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Securities Fraud

Ponzi Scheme Lands Minnesota Adviser 25 Years in Prison

Former financial adviser, Sean M. Meadows, has been sentenced to 25 years in prison for fraud. A St Paul, Minn., U.S. District Court judge handed down the sentence recently in the case in which Meadows pleaded guilty to diverting $10 million for business and personal expenses, including gambling and adult entertainment. As part of the initial indictment, Meadows was ordered to forfeit properties tied to the scheme, including a boat and expensive watches. Ponzi Scheme According to Investment News, Meadows collected some $13 million through his registered investment adviser, Meadows Financial Group, from around 2007 to 2014. Meadows told his clients that he would invest...

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Broker Busted for Trying to Inherit $1.8 Million from Alzheimer’s Client

The Financial Industry Regulatory Authority Inc. (FINRA) filed a complaint against Arizona broker, John Waszolek, for allegedly attempting to inherit $1.8 million from a client with Alzheimer’s disease. Broker Took Unfair Advantage FINRA says that in 2009, John Waszolek, who was at UBS Wealth Management at the time, "took unfair advantage" of an 81-year-old client by having her assign him as beneficiary for her trust — even though he knew she "lacked testamentary capacity" and was "completely unable to protect herself from exploitation." The client, a widow who lived alone in Arizona, had been Waszolek’s client since 1982. Until 2007, he would only...

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Robert W. Baird & Co. Fined $17.8 Million for Unfair Competition

The asset and wealth management firm Robert W. Baird & Co. along with 20 of its employees have been fined $17.8 million plus interest, with the money awarded to Gleacher & Co., a dissolved investment firm, for alleged unfair competition and solicitation. The order, among other claims related to employees who left Gleacher for Baird, was imposed by a Financial Industry Regulatory Authority Inc. (FINRA) arbitration panel. Gleacher, which dissolved in 2014, is now solely winding down its operations. Unfair Competition and Solicitation Five of the 20 Baird employees have been ordered to pay at least $50,000 plus interest, and the firm has been...

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Boston Adviser Investigated for Losing $12 Million of Clients’ Money

Hans Peter Black, founder of Boston-based Interinvest Corp., has been charged by the Securities and Exchange Commission (SEC) for defrauding investors and losing up to $12 million of the $17 million of clients’ money invested in Canadian penny stock companies in which he had undisclosed financial stakes. Penny stocks are low-priced, small-cap stocks which usually cost under $5. Conflict of Interest In a complaint filed in Federal court in Boston, the SEC alleged that Black served on the boards of the four companies in which he put his clients’ investments. A separate entity Black controls received $1.7 million, which Black contends represent reimbursement...

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Adviser Gets 9 Years in Prison for Diverting Investment Funds

Self-styled “Financial Coach” also must pay $3.6 million in restitution for fraud Bryan C. Binkholder, a St. Louis-area financial adviser, was sentenced to nine years in prison and ordered to pay more than $3.6 million in restitution to clients who participated in a real-estate investment program Binkholder used to pay personal expenses and salaries. According to prosecutors, Binkholder used YouTube videos, a talk-radio show and books to hoodwink his clients. He also acted as a bank for real-estate developers looking to purchase, renovate and re-sell homes. However, Binkholder made only a small amount of these loans. Instead, he used the money -- millions...

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FINRA Toughens its Sanctions on Suitability Violations

The self-regulator suggests barring offenders, expelling more firms, uping suspensions to two years The Financial Industry Regulatory Authority Inc. is tightening the screws on its disciplinary responses to violations of the suitability standard by brokers. As part of its Sanction Guidelines, which provide suggestions for the National Adjudicatory Council, the committee that oversees disciplinary proceedings, the self-regulator has increased its suggested suspensions from one year to two for brokers making unsuitable recommendations. It also strongly advises possible barring of brokers and expelling of firms for fraudulent activity. The guidelines are set in place to protect investors from a broker's failure to comply with...

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Morgan Stanley Sued for $170M by Home Shopping Founder’s Widow

Lynnda L. Speer, the widow of cable shopping pioneer Roy M. Speer and the personal representative of Mr. Speer's estate, is suing Morgan Stanley Wealth Management plus an adviser and branch manager for more than $170 million. The suit was filed under the Financial Industry Regulatory Authority Inc.'s (FINRA) arbitration forum, and was disclosed in Morgan Stanley’s annual financial report filed with the SEC in March. Alleged broker misconduct Ms. Speer claims that the firm, branch manager Terry McCoy, and adviser Ami Forte in the Palm Harbor, Fla., branch engaged in excessive trading, unauthorized use of discretion, negligent supervision, unjust enrichment and abuse...

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It Just Got Easier to Sue Over 401(k) Plans

Individuals who have retirement investments in a company 401(k) plan may now have more success filing a suit against the company for infractions such as breach of fiduciary duty. Recently, the United States Supreme Court unanimously ruled in favor of participants in employee retirement plans, in which the participants object to the companies’ investment decisions that negatively affect their retirement portfolios. Mutual funds with excessive fees In the case -- Tibble v. Edison International, 13-550 -- current and former employees of the energy company Edison International argued that the company did not act in their best interests by choosing mutual funds with higher...

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Wells Fargo Broker Banned for Undisclosed Business Interests

Aaron Parthemer, a Wells Fargo adviser, has been barred by the Financial Industry Regulatory Authority Inc. (FINRA) for engaging in a number of undisclosed businesses, including running a dance club in South Beach, Fla., plus running an Internet branding startup and a tequila marketing operation. Undisclosed loans and business involvements FINRA alleges that Parthemer managed operations at the club, and loaned just under $400,000 to three professional athletes who were owners at the club. The loans were to pay for operating expenses at the club, but they violated Wells Fargo’s policy against brokers lending money to clients. James Sallah, an attorney representing Parthemer,...

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FINRA Focusing on Protecting Elderly Investors

While brokers and investment advisers are targeting older clients to build their book of business, regulators are attempting to protect graying investors. Misrepresentation of company strength Recently, the Financial Industry Regulatory Authority Inc. (FINRA) filed a cease-and-desist order against Avenir Financial Group for sales of equity in the firm. FINRA claims Avenir lied about the health of the firm and raised more than $730,000 over three years in sales mostly to elderly investors. Avenir registered representative, Cesar Rodriguez, was also barred for personal use of $77,000 in investor funds. Toll-free FINRA Securities Helpline The filing against Avenir comes just over a week after FINRA set...

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