mutual fund purchases as a result of the foregoing issues.

Brokerage firms are required to adequately supervise their personnel to ensure they are complying with FINRA rules while they are registered with the firm. If they fail to do so, the firms can be held responsible for the activities of their representatives and, thus, could be ordered to compensate their clients for losses sustained for the period they were registered with the firm.

Depending on their individual circumstances, investors who believe that they may have been charged excessive fees by a stockbroker or financial advisor may be able to recover losses through FINRA arbitration. Investors may contact the attorneys at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

Recently, the Financial Industry Regulatory Authority (“FINRA”) ordered Wells Fargo & Co. to pay a $3.4 million fine in connection with sales practice issues related to recommendations of volatility-linked exchange-traded funds (“ETFs”) and volatility-linked exchange-traded notes (“ETNs”) to customers. Specifically, FINRA determined that between July 2010 and May 2012, some Wells Fargo brokers affiliated with the company’s wealth management business recommended that their customers purchase volatility-linked exchange-traded funds (“ETFs”) and volatility-linked exchange-traded notes (“ETNs”) “without fully understanding their risks and features.” In addition, FINRA indicated that Wells Fargo lacked the appropriate supervisory procedures and safeguards to facilitate sales of the volatility-linked investment products.

By their very nature, volatility-linked investments are designed to return a profit when the market experience choppiness (or volatility) and are not intended for ordinary investors. In fact, when volatility-linked ETFs began rolling out to retail investors in early 2011, Michael L. Sapir, Chairman and CEO of ProShare Capital Management, stated that “The intended audience for these ETFs are sophisticated investors.”

Investing in a volatility-linked product is a very risky enterprise that is likely only suitable for professional investors seeking to trade on a short-term basis (e.g., several hours or day trading). Furthermore, because the VIX or so-called ‘fear index’ is not actually tradeable, investors who wish to invest in the VIX must trade derivatives instead (including volatility-linked ETFs and ETNs)- products that are beyond the understanding of ordinary retail investors.

As addressed in a March 2016 Barron’s article by Chris Dieterich – The Fear Gauge: Investors Should Avoid VIX ETFs – the stock market’s short-term roller-coaster ups and down have increased interest in exchange-traded products linked to the CBOE Volatility Index, or VIX. Dietrich asserts that these products, “… offer the chance to catch lightning in a bottle but, like all hedging tools, are virtually guaranteed to lose money longer term.” Dietrich goes on to describe how these VIX-related ETFs and ETNs are essentially “souped-up versions of short-selling bear-market funds, which ‘hedge’ stock holdings by rising when the major stock benchmarks sink.”

Aside from the risks associated with investing in derivatives, volatility-linked ETFs and ETNs also face certain structural limitations, including the fact that the funds are not directly tied to the VIX itself. These products are linked to the futures market, and because futures contracts have a finite lifespan and regularly expire, the ETFs and ETNs may face additional difficulties in tracking the index’s performance.

The attorneys at Law Office of Christopher J. Gray, P.C. have considerable experience in representing investors who have sustained losses in non-traditional, or exotic investment products, including managed futures, structured notes, and non-traditional ETFs. Investor facing losses due to an investment in a volatility-linked fund or note may contact our office at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

The Financial Industry Regulatory Authority (FINRA) recently filed a complaint against two MetLife Securities Inc. brokers, Patrick Chapin and Christopher Birli. According to the complaint, Chapin and Birli focused on advising State University of New York employees on their retirement plan. Both were terminated in 2012 and do not work in the securities industry at this time.

According to the complaint, Chapin and Birli allegedly made recommendations to 45 of their customers to unload their plan’s MetLife variable annuities by cashing in their annuities, purchasing another security within the plan to be held for 90 days, and then selling that security to switch to new variable annuities outside the university plan, held in IRAs. The alleged misconduct took place between 2004 and 2007. According to FINRA, this scheme generated commissions for the brokers amounting to hundreds of thousands of dollars.

According to stock fraud lawyers, the brokers’ actions exposed investors to unnecessary risks. Reportedly, in order to cash in their plan’s annuities, some investors were required to pay fees, and investor funds were tied up in the new annuities for up to seven years. Brokers 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. Securities fraud attorneys say that many investors may have received unsuitable recommendations related to variable annuities.

If you received an unsuitable recommendation regarding variable annuities and suffered significant losses as a result, you may be able to recover your losses through securities arbitration. To find out more about your legal rights and options, contact a stock fraud lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

According to stock fraud lawyers, the investigation began when one of Becker’s clients filed a complaint with the bureau. The complaint alleged unsuitable and excessive trading by Becker in the client’s account. Reportedly, it wasn’t until five months after the complaint was received by Merrill Lynch, in September 2010, that Merril Lynch required heightened supervision of Becker.

“After a thorough investigation and review by Bureau auditor William Masuck, we determined that there was a basis for the client’s complaint of excessive trading, especially with regard to mutual funds and structured products,” says Deputy Director of Enforcement Jeff Spill. “These kinds of investments are not suitable for frequent, short-term trading.”

Becker was ordered to pay a $10,000 fine and Merrill Lynch was ordered to pay $80,000 in fines and investigation costs. Furthermore, Becker received a cease and desist order for the improper conduct and Merrill Lynch was censured. Securities fraud attorneys say the client was reportedly able to recover his losses from the unsuitable trading through an arbitration settlement.

Neither Merrill Lynch nor Matthew Becker admitted or denied the bureau’s allegations.

If you are a client of a Merrill Lynch agent and suffered significant losses as the result of unsuitable short-term trading in investments such as mutual funds and structured products, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a stock fraud lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

According to a securities arbitration claim filed by a former JP Morgan broker, the firm allegedly “had a policy to only recommend in-house product to customers, irrespective of whether that product was the best choice for customers to meet their investment objectives.” Furthermore, the firm continued to discourage the selling of outside products by allegedly making it difficult for brokers to collect commissions and fees for those products. In addition, the claim alleges that the firm’s continuing insistence on the sales of proprietary mutual funds created a perpetual conflict between the firm’s policies and a broker’s responsibility to his or her clients.

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. The alleged practices of JP Morgan would have discouraged and/or made it difficult for brokers to act in the best interest of their clients.

If you are a JP Morgan customer and you received an unsuitable recommendation of a proprietary mutual fund, you 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.

Wells Fargo Advisors LLC was ordered to pay a $1.25 million fine and restitution of approximately $2 million for losses sustained by 239 customers. As Banc of America’s successor, Merrill Lynch, Pierce, Fenner & Smith was ordered to pay a $900,000 fine and restitution of approximately $1.1 million for losses sustained by 214 customers.

Floating-rate bank loan funds can be illiquid and carry significant risks because they invest in loans to entities with below-investment-grade ratings. According to FINRA’s findings, Banc of America and Wells Fargo made recommendations of concentrated purchases of these investments to customers for whom the recommendation was unsuitable. Stock fraud lawyers say that most investors with conservative risk tolerances or who want to conserve principal should not have received a recommendation to invest in a floating-rate bank loan fund.

Vice President and Chief of Enforcement for FINRA, Brad Bennett, said, “As investors continue to look for yield in a low-interest-rate environment, these actions should serve as a reminder that brokers and their firms need to ensure that investment recommendations are consistent with customers’ investment objectives and risk tolerances. Wells Fargo and Banc of America allowed their brokers to sell floating-rate bank loan funds to investors for whom the positions were unsuitable, resulting in significant losses to many customers.”

Furthermore, securities fraud attorneys say FINRA’s findings indicated that the firms did not properly train their sales force on the funds’ unique characteristics and risks.

If you received an unsuitable recommendation to invest in floating-rate bank loan funds from any full-service brokerage firm, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a stock fraud lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 for a no-cost, confidential consultation.

Unfortunately, Hines REIT investors have found themselves in a tight spot when they want to sell their investment. Because the Hines REIT is non-traded, investors are forced to sell through a secondary market, through an auction or privately. Investors who sell through a secondary marketmay be forced to accept a price far below their purchase price. Investors also may choose to hold onto their shares in the hopes that the real estate investment trust will decide to make a public offering and register with the Securities and Exchange Commission or pursue another liquidity event such as a merger with a publicly traded company.

Investment fraud lawyers are investigating the possibility that full-service brokerage firms may be held liable for the recommendation of the Hines REIT. Financial Industry Regulatory Authority rules have established that brokers and 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. Non-traded REITs like this one are illiquid and inherently risky and, therefore, not suitable for many investors.

Securities fraud attorneys say non-traded REIT investments like the Hines REIT typically offer commissions between 7-10 percent, which is significantly higher than traditional investments like mutual funds and stocks. In some cases, the commission generated by these investments can be as high as 15 percent. This higher commission can explain why brokerage firms are motivated to recommend these investments despite their possible unsuitability.

If you purchased the Hines REIT or another risky, non-traded REIT and suffered significant losses as a result, you may be able to recover your losses through securities arbitration. To find out more about your legal rights and options, contact an investment fraud lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

According to FINRA’s findings, Cashmore distributed “Power Optimizer” packages during the relevant period, which is at least from January 2006 through December 2010. These packages consisted of documents that contained investment information and portfolio recommendations and typically included a Cash Flow Report, a Power Optimizer Report, a Portfolio Recommendations/Asset Allocation page, a Fee and Asset Summary Report and Morningstar Reports for each recommended mutual fund. These packages were distributed to at least 100 clients and potential clients. However, according to stock fraud lawyers and FINRA, these packages contained misleading information. Specifically, FINRA says the documents provided incomplete and oversimplified information which did not provide a sound basis for investors to be able to evaluate facts about the information provided by the package.

Reportedly, the Cash Flow Report’s cash flow summary was based on only one projected rated of return, rather than including alternate cash flow scenarios, and did not include any possible cash flows that would illustrate a negative rate of return. Furthermore, the Morningstar Reports allegedly included in the package all addressed Class A investments while Cashmore recommended and sold Class C investments almost exclusively. Securities fraud attorneys say that Class A and C investments have differing rates of return, surrender charges and fees, despite being similar investments when in the same mutual fund.

According to FINRA, Cashmore has entered into a Letter of Acceptance, Waiver and Consent. According to the terms of the letter, Cashmore has been fined $5,000 and suspended for one month.

If you suffered significant losses as a result of your investment with Jeffrey A. Cashmore and LPL, you may be able to recover your losses through securities arbitration. To find out more about your legal rights and options, contact a stock fraud lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

According to the SEC’s complaint, the two clients were “elderly and unsophisticated investors” which, securities arbitration lawyers say, made them ideal targets for Rothman’s fraud. The complaint further alleges that the fraud occurred from 2006-2011 and the falsified statements “materially overstated” the value of the clients’ investments. In addition, allegations against Rothman state that once the investors realized the fraud had taken place, the financial advisor stated that he would repay the statements’ reported value. However, his financial resources eventually ran short.

Apparently, Rothman was previously censured by the CFP Board in 2004. This separate matter involved the purchasing of mutual fund Class S shares.

Stock fraud lawyers say that it is not enough for investors to simply read their account statements, but they should examine them thoroughly for indications of fraud. Many investment schemes take place over a long period of time. In this case, the scheme continued for five years and did not stop until the fraud was discovered by one of the clients. Diligence in examining statements can significantly reduce the amount of investor losses by discovering fraud sooner.

Though all investors should closely examine their account statements, elderly and retired investors are common targets for fraud. For more information on how elderly investors can be on the watch for fraud in their investment accounts, see the previous blog post, “Investment Fraud Red Flags for Elderly Investors.”

If, after thoroughly examining your account statements, you believe you have been defrauded, find out more about your legal rights and options by contacting a securities arbitration lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

In the case of Sanders Morris Harris, FINRA’s findings indicated that the firm’s registered representatives distributed advertising material to retail customers for hedge funds that did not adequately disclose the risks of the funds. Furthermore, it was alleged that the advertising contained unclear graphs or charts that contained misleading statements and omitted material information. In addition, the material allegedly implied that investors could avoid negative returns and/or indicated that the fund’s past performance would yield future positive returns. According to stock fraud lawyers, FINRA’s findings also indicated that two of the nine subject pieces of advertising were distributed by the firm, without principal review, to retail customers.

Securities fraud attorneys say that in the case of Fifth Third Securities, FINRA’s findings indicated that the firm’s transactions with or for a customer resulted in a failure to execute due diligence to determine the most appropriate inter-dealer market and, further, failed to execute transactions in such a market to procure the most favorable price to its customer as possible, given market conditions. Reportedly, the firm did not properly report transactions in municipal securities to the RTRS, and an adequate supervisory system was not in place to maintain compliance with applicable MSRB rules, securities laws and regulations in regard to step-out transactions.

If you have questions about your investments with either Sanders Morris Harris or Fifth Third Securities, find out more about your legal rights and options by contacting a stock fraud lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

According to the allegations against them, the firms sold, wholesaled and/or marketed an income mutual fund’s shares and, in connection, created training, wholesaling and/or advertising materials for the fund. These materials were provided to the retail sales firms, used within the selling intermediaries for institutional purposes, used internally, used for institutional purposes and provided to public customers.

Securities arbitration lawyers say that the findings stated that some of the sales materials distributed by the firms were misleading, unbalanced, failed to provide a sound basis for evaluating the risks of the funds and contained statements that were unwarranted. Furthermore, the firms allegedly failed to perform timely updates on the sales materials which affected the accuracy of the portrayal of the negative impacts resulting from the sub-prime crisis. This resulted in an inaccurate representation of the value of the portfolio investments and share of the fund and unqualified promises about future performance.

Additionally, FINRA’s findings indicated that the firms did not have adequate supervisory procedures in place to monitor compliance with applicable laws, rules and regulations. Stock fraud lawyers say Fidelity Brokerage Services and Fidelity Investments Institutional Services Company consented to FINRA’s findings but did not admit nor deny the allegations.

If you suffered significant losses as a result of your investment with Fidelity Brokerage Services and Fidelity Investments Institutional Services Company, you may be able to recover your losses through securities arbitration. To find out more about your legal rights and options, contact a securities arbitration lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

“Fraley, who was a licensed securities professional employed with licensed broker-dealers until he was terminated in 2011, solicited hundreds of thousands of dollars from Colorado investors, promising the investors that their money would be invested in ‘a well-balanced portfolio of investments’ consisting of Roth IRAs, traditional investments such as stocks and bonds, mutual funds and non-qualified investments,” says the statement from Colorado enforcement officials. However, “Fraley gained unauthorized access to the investors’ accounts, forged the investors’ signatures on checks, deposited the money in a Wealth bank account and converted the money for his own personal benefit, including the purchase of a house.”

Stock fraud lawyers say Fraley was registered from March 2007 to May 2011 with Northwestern Mutual Investment Services, a FINRA-registered broker-dealer. Fraley was registered with another FINRA-registered broker-dealer, MML Investors Services, from May 2011 to October 2011. All FINRA-registered broker dealers are, according to securities fraud attorneys, required to properly supervise the activities of their brokers during the time in which they are registered with the firm. As a result, these firms may be held liable for failing to adequately supervise Fraley.

If you suffered significant losses as a result of your investments with Clinton D. Fraley, you may be able to recover your losses through Financial Industry Regulatory Authority arbitration. To find out more about your legal rights and options, contact a stock fraud lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

According to stock fraud lawyers, Financial Industry Regulatory Authority rules have established that brokers and 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. If a broker or adviser makes a recommendation that is unsuitable for their client, the broker or brokerage firm can be held responsible for the investor’s losses in Financial Industry Regulatory Authority arbitration.

The following is a list of mutual funds currently being investigated by securities arbitration lawyers:

• Oberweis China Opportunities Fund – Because it primarily invests in China, this mutual fund is more aggressive than typical mutual funds.
• Dreyfus Greater China Fund – Because it primarily invests in China, this mutual fund is more aggressive than typical mutual funds.
• Eaton Vance Greater India Fund – Because it primarily invests in India, this mutual fund is more aggressive than typical mutual funds.
• Mathews India Investor Fund – Because it primarily invests in India, this mutual fund is more aggressive than typical mutual funds.
• John Hancock Global Opportunities Fund – Because it primarily invests in emerging markets, this mutual fund is more aggressive than typical mutual funds.
• Legg Mason Capital Management Opportunity Fund

If you invested in any of these mutual funds and your financial advisor did not fully disclose the risks, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a stock fraud lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

REIT Investments like the ArciTerra National REIT typically offer commissions between 7-10 percent, which is significantly higher than traditional investments like mutual funds and stocks. In some cases, the commission generated by these investments can be as high as 15 percent. This higher commission can explain why brokerage firms are motivated to recommend these investments despite their possible unsuitability.

Stock fraud lawyers are investigating the possibility that brokerage firms may be held liable for the recommendation of ArciTerra National REIT. Financial Industry Regulatory Authority rules have established that brokers and 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. Non-traded REITs are illiquid and inherently risky and, therefore, not suitable for many investors.

Furthermore, the ArciTerra National REIT reportedly offered private placements in order to raise capital. These private placements were then offered by broker-dealers registered with the Financial Industry Regulatory Authority. According to investment fraud lawyers, because private placements are typically more complicated and carry more risk than other traditional investments, they are usually only suitable for sophisticated, high-net-worth investors.

If you suffered losses in the ArciTerra National REIT, another risky REIT, or were unsuitably recommended private placements, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a stock fraud lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

Last month, the Financial Industry Regulatory Authority, the Securities and Exchange Commission and other regulators reportedly initiated inquiries into the fund sales practices of JPMorgan. A recognized fund researcher, Morningstar, reported that around 42 percent of JPMorgan’s funds did not surpass the average performance of similar funds over the past three years. Furthermore, a New York Times article published last month stated that JPMorgan financial advisors were allegedly “encouraged, at times, to favor JPMorgan’s own products even when competitors had better-performing or cheaper options.” Investment fraud lawyers’ investigations will establish whether the firm or its advisors can be held responsible for investor losses that resulted because of improper sales practices.

The Chase Strategic Portfolio is reportedly one of the main products that has been pushed by JPMorgan. The investment is made up of a combination of around 15 mutual funds. Some of these funds are developed by JPMorgan. Securities fraud attorneys say the Chase Strategic Portfolio is designed to allow ordinary investors access to holdings in stocks and bonds, with varying levels of risk, accomplished through the use of six main models. The fund was launched in 2008 and reportedly has around $20 billion in assets. Chase Strategic Portfolio carries an annual fee on assets of 1.6 percent, but also includes a fee on underlying JPMorgan funds. The aforementioned New York Times article also stated that the actual annual return of the fund after fees was 13.87 percent per year, which trailed the hypothetical 15.39 percent return included in the marketing materials.

If you suffered losses as a result of your investment in Chase Strategic Portfolio or other JPMorgan mutual funds, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact an investment fraud lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

Two ways investors can be victims of fraud through mutual funds are churning and break point fraud:

1. Churning: As market condition change, a stockbroker may suggest switching to a different mutual fund. If the new fund is within the same company as the old one, the investor usually doesn’t have to pay a commission. However, if the new fund comes from a different company, the investor must pay commissions and fees on the transaction. If the stockbroker encourages switching to a different company despite suitable options within the same company or attempts to generate commissions by encouraging the investor to switch multiple times to different companies, they may be “churning.”
2. Break Point Fraud: When investing in a mutual fund, the commission percentage drops as you invest more money in a company. The term “break point” refers to the financial intervals at which the commission percentage drops. An investor can purchase separate funds within the same company and combine the total money invested to reach a lower break point and, thus, pay less in commission. If a stock broker does not make them aware of this concept and/or recommends small purchases with multiple companies — rather than one or a few companies — without good reason, then they have committed break point fraud.

If you believe you’ve been a victim of mutual fund fraud, either through churning or break point fraud, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact an investment attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

Official court documents stated that Noel and Klosek’s fraud took place from about January 2003 to around July 2006 and involved over 100 clients, the majority of which were local NC retirees. In this atrocious broker fraud, clients were persuaded to invest large sums with Noel’s business, which were then diverted to another company belonging to Noel, significantly decreasing clients’ investment values. The diversion occurred without his clients’ knowledge or approval. The decrease in investment value was then hidden from clients with falsified quarterly statements and in July 2006, investors were told that their investment had actually grown. Victims of Noel and Klosek’s fraud now believed their assets to be around $16 million when, in fact, they had dwindled to only around $1 million.

According to the NC Securities Division Newsletter, Acting Special Agent in Charge of the Charlotte Division of the FBI, Joseph S. Campbell, said this of the case: “Retirees are often victims of fraud, and to steal their financial security is unconscionable. These men stole millions of dollars from people who don’t have the opportunity to restore the savings they’ve spent their lives building.” Though the $1 million that is now being distributed is only a small portion of the total restitution ordered by the court, it is a start.