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Articles Tagged with stock broker fraud

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money whirlpoolAs recently reported, former financial advisor Hector Anthony May (CRD# 323779) was recently discharged from employment by Securities America, Inc. (“Securities America”) (CRD# 10205) on or about March 9, 2018.  Mr. May’s termination by Securities America, which is Ladenburg Thalman’s largest subsidiary and the tenth largest independent broker-dealer in the nation, occurred the day after the U.S. Department of Justice disclosed an investigation into a suspected felony concerning Mr. May’s business activities as a New City, New York financial advisor.  Specifically, allegations have been raised suggesting that Mr. May bilked his clients out of millions of dollars through the use of phony account statements and purported offers to invest in “tax-free corporate bonds.”

Hector May, 77 years of age, is a well-known figure in Rockland County, New York, having been politically active and engaged in the local business community for the past several decades.  Following the 2009 arrest of a Peral River hedge-fund operator charged with running a $150 million Ponzi scheme, Mr. May issued the following warning to investors: “I have a lot of empathy for the people who got hurt, but before you invest a million dollars, do your due diligence.  Otherwise, it’s like going to get a heart operation and you don’t even know if he’s a doctor.”

According to publicly available information through FINRA BrokerCheck, Mr. May was a long-time financial advisor, having first entered the securities industry in 1973.  Most recently, Mr. May worked as an independent advisor on behalf of Securities America, from 1994 until his March 2018 termination.  Mr. May’s financial planning business was conducted through his own Registered Investment Advisory (RIA) firm called Executive Compensation Planners, Inc. (“ECPI”).  Upon information and belief, Mr. May’s ECPI clientele included investors in the following states: New York, New Jersey, Connecticut, Pennsylvania, Maryland, Virginia, North Carolina, and Florida.  Mr. May’s firm, ECPI, was formed as a New York corporation on December 27, 1982.

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Money in WastebasketOn June 19, 2018, the Securities and Exchange Commission (“SEC”) filed a Complaint against various individuals and entities — including former financial advisor John Charles Piccarreto, Jr. (CRD# 6276418) of San Antonio, TX — in furtherance of the SEC’s efforts to “stop an ongoing fraudulent scheme in which the Defendants have raised more than $102 million from at least 637 investors across the United States since 2011.”  As alleged by the SEC, Defendants Perry Santillo and Christopher Parris of Rochester, NY purportedly orchestrated a fraudulent Ponzi-like scheme predicated upon first buying or taking over books of business from retiring investment professionals from around the country.

According to the Complaint, after acquiring new investors and assets, Messrs. Santillo and Parris (each formerly registered with FINRA) would coordinate their sales efforts with Defendants, including John Piccarreto, Jr., in order to allegedly persuade victims into withdrawing savings from traditional investments, in order to transfer the capital into issuers controlled by Messrs. Santillo, Parris, or certain of their associates.  The SEC has alleged that the Defendants would “falsely claim that their investors’ money [would] be used to operate businesses in fields such as financial services, insurance, real estate development, and medical laboratories.”  In actuality, however, the SEC has alleged that Defendants would transfer funds received into “multiple accounts held in the names of different entities” controlled by Defendants.  While some of the funds were purportedly used to repay investors in typical Ponzi-fashion, the SEC has alleged that the bulk of the monies were misappropriated by the Defendants.

With regard to Mr. Piccarreto, the SEC has alleged that, in one instance, he met with an elderly investor from Austin, TX in February 2015.  As alleged, Mr. Piccarreto convinced the 80 year old investor, who suffered from dementia, into putting $250,000 into an entity controlled by Defendants: Percipience.  Mr. Piccarreto later emailed the investor’s daughter, in response to her concerns with the Percipience investment, that “I know this is scary for you and you are just looking out for dad but I promise you I will not let anything happen to any of the money.”  In total, the SEC has alleged that Mr. Piccarreto misappropriated approximately $1.3 million in investor money.

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broker misappropriating client moneyOn May 30, 2018, the Securities and Exchange Commission (“SEC”) filed a civil complaint against Mr. Steven Pagartanis, alleging that the East Setauket, NY stockbroker purportedly “[d]efrauded at least nine retail investors of approximately $8 million by soliciting and selling them securities using false and misleading statements from 2013 to at least February 2018 (the ‘Relevant Period’).”  During the Relevant Period, Mr. Pagartanis was affiliated with Cadaret, Grant & Co., Inc. (“Cadaret”) (CRD# 10641) from 2012 – 2017 and, thereafter, with Lombard Securities Incorporated (CRD# 27954) (“Lombard”).

As alleged by the SEC in its Complaint filed in federal court in the Eastern District of New York (SEC v Pagartanis Complaint), Mr. Pagartanis purportedly solicited certain of his customers — many of them retirees who relied upon his advice and investment recommendations — to invest in what was touted as a safe and conservative investment “[w]ith a fixed percentage return, generally between 4.5 and 8 percent annually.”  Specifically, the SEC alleged that Mr. Pagartanis informed at least five investors that they were investing in the common stock of Genesis Land Development Co. (“GDC”), a Canadian real estate firm listed on the Toronto Stock Exchange.  According to the SEC’s Complaint, in actuality the investment capital raised by Mr. Pagartanis was allegedly funneled to an LLC sharing the name Genesis, for which Pagartanis was the sole member and owner of the LLC.

The SEC has alleged that Mr. Pagartanis conducted a fraudulent scheme, under which he purportedly “[t]ransferred the money raised to his personal bank account, to other entities he controlled, and used around $1.8 million to make monthly interest payments to his customers.”  In typical Ponzi-like fashion, the scheme reportedly collapsed in early 2018 when Mr. Pagartanis failed to pay investors their monthly interest payments.

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Investors in American Finance Trust and  Lightstone Value Plus REIT V may have viable arbitration claims before the Financial Industry Regulatory Authority (FINRA) if a stockbroker or investment advisor made an unsuitable recommendation to the investor to  purchase them, or made a misleading sales presentation in recommending them.
Publicly registered non-exchange traded REITs like American Finance Trust and Lightstone Value Plus REIT V are complex investment vehicles that carry substantial risk, including significant fees and lack of liquidity (often making redemption difficult for a shareholder seeking to exit an investment).  Many retail investors are steered into purchasing non-traded REITs upon the recommendation of their broker or financial advisor who will typically tout the investment’s income component to their clients seeking an income stream.  Unfortunately, many investors who purchase shares in non-traded REITs are not fully informed of the many complexities and risks associated with such an investment.

American Finance Trust (“AFT”) is a non-traded REIT that was formed in January 2013 and subsequently launched by American Financial Advisors, LLC.  More recently, in February 2017, AFT (with $2.1 billion in assets) and American Realty Capital-Retail Centers of America (with $1.25 billion in assets) announced shareholder approval for a merger of the two non-traded REITs.

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With increasing frequency retail investors are encountering scenarios in which they are offered an opportunity to invest in a private placement. A private placement – often referred to as a non-public offering – is an offering of a company’s securities that are not registered with the Securities & Exchange Commission (“SEC”). Under the federal securities laws, a company may not offer or sell securities unless the offering has been registered with the SEC or an exemption from registration applies.


When an investor decides to purchase shares in a publicly traded company, or for that matter purchase shares in a mutual fund or exchange traded fund (“ETF”), he or she will have the opportunity to first review a comprehensive and detailed prospectus required to be filed with the SEC. When it comes to a private placement, however, no such prospectus need be filed with the SEC – rather, these securities are typically offered through a Private Placement Memorandum (“PPM”).

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Investors who suffered losses as a result of their broker’s recommendation of Guggenheim Shipping ETF are seeking the help of investment fraud lawyers in recovering their losses. Guggenheim Shipping ETF is a targeted ETF that tries to track the shipping industry. In general, the shipping industry can be a leveraged play — when there is a strong demand for freight transportation — on the global economy. However, as a result of the decreasing demand for raw materials from emerging markets, the need for shipping services has decreased. Reportedly, the Guggenheim Shipping ETF is down 46 percent, which is bad news for many investors. Luckily, investors who suffered significant losses may have a valid securities arbitration claim.

Investors of Guggenheim Shipping ETF Could Recover Losses Through Securities Arbitration

Brokers, and brokerage firms, have a fiduciary duty to their clients. They must research an investment prior to making a recommendation to an investor, to establish that the investment is suitable. It must be appropriate for each individual investor, taking into consideration the investor’s investment objectives, investment experience, net worth and age. The Financial Industry Regulatory Authority has a dispute resolution form where investors can settle disputes with their brokerage firms relating to unsuitability and other forms of stock broker fraud.

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.

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Investors who suffered losses as a result of their broker’s recommendation of C-Tracks ETN Citi Volatility Index Total Return are seeking the help of investment attorneys in recovering those losses. Reportedly, a unique methodology has caused a severe decline in the Volatility ETFdb Category. The C-Tracks ETN Citi Volatility Index Total Return combines short exposure to the S&P 500 Total Return Index to directional exposure of large cap stocks through third and fourth month futures contracts positions on the CBOE Volatility Index. When volatility spiked over the summer, this strategy worked well. However, CVOL has struggled over the long-term. Reportedly, the C-Tracks ETN Citi Volatility Index Total Return is down 48 percent, the most severe decline year-to-date.

Investors of C-Tracks ETN Citi Volatility Index Total Return Could Recover Losses Through Securities Arbitration

Luckily, investors who suffered significant losses may have a valid securities arbitration claim.

Brokers, and brokerage firms, have a fiduciary duty to their clients. They must research an investment prior to making a recommendation to an investor in order to establish that the investment is suitable. It must be appropriate for each individual investor, taking into consideration the investor’s investment objectives, investment experience, net worth and age. The Financial Industry Regulatory Authority has a dispute resolution form where investors can settle disputes with their brokerage firms relating to unsuitability and other forms of stock broker fraud.

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According to an upcoming issue of trade publication CFA Magazine, 1 in 10 Wall Street employees likely is a clinical psychopath. According to Sherree DeCovny, journalist and author of the story, “A financial psychopath can present as a perfect well-rounded job candidate, CEO, manager, co-worker, and team member because their destructive characteristics are practically invisible.”

Is Your Broker a Psychopath?

It comes as no surprise that some psychopathic traits are magnets for stock broker fraud. And the relatively high number of psychopaths on Wall Street may explain why securities fraud runs rampant.

DeCovny’s story points to the research of several psychologists. It’s important to note that the term “psychopath” is not synonymous with rampaging murderers and should not instantly conjure up images of Norman Bates, she says. Rather, according to DeConvy, clinical psychopaths are charming, gregarious and bright. But they have no trouble lying and do so often. Furthermore, they may not feel empathy for others. She states that psychopaths are also more likely to take risks because they either don’t understand or don’t care about the consequences.

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Sometimes losing money in the stock market and yelling “Fraud!” is a little like smelling smoke and yelling “Fire!” Just as smelling smoke might only mean dinner’s burning, losing money doesn’t always mean stock broker fraud has occurred. It is important for investors to be able to tell the difference between losses resulting from fraud and plain old bad luck. To that end, here are some common types of broker misconduct and tips on how to tell if you’ve been a victim:

Stock Broker Misconduct: When Losses are the Result of Fraud

  1. Unauthorized Trading: Unauthorized trading occurs when a broker makes trades without permission. This is surprisingly common and brokers will often defend their actions by saying that the investor either agreed to the trade or ratified it by raising no objection when they received a confirmation.
  2. Unsuitable Investments: Surprisingly, it is common for brokers to be unable to accurately measure risk. As a result, investors may have a portfolio that is far more risky than is appropriate. Brokers must, by law, take into account the risk tolerance and investment objectives of each client and make suitable recommendations based on those criteria. Unsuitable investments include investments that carry a risk that is not in keeping with the investor’s risk tolerance, as well as inadequate diversification and improper asset allocation. Churning, which generates excessive commissions through excessive trading, is also a form of unsuitable investments. Investors who suspect the trading on their account is excessive will most likely have to consult an investment attorney for an analysis of their portfolio.
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Stock broker fraud lawyers are on the lookout for investors who have been the victim of cold-calling fraud. Even though the number of sales calls has been reduced by the National Do Not Call Registry, securities firms still commonly use cold-calling as a tool for generating investments. Because not all cold-calls indicate fraud, cold-call scams remain a dangerous possibility for investors.

Have You Been a Victim of Cold-Call Stock Broker Fraud?

Individuals who have made investments based on a cold-call may have been the victim of fraud. Here are several indicators that a cold-call may have been a scam:

  • The caller used high-pressure sales tactics. Cold-calling fraudsters often use scripts that contain a list of retorts for every possible objection and will continue to attempt a sale as long as the investor remains on the line.
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