New York

Published on: November 26, 2012

Clients of Jeffrey A. Cashmore, LPL Financial Could Recover Losses

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses as a result of their financial investments with Jeffrey A. Cashmore and LPL Financial. According to the Financial Industry Regulatory Authority allegations against him, Cashmore prepared and distributed sales literature to prospective and current customers that was misleading. Furthermore, he allegedly failed to retain copies of the misleading sales literature, a violation of NASD Conduct Rules. The alleged misconduct reportedly occurred between November 1994 and October 2012, while Cashmore was registered with LPL.

Clients of Jeffrey A. Cashmore and LPL Financial Could Recover Losses

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.

Published on: November 22, 2012

FINRA Bars CEO; Victims of Unauthorized Trading Could Recover Losses

by InvestorLawyers

On November 8, 2012, the Financial Industry Regulatory Authority issued a news release stating that it has barred Mark Gillis, Chief Executive Officer for Hudson Valley Capital Management, and expelled the firm itself for defrauding its customers. The fraud occurred when funds and securities were used to cover losses incurred by manipulative day trading executed by Gillis. Securities fraud attorneys are following this and other unauthorized trading cases for potential arbitration claims to recover losses for investors.

FINRA Bars CEO: Victims of Unauthorized Trading Could Recover Losses

According to FINRA’s findings, in 2012, Hudson Valley, through Gillis, improperly day traded stock worth millions using the firm’s Average Price Account. Following the improper trades, Gillis manipulated the stocks’ share prices and withdrew his day trading proceeds using accounts under his control. Following significant losses caused by this fraudulent trading, Gillis made unauthorized trades in customer accounts in order to cover the losses. Thousands of shares in securities were purchased by Gillis and then allocated to customers at excessive markups from 177 percent to 280 percent. In addition, he paid for an unauthorized purchase of stock by converting customer funds. One customer suffered losses of around $400,000 because of Gillis’ fraudulent activity.

When two customers became aware of unauthorized trading in their accounts, they confronted Gillis, who attempted to hide his misconduct by lying to them. He later lied during sworn testimony to FINRA staff. Investment fraud lawyers stress to investors the importance of diligently monitoring their accounts and statements for fraudulent activity. If investors suspect unauthorized trading or any other type of securities fraud has occurred in their accounts, they should contact a securities fraud attorney immediately.

Published on: November 21, 2012

Berton Hochfeld Charged with Securities Fraud, Allegedly Stole $1 Million from Investors

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of customers of Berton Hochfeld, following the announcement that Hochfeld has been charged with securities fraud and wire fraud. Hochfeld, the 66-year-old manager of Hochfeld Capital Management LLC, allegedly stole over $1 million from investors. According to an article in Bloomberg, Hochfield was arrested the morning of November 9, 2012 at his home in Stamford, Connecticut.

Berton Hochfeld Charged with Securities Fraud, Allegedly Stole $1 Million from Investors

Hochfeld Capital Management LLC had an office at Park Avenue in New York that reportedly functioned as a Heppelwhite Fund general partner. According to the allegations against Hochfeld, he stole investor funds for his own use during the period of April 2011 to October 2012. The complaint also states that a private placement memorandum for the Heppelwhite Fund stated it would not purchase debt obligations issued by, or make loans to, Hochfeld Capital Management and/or principals of the LLC. Furthermore, according to the sworn complaint by U.S. Federal Bureau of Investigation Special Agent Michael Howard, in monthly statements provided by Hochfeld, the value of the fund was falsely inflated, concealing his withdrawals from investors. Private placement fraud like this is routinely investigated by stock fraud lawyers in order to recover stolen funds from investors.

Customers of Berton Hochfeld and/or Hochfeld Capital Management LLC who were customers of the firm during the time period stated above are encouraged to contact a securities fraud attorney as soon as possible. If convicted of both charges, Hochfield could face as many as 40 years in prison.

Published on: November 16, 2012

FINRA Decision: David Lerner Associates to Pay $12 Million in Restitution to Customers for Unsuitable Sales of Apple REIT Ten

by InvestorLawyers

According to a news release on October 22, 2012, the Financial Industry Regulatory Authority has sanctioned David Lerner Associates Inc. and ordered the company to pay approximately $12 million to customers. The affected customers purchased Apple REIT Ten shares, which is a non-traded Real Estate Investment Trust sold by David Lerner Associates. Some customers who will be receiving restitution were also charged excessive markups. Investment fraud lawyers are still investigating potential claims on behalf of investors who purchased Apple REITs from David Lerner Associates.

FINRA Decision: David Lerner Associates to Pay $12 Million in Restitution to Customers for Unsuitable Sales of Apple REIT Ten

David Lerner Associates is the sole distributor of Apple REITs, including the $2 billion Apple REIT Ten. According to the press release, David Lerner Associates “solicited thousands of customers, targeting unsophisticated investors and the elderly, selling the illiquid REIT without performing adequate due diligence to determine whether it was suitable for investors.” According to securities arbitration lawyers, selling non-traded REITs to customers for whom the investment is unsuitable is one of the biggest problems with non-traded REITs. Furthermore, misleading marketing materials were used in order to sell the REIT. These materials presented performance results but did not disclose that the REIT’s income was insufficient for supporting owners’ distributions.

In addition to the $12 million in restitution, David Lerner Associates was fined over $2.3 million for supervisory violations and charging unfair prices on collateralized mortgage obligations (CMOs) and municipal bonds. These unfair prices occurred over a 30-month period. According to investment fraud lawyers, victims of CMO and municipal bond fraud can also recover their losses through FINRA arbitration.

Published on: October 26, 2012

Fraud Victims of William T. Johnson Could Recover Losses

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of the customers of William T. Johnson. A resident of Palm Beach Gardens, Fla., Johnson is accused of stealing around $500,000 from 13 clients. Johnson allegedly informed his clients that he would invest their money in Certificates of Deposit (CDs), Individual Retirement Accounts (IRAs), short-term commercial paper and various other products. However, according to the allegations against him, Johnson actually used the money he received from clients to benefit his family and himself. The fraud allegedly took place between July 2003 and September 2011.

Fraud Victims of William T. Johnson Could Recover Losses

Johnson’s attorney reportedly said that Johnson would likely plead guilty. Securities regulators in Maine and Florida have apparently scrutinized Johnson in the past and, in addition, the Financial Industry Regulatory Authority has already barred him from association with FINRA-registered firms. Securities arbitration lawyers say Johnson previously was associated with Kovack Securities and Next Financial Group Inc.

If Johnson defrauded clients through his company while also registered with Kovack Securities or Next Financial group, he may have been “selling away.” From 2002 until 2009, Johnson was registered with Kovack Securities, and was registered with Next Financial Group from May 2010 to June 2010. According to securities fraud attorneys, “selling away” occurs when a FINRA-registered broker-dealer executes transactions outside his or her registered firm. Investment firms can still be held liable for a broker that is “selling away” if their supervision of that broker is deemed to have been negligent. As a result, it is possible for investors to recover their losses through securities arbitration.

Published on: October 25, 2012

Investors Allegedly Overcharged Customers $18.7 Million; Four Brokers Facing Charges

by InvestorLawyers

According to stock fraud lawyers, four brokers were recently charged by the Securities and Exchange Commission with securities fraud. The SEC’s allegations state that the four brokers illegally overcharged their customers $18.7 million. Reportedly they perpetuated their fraud by keeping a portion of profitable trades executed in customer accounts and using hidden markups and markdowns. The brokers named in the charges are Henry Condron, Benjamin Chouchane, Marek Leszczynski and Gregory Reyftmann.

Investors Allegedly Overcharged Customers $18.7 Million; Four Brokers Facing Charges

The clients of these brokers may have thought they were getting a great deal as, according to the SEC’s complaint, the brokers purported incredibly low commissions, often fractions of pennies or pennies per transaction. However, in actuality, when executing customers’ purchase and sell orders, they were reporting false prices. Reportedly, the hidden markups and markdowns were intentionally charged at times when the market was volatile. Investment fraud lawyers say this made the fraud particularly difficult to detect. The markups and markdowns occurred over a period of four years, involved over 36,000 transactions and ranged from only a few dollars up to $228,000. This resulted in fees that were sometimes altered from what had been reported to customers by over 1,000 percent.

In another part of the scheme, a customer sought to buy shares and specified a limited price. The brokers allegedly filled the order at the maximum price, but sold part of the order in order to obtain a profit for their firm. Next, they informed the customer that they were unable to complete the order at the maximum price set. During this time, millions of dollars were being made by these brokers through performance bonuses based on fraudulent earnings. In total, the brokers received over $15.6 million in performance bonuses, part of which resulted from earnings related to fraud.

Published on: October 8, 2012

ProShares Investors Could Still Recover Losses Following Class Action Lawsuit Dismissal

by InvestorLawyers

Following the dismissal of the class action lawsuit against ProShares, securities fraud attorneys are investigating potential claims on behalf of investors who suffered significant losses as a result of their investment in the ProShares leveraged and inverse exchange-traded funds.

ProShares Investors Could Still Recover Losses Following Class Action Lawsuit Dismissal

The U.S. District Court for the Southern District of New York recently dismissed the class action lawsuit that was reportedly filed in 2009. According to securities arbitration lawyers, reports indicated that the plaintiffs’ claims that certain risks were omitted from the registration statements disclosures were rejected by the courts. Reportedly, these omitted risks were associated with holding inverse and leveraged exchange-trade funds, or ETFs, for periods exceeding one day.

In a warning issued by FINRA, the regulatory authority stated that leverage inverse ETFs are unsuitable for ordinary investors and that these investments should be held for a short time period only. Brokers have been known to sell ETFs and ETNs as conservative ways to track a sector of the market, or the market as a whole. However, complicated trading strategies are necessary to accomplish this, and using these investments to track a sector of the market may or may not be a conservative trading strategy. This depends on the sector of the market and assets in the account relative to the investment’s concentration level. For more information on ETFs and ETNs, see the previous blog post, “Investors Could Recover Losses from their Inverse ETF and ETN Investments.”

Published on: October 5, 2012

News: Arbitration Panel Rules in Favor of Investor, Citigroup to Pay $1.4 Million

by InvestorLawyers

Securities fraud attorneys scored a win for investors in FINRA arbitration against a unit of Citigroup Inc. in a FINRA ruling on September 5. The arbitration panel ordered Citigroup to pay investors losses amounting to $1.4 million. These losses were associated with a municipal bond steeped in derivative securities that were very risky — yet the bond was, allegedly, marketed as “safe” to the investor.

News: Arbitration Panel Rules in Favor of Investor, Citigroup to pay $1.4 Million

New York City investor Margaret Hill filed the case in 2011 and requested over $3.5 million in damages. Her losses were a result of Citi’s Rochester Municipal Fund. Investment fraud lawyers say Hill’s case alleged that she was sold unsuitable investments by Citigroup Global Markets Inc. which, in addition, misrepresented facts.

According to the allegations against Citigroup, Hill bought the Rochester Fund as an alternative to her individual municipal bond funds because Citigroup said it would pay more interest and would be a “safe” alternative to her funds at that time. However, the Rochester Fund reportedly consisted primarily of tobacco bonds and risky derivative securities. After purchasing the bond in 2007, Hill sold the funds in 2009, suffering losses amounting to $2.9 million.

Published on: September 13, 2012

Investors in Icon Leasing Fund Eleven May Have Securities Arbitration Claim

by InvestorLawyers

Stock fraud lawyers are currently investigating claims on behalf of investors of Icon Leasing Fund Eleven investors. A recent announcement stated that investors will not be able to withdraw their money from Icon for another seven years longer than originally agreed. ICON Leasing Fund Eleven LLC participates in the purchasing and leasing of various types of equipment to third parties in Europe, Canada and the United States. Based in New York and founded in 2004, Icon also provides equipment and other financing.

Icon Leasing Fund Eleven Investors may have Securities Arbitration Claim

Like any private placement, the high risks associated with Icon Leasing Fund Eleven investments are only appropriate for sophisticated, high-net-worth investors. However, according to securities arbitration lawyers, the commissions offered to brokers and brokerage firms for this investment were high enough that some broker-dealers recommended this investment to clients for whom it was unsuitable without adequately disclosing the risks associated with the investment. Furthermore, stock fraud lawyers say information that is now available indicates that many of the firms selling the product did not adequately perform the necessary due diligence.

The following investments made up the bulk of Icon Leasing Fund Eleven’s portfolio as of March 21, 2012:

Published on: August 13, 2012

Investors of Bradford Exploration, Bradford Drilling Could Recover Losses

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered losses as a result of their investment in Bradford Drilling or Bradford Exploration. Bradford Exploration is, according to its Form D filing with the Securities and Exchange Commission, an oil and natural gas development company based in Buffalo, New York. Bradford Drilling Associates filed a Form D Notice of Sale of Securities with the SEC to raise capital. This type of filing is a limited offering exemption that allows small companies to use private placements to raise funds. This private placement was then sold by broker-dealers registered with the Financial Industry Regulatory Authority.

Investors of Bradford Exploration and Bradford Drilling Could Recover Losses

According to stock fraud lawyers, private placements allow smaller companies to use the sale of debt securities or equities to raise capital without it becoming necessary for them to register these securities with the Securities and Exchange Commission. Because these investments are typically more complicated and carry more risk than other traditional investments, they are usually only suitable for sophisticated, high-net-worth investors.

Securities fraud attorneys say that because the creation and sale of private placements often carry high commissions, these investments continue to be pushed by brokerage firms despite the fact that they may be unsuitable for investors. 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 that those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance.