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Securities Fraud

Beware of Ponzi Schemes!

There presently is a trial going on in California involving a woman who was among hundreds of investors who claimed that a Metropolitan Life Insurance agent tricked them into buying unregistered securities as part of 200 million dollar Ponzi scheme. The victim in that case is a 75 year old widow. A couple of years ago our office handled a very similar case here in Indiana involving a life insurance agent. In that case the agent convinced his clients to give him large sums of money to invest in a “retirement savings plan”. The fraudster then took the money and lived...

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Department of Labor Rolls Out New Rules for Financial Advisers: What They Mean for Reporters

by Jennifer Backer The Donald W. Reynolds National Center of Business Journalism Despite a shift towards more transparency in the financial planning industry, many investors still aren’t sure what they are paying their financial advisers, USA Today reported. But new rules the Department of Labor rolled out earlier this month are designed to clear things up for investors. The long-awaited and debated fiduciary rule requires that investment advisers put their clients’ interests before their own when it comes to fees and investment choices. The new rules are designed to clarify how much advisers are paid, who they work for, and how they get...

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The SEC and Finra Tighten Their Grip on Money Laundering Violations

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Regulators are clamping down on money laundering violations among brokerdealers in firms of all sizes, regardless if they have the proper compliance resources or not. Brokerdealers of small and medium sized firms should brace themselves for increasing regulations involving their compliance practices. No more are Finra and the SEC targeting just the larger companies. Nick Fera, chief executive officer of Firm58 stated, “They’re getting more aggressive about things and it’s harder to operate a business in this environment.” Recent Money Laundering Violations and Why E.S. Financial Services based in Miami, agreed to a $1 million fine for charges of violating antimoney laundering rules. The SEC fined New...

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Massachusetts Looks to Hammer Shady Brokers

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The top 241 firms in Massachusetts with an above average number of reps with misconduct reports on their records are being audited. Secretary of the Commonwealth, William Galvin has requested the firms hand over their hiring information. The letter being sent out, commonly referred to as a “sweep”, is to help the governing body understand brokerdealer hiring policies and procedures. According to Galvin, the goal is to rid the commonwealth of the bad apples. He stated, “We need and expect the brokerdealer community to assist us by aggressively policing and monitoring their own workforce. This sweep is intended to establish how the industry is meeting this critical investor protection responsibility...

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SEC Bans Broker For Fraud in Tobacco Scheme

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Lee Weiss, a Massachusetts resident, was banned from the brokerage and investment industry for a fraud scheme revolving around tobacco. He claimed a French company could reduce the harmful effects of tobacco smoking, according to the SEC . Mr. Weiss and his firm Family Endowment Partners LLC , will pay approximately $8.4 million in fines back to the investors who he stole from. According to the SEC litigation announcement, they also have been ordered to pay $1.5 million in civil penalty. How the Fraud Scheme Worked The SEC alleged that from 2010 to 2012, Weiss and his firm fraudulently advised clients to invest more than $40 million in...

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Financial Adviser Charged with Fraud

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The Securities and Exchange Commission (SEC) charged broker Louis Martin Blazer III with fraud, for stealing money from multiple professional athletes claiming to invest in movie projects. In all, Blazer defrauded five clients for approximately $2.35 million to help finance two films, “Sibling” and “Mafia the Movie,” stated the SEC. In one instance, Blazer allegedly stole $500,000 from the account of an athlete after he refused to invest in the projects. The client discovered the wrongdoing and threatened with a lawsuit. In a ponzi­like fashion, Blazer stole the money from one client to repay another client. Fraud Never Pays in the Long Run A statement from the SEC’s...

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Old Memories Resurface in Scam

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Multiple investors were cheated out of $131 million by buying stock in a worthless LED lighting distributor, by another former Stratton Oakmont broker. You all know about the old story involving the Long Island boiler room where investors got rich on scams. “Wolf of Wall Street” made this firm famous along with its infamous founder Jordan Belfort. Christopher Castaldo, a former Stratton Oakmont broker was charged with helping investors believe a company named ForceField Energy Inc. was worth multi millions. In actuality, it had “essentially no business operations and very little revenue, making the stock worthless,” according to Attorney Robert Capers statement. How the Scam was Ran The ringleader...

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Variable Annuity Penalty Costs Record $25 Million

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The Financial Industry Regulatory Authority (FINRA) levied a record $25 million penalty against MetLife Inc., who agreed to settle a bevy of abuses tied directly to variable annuities. $5 million of that fine, is due to be paid to customers for negligent misrepresentation and omissions, according to Finra statement. MetLife, the largest U.S. life insurer has neither accepted responsibility nor denied any wrongdoing. Finra’s chief of enforcement Brad Bennett, stated “Variable annuities are complex and expensive products that are routinely pitched to vulnerable investors as a key component of their retirement planning. Firms engaging in this business must ensure that the information on the costs and benefits of...

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Money Laundering Scheme Ends With Finra Ban

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James Van Doren was barred by Finra for deceiving creditors who were trying to recoup assets from a friend’s business. Van Doren, who was sentenced to 15 months in prison from related charges, was found guilty of laundering by helping a childhood friend conceal assets when financial agreements were not met. Laundering Scheme Unveiled Finra stated that Van Doren was given $30,000 in cash in a briefcase and a total of $732,000 over the course of three separate payments to help conceal debt money owed to creditors. He later on returned most of money while keeping some to help offset a few financial losses he incurred. Charges by...

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Jump In Securities Class Action Settlements

Cornerstone Research has reported that a total of $3 billion worth of securities class-action settlements occurred in 2015, involving 80 cases – a 184 percent increase over the previous year. Last year there were eight “mega settlements” – cases with a value at $100 million or more – compared with only one in 2014. In 2015, there were more cases featuring very high estimated damages. Average estimated damages rose 151 percent from 2014. The average settlement increased in size from $17 million in 2014 to $37.9 million in 2015. The proportion of securities class action settlements involving financial sector firms was lower...

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