Securities fraud attorneys are currently investigating claims on behalf of investors who have suffered significant losses because their broker, adviser or firm did not notify or obtain their permission before executing trades on their account. According to the Securities and Exchange Commission, Parallax Investments LLC and Tri-Star Advisors allegedly executed thousands of transactions through their affiliated broker-dealer without disclosing their actions to clients.
According to stock fraud lawyers, principal transactions usually involve an investment adviser who uses affiliate brokerage firms to act on behalf of its account. However, conflicts of interest frequently arise between adviser and client. Therefore, securities fraud attorneys say that advisers must disclose any monetary interest or conflicted role in written form when advising the client and obtaining permission.
Parallax Investments LLC, Tri-Star Advisors and three executives — John P. Bott II, Jon C. Vaughan and William T. Payne — all based in Houston, Texas, face securities charges regarding the unauthorized transactions. According to the SEC’s orders of administrative proceedings, Bott made at least 2,000 principal transactions without disclosing or receiving permission from clients from 2009 to 2011. Furthermore, for each transaction, the broker-dealer affiliate bought mortgage-backed bonds with its inventory account and placed them in the client accounts. Bott gained almost half the $1.9 million in sales credits the firm received on the transactions. Vaughan and Payne executed similar trades and received similar benefits.