Life Settlements and Promissory Notes Top FINRA’s 2012 Watchlist

You should never invest in anything that involves a promissory note unless you have done a thorough due diligence investigation.

The Financial Industry Regulatory Authority (FINRA) has released its 2012 Watchlist of investments that present a potential danger to investors. At the top of the list are life settlements, which are investments in a policy insuring the life of someone else, usually someone elderly. News of the abuses in the life settlement industry have swamped any positive stories. People who offer such investments routinely fail to make the premium payments necessary to keep the policies in effect and often descend into outright Ponzi schemes. (more…)

Securities America Ordered to Pay Punitive Damages in Promissory Note Case

That is one of the serious flaws in the arbitration system. As a tool for directing the behavior of brokers and their firms, it is worthless.

Financial Advisor magazine is reporting that a FINRA arbitration panel has ordered Securities America to pay $1.2 million to an investor who bought Medical Capital Holdings, Inc. promissory notes from a Securities America broker.  Significantly, the panel ordered Securities America to pay $250,000 in punitive damages.  According to the article: (more…)

SEC Shuts Down Alleged Ponzi Scheme Preying on Seniors

The Securities and Exchange Commission has shut down an apparent Ponzi scheme that includes so many of the red flags for fraud that it could serve as the basis for an entire course on investor protection.

The Securities and Exchange Commission has shut down an apparent Ponzi scheme that includes so many of the red flags for fraud that it could serve as the basis for an entire course on investor protection.  This week the SEC charged “Matthew J. Ryan, a Troy, N.Y.- based financial professional, with operating a Ponzi scheme through American Integrity Financial Co.” (more…)

FINRA Tells Its Membership to Do a “Reasonable” Investigation of Private Placements

FINRA members love to sell private placements for one reason: they pay huge commissions, far bigger commissions than stocks, bonds, or mutual funds.

The Financial Industry Regulatory Authority (“FINRA”) has issued Notice to Members 10-22, which reminds FINRA’s brokerage firm members of their obligation to “reasonably” investigate private placement offerings that they sell to their customers.  Private placements are unregistered securities which are available only to wealthy investors.  The mistaken assumption behind allowing the sale of these loosely regulated securities is that wealthy people are sophisticated enough to protect themselves from fraud.  Yet, some studies suggest that more sophisticated investors are more likely to fall for a financial scam than investors with less financial experience. (more…)

“Barred” From the Industry

Do you know what happens to rogue brokers once they are barred from the securities industry?  One would assume that they would be left to find a new career, and more or less, start over.  But this is not the case.  Barred brokers often find a way to stay in the industry; making it unsafe for [...]

Do you know what happens to rogue brokers once they are barred from the securities industry?  One would assume that they would be left to find a new career, and more or less, start over.  But this is not the case.  Barred brokers often find a way to stay in the industry; making it unsafe for investors who don’t know how to check out a broker’s past.  This is explained in a recent article by Bruce Kelly of Investment News. (more…)

 

Charting New Territory

For the first time, a federal grand jury has indicted a stockbroker – David McFadden, formerly of Securities America, Inc. - for allegedly conspiring to defraud elderly investors.   Jessica Papini of the Wall Street Journal has covered the story.  Her latest piece in the WSJ reads in part as follows:
“This is a very unusual case,” said Joseph Fogel of [...]

For the first time, a federal grand jury has indicted a stockbroker – David McFadden, formerly of Securities America, Inc. - for allegedly conspiring to defraud elderly investors.   Jessica Papini of the Wall Street Journal has covered the story.  Her latest piece in the WSJ reads in part as follows:

“This is a very unusual case,” said Joseph Fogel of Fogel & Associates, who isn’t involved in the case. In prior cases where brokers were charged with placing their clients in unsuitable investments or misrepresenting returns, firms paid the investors’ money back and were fined.

According to the complaint, McFadden made misrepresentations and omissions related to his qualifications, the diversification of stocks, and the potential investment returns.  This included telling clients he was a certified public accountant (CPA) although he hasn’t been licensed as such since 1987.   

In another impressive article, Ted Griggs of The Advocate, also following the McFadden story, wrote that McFadden also told his clients that his firm, Diversified Financial Services, employed other CPA’s as well. 

McFadden’s alleged unsuitable investment scheme is said to have cost his retired clients millions of dollars. In 2006, the NASD (now know as FINRA) fined Securities America and barred McFadden from the industry. And now, if he is convicted in the federal case, McFadden faces up to five years in prision and a fine of up to $250,000. 

So, the securities regulators and law enforcement are trying to set a new precedent:

This prosecution provides a warning to all brokers that, in egregious cases of customer fraud, sanctions may not end with Finra’s barring the broker from the securities industry, but may, instead, end up with jail time,” said James Eccleston, head of the securities group at Shaheen, Novoselsky, Staat, Filipowski & Eccleston PC.

But as the securities fraud battle continues, brokers will continue to misrepresent and omit material facts in order to gain your business.  It is the investor’s job to check out the broker and his firm and decide whether they are legit or not.  Ask Investor’s Watchdog for help— IW will uncover all customer complaints, and review the broker’s education and employment credentials for you.

 

New Study Proves That Brokers Enjoy a Home Field Advantage

The Super Bowl was in Tampa this year.  If you had let the Cardinals decide where the game should be played, they’d have played it in Phoenix.  If the Steelers had been allowed to decide, we’d have watched them play football in snowy Pittsburgh.  Why?  Home field advantage.  Every team wants it.  Though you’ll see [...]

The Super Bowl was in Tampa this year.  If you had let the Cardinals decide where the game should be played, they’d have played it in Phoenix.  If the Steelers had been allowed to decide, we’d have watched them play football in snowy Pittsburgh.  Why?  Home field advantage.  Every team wants it.  Though you’ll see the occasional baseball player who hits or pitches better on the road, that is a rarity.  Home field advantage matters. (more…)

 

Big Name Brokerage Firms Hurting Baby Boomers

Mara Der Hovanesian has written a story that all baby boomers should read.  In this week’s BusinessWeek, Hovanesian covers the story that Investor’s Watchblog has been following since our launch and that too few reporters cover.  There is a tidal wave of investment fraud breaking over American baby boomers.  Their nest eggs are disappearing not [...]

Mara Der Hovanesian has written a story that all baby boomers should read.  In this week’s BusinessWeek, Hovanesian covers the story that Investor’s Watchblog has been following since our launch and that too few reporters cover.  There is a tidal wave of investment fraud breaking over American baby boomers.  Their nest eggs are disappearing not only into the hands of con artists, but also into the hands of overeager and commission-hungry stockbrokers at America’s largest and best known brokerage houses.  (more…)

 

Stockbrokers Cheat on Tests

Like attorneys, doctors, and accountants, stockbrokers are required to take continuing education courses.  For stockbrokers, the course comes in two parts–a regulatory part and a firm part.  The firm part is an on-line course followed by an on-line test that the brokers can take from their own computers.  They receive a user name and password [...]

Like attorneys, doctors, and accountants, stockbrokers are required to take continuing education courses.  For stockbrokers, the course comes in two parts–a regulatory part and a firm part.  The firm part is an on-line course followed by an on-line test that the brokers can take from their own computers.  They receive a user name and password to log into the course and the test and must score 80% or better to pass the test.  (more…)

 

FINRA Disciplines Five Firms

The Financial Industry Regulatory Authority (FINRA) has disciplined five broker-dealers for “mutual fund sales and supervisory violations.”  The firms all failed to give mutual fund customers commission discounts to which they were entitled.  The five firms are Prudential Securities, Inc., Pruco Securities, Inc., UBS Financial Services, Merrill Lynch, and Wells Fargo.  

The Financial Industry Regulatory Authority (FINRA) has disciplined five broker-dealers for “mutual fund sales and supervisory violations.”  The firms all failed to give mutual fund customers commission discounts to which they were entitled.  The five firms are Prudential Securities, Inc., Pruco Securities, Inc., UBS Financial Services, Merrill Lynch, and Wells Fargo.   (more…)

 

Elderly Parents At Risk

She trusted him.  He’d been her broker for more than 20 years.  When her husband died in 1999 and she wanted to set up a charitable foundation to benefit the arts, she made the broker an officer and trustee of the foundation.  In 2000, when she entered a nursing home in failing health, she gave the broker [...]

She trusted him.  He’d been her broker for more than 20 years.  When her husband died in 1999 and she wanted to set up a charitable foundation to benefit the arts, she made the broker an officer and trustee of the foundation.  In 2000, when she entered a nursing home in failing health, she gave the broker her power of attorney, authorizing him to engage in banking transactions on her behalf.  (more…)

 

The Investment Decision You Can’t Delegate to a Broker

As the U.S. economy tumbles and the world economy trembles, businesses will begin laying off workers.  In October, AOL announced that it would be laying off 2000 employees.  Yahoo is planning on laying off hundreds of employees.  Airbus is set to cut 10,000 jobs. 

As the U.S. economy tumbles and the world economy trembles, businesses will begin laying off workers.  In October, AOL announced that it would be laying off 2000 employees.  Yahoo is planning on laying off hundreds of employees.  Airbus is set to cut 10,000 jobs.  (more…)

 

SEC Wants to Know Whether a NJ Brokerage Firm is a Ponzi Scheme

Registered Broker-Dealer.  Member of the Financial Industry Regulatory Authority (FINRA).  Securities Investor Protection Corporation (SIPC).   Every brokerage firm you’ve ever done business with touts those three things.  Let’s admit it–unless you work in the industry, those claims make the firm sound stable, solid, and safe.  They give it an aura of legitimacy.  A case the SEC [...]

Registered Broker-Dealer.  Member of the Financial Industry Regulatory Authority (FINRA).  Securities Investor Protection Corporation (SIPC).   Every brokerage firm you’ve ever done business with touts those three things.  Let’s admit it–unless you work in the industry, those claims make the firm sound stable, solid, and safe.  They give it an aura of legitimacy.  A case the SEC is investigating should cure us all of that misunderstanding. (more…)

 

FINRA’s New Expungement Rule

The Financial Industry Regulatory Authority has approved a rule that will make it tougher for stockbrokers to whitewash their records.  As reported in the New York Times, and covered on Investor’s Watchblog, for two decades many customer complaints have not been added to stockbrokers’ records.  That is because brokers were allowed to negotiate for expungement [...]

The Financial Industry Regulatory Authority has approved a rule that will make it tougher for stockbrokers to whitewash their records.  As reported in the New York Times, and covered on Investor’s Watchblog, for two decades many customer complaints have not been added to stockbrokers’ records.  That is because brokers were allowed to negotiate for expungement of their record as a condition of settlement.  Expungement does not mean that a broker is innocent of the charges made by the customer.  It means only that the firm thought it important to keep the broker’s record clean so that he or she can continue to attract customers.  (more…)

 

GM Employees Beware!

Today’s Wall Street Journal reports that the GM has begun the first phase of a buyout designed to reduce its workforce by 5200 people.  GM plans to replace those employees with people earning less money per hour.My experience tells me that stockbrokers and investment advisers have already begun crafting their sales presentations to snare the [...]

Today’s Wall Street Journal reports that the GM has begun the first phase of a buyout designed to reduce its workforce by 5200 people.  GM plans to replace those employees with people earning less money per hour.My experience tells me that stockbrokers and investment advisers have already begun crafting their sales presentations to snare the employees leaving GM with the buyout.  Unless they take steps to protect themselves, a significant percentage of these GM employees will find themselves without a retirement nest egg within 7 to 10 years.  (more…)

 

Another Lesson from The Wolf of Wall Street

Jordan Belfort wound up in jail after running wild on Wall Street.  His memoir The Wolf of Wall Street spares no detail in describing how he ran roughshod over almost every securities law ever enacted, while every securities regulator in the country tried to shut him down.  His firm, Stratton Oakmont, lasted seven years.

Jordan Belfort wound up in jail after running wild on Wall Street.  His memoir The Wolf of Wall Street spares no detail in describing how he ran roughshod over almost every securities law ever enacted, while every securities regulator in the country tried to shut him down.  His firm, Stratton Oakmont, lasted seven years. (more…)

 

New York Times Exposes Deficiencies in FINRA’s BrokerCheck Report

The Financial Industry Regulatory Authority (“FINRA“) is in the middle of a media campaign touting themselves as the investor’s friend.  They urge people to check out their broker for free using FINRA’s BrokerCheck report.  Today, New York Times reporter Lynnley Browning reported that FINRA’s BrokerCheck is worth what you pay for it — nothing. 

The Financial Industry Regulatory Authority (“FINRA“) is in the middle of a media campaign touting themselves as the investor’s friend.  They urge people to check out their broker for free using FINRA’s BrokerCheck report.  Today, New York Times reporter Lynnley Browning reported that FINRA’s BrokerCheck is worth what you pay for it — nothing.  (more…)

 

FINRA Catches Oppenheimer Changing Its Report Card

Recently the Financial Industry Regulatory Authority fined Oppenheimer & Co., Inc. $1 million for providing false information in response to a FINRA request aimed at determining whether the firm had given its customers mutual fund commission discounts to which they were entitled.  In 2005 regulators found that, industry-wide, nearly one out of every three mutual [...]

Recently the Financial Industry Regulatory Authority fined Oppenheimer & Co., Inc. $1 million for providing false information in response to a FINRA request aimed at determining whether the firm had given its customers mutual fund commission discounts to which they were entitled.  In 2005 regulators found that, industry-wide, nearly one out of every three mutual fund investors in front-end loaded funds did not receive commission discounts to which they were entitled. 

FINRA asked Oppenheimer for a self assessment to determine whether Oppenheimer was among the broker-dealers cheating its customers.  FINRA found that Oppenheimer submitted information that it knew to be flawed in response to that request. (more…)

 

Wachovia Slapped on the Wrist for Conflicts of Interest

Four years after the analyst conflict of interest scandal that rocked Wall Street and led to actions against ten of the world’s biggest brokerage firms, the Financial Industry Regulatory Authority (“FINRA“) has found that Wachovia Capital Markets engaged in the same kind of conduct.
FINRA found that from March 2004 to July 2007, Wachovia failed to adequately [...]

Four years after the analyst conflict of interest scandal that rocked Wall Street and led to actions against ten of the world’s biggest brokerage firms, the Financial Industry Regulatory Authority (“FINRA“) has found that Wachovia Capital Markets engaged in the same kind of conduct.

FINRA found that from March 2004 to July 2007, Wachovia failed to adequately disclose its relationship to companies on which it issued ”buy” recommendations.  (more…)

 

What Investors Can Learn From The Wolf of Wall Street

Jordan Belfort’s memoir The Wolf of Wall Street is NC-17 rated; but the truth is sometimes vulgar.
Belfort built Stratton Oakmont into one of the most infamous broker-dealers ever to stain FINRA’s membership list.  Both before and after being barred from the securities industry, he was the moving force behind several other firm’s, receiving millions per year for funding their operations.The [...]

Jordan Belfort’s memoir The Wolf of Wall Street is NC-17 rated; but the truth is sometimes vulgar.

Belfort built Stratton Oakmont into one of the most infamous broker-dealers ever to stain FINRA’s membership list.  Both before and after being barred from the securities industry, he was the moving force behind several other firm’s, receiving millions per year for funding their operations.The story of Belfort’s personal life would consume a month of Jerry Springer shows.  But there are several important truths revealed in Belfort’s book from the perspective of the other side of the law. 

You may have seen episodes of 48 Hours or 60 Minutes in which the correspondents interview people who formerly made their living by burglary or robbery or some other crime.  You pay close attention because you know you are learning from a knowledgeable teacher.  The terrific movie, Catch Me If You Can, tells the story of fraudster Frank Abignale, who later became a consultant to the Federal Bureau of Investigation.  Those who want to protect themselves listen to those who have broken the law because they reveal dangers that we otherwise would not appreciate.  In the next few posts, we’ll take a look at a few of the insights that investors should take from Belfort’s memoir:

They Don’t Fear the Cops 

(more…)