Category Archives: Securities Arbitration

SEC

NOTICE TO MORGAN STANLEY CLIENTS: Klayman & Toskes, P.A. Announces Investigation of Morgan Stanley Following $8 Million in SEC Fines for Exchange Traded Fund Violations

By | Exhanged Traded Funds, Featured Investigations, FINRA Sales Practice Violations, SEC Disciplinary Actions, Securities Arbitration | No Comments

New York, NY — February 21, 2017 – The Securities Arbitration Law Firm of Klayman & Toskes, P.A.,(K&T) www.nasd-law.com, announces an investigation into sales practice violations by Morgan Stanley (NYSE:MS) following $8 million in fines levied by the Securities Exchange Commission (SEC) related to Exchange Traded Funds (ETFs).

On February 14, 2017, the SEC imposed a Cease and Desist Order and Remedial Actions against Morgan Stanley for sales practice violations related to recommended investments in single-inverse ETFs for advisory clients in non-discretionary accounts.  According to Morgan Stanley compliance procedures, recommended investments in single-inverse ETFS had two requirements:

  • Advisory clients were required to sign Client Disclosure Notices which detailed the risks associated with the investment; and
  • Morgan Stanley supervisors were required to review the risky transactions for suitability based on client profile.

The SEC examination determined deficiencies were found in the supervisory procedures related to record keeping and the determination of “suitability” in advisory clients’ non-discretionary accounts.  No Client Disclosure Notices were signed for these risky transactions for nearly 44% of the non-discretionary advisory accounts at Morgan Stanley.  The supervisory review was considered “deficient or non-existent” for advisory clients who did not have a signed Client Disclosure Notice.

The sole purpose of this release is to investigate Morgan Stanley’s sales practices related to single-inverse exchange traded funds, which were supposed to be monitored on a daily basis and only considered suitable as a part of a hedging strategy. Morgan Stanley’s sales practice violations may include misrepresentations and omissions of material facts, conflicts of interest, unsuitable investment advice, and the failure to supervise financial advisor recommendations concerning these risky transactions. Current and former Morgan Stanley customers who have information about the firm’s sales practices are encouraged to contact Lawrence L. Klayman, Esq. or Raymond Gentile, Esq. of Klayman & Toskes, P.A.  at (888) 997-9956, or visit our website at www.nasd-law.com.

About Klayman & Toskes, P.A.

K&T is a leading national securities law firm which practices exclusively in the field of securities arbitration and litigation, on behalf of retail and institutional investors throughout the world in large and complex securities matters. The firm represents high net-worth, ultra-high-net-worth, and institutional investors, such as non-profit organizations, unions, public and multi-employer pension funds. K&T has office locations in California, Florida, New York and Puerto Rico.

Destination:  http://nasd-law.com/notice-to-morgan-stanley-clients-klayman-toskes-p-a-announces-investigation-of-morgan-stanley-following-8-million-in-sec-fines-for-exchange-traded-fund-violations/

Contact:

Klayman & Toskes, P.A.

Lawrence L. Klayman, Esq.

Raymond Gentile, Esq.

Toll Free: (888)-997-9956

Email: info@nasd-law.com

 

dollars-in-chains

Another Investor Lawsuit Filed Over Puerto Rico Bonds

By | FINRA Sales Practice Violations, News, Puerto Rico Bond Funds, Regulator Disciplinary Actions, Securities Arbitration | No Comments
Caribbean News

January 16, 2017
SAN JUAN, Puerto Rico — A securities arbitration law firm on Friday filed a claim against UBS Financial Services Inc. of Puerto Rico and UBS Financial Services, Inc. (collectively “UBS”) for $8.5 million.

According to the claim, the claimant entrusted assets to UBS with the investment objective of capital preservation. However, UBS ultimately concentrated the account in Puerto Rico government bonds (PRGBs) and its proprietary Puerto Rico closed-end bond funds (UBS PR CEBFs), which are leveraged and concentrated in PRGBs.

UBS purchased and held for the claimant PRGBs and UBS PR CEBFs, both of which are closely tied to the performance of Puerto Rico’s economy. The claimant believed the purchases were consistent with their low risk tolerance. However, the over concentration in these PRGBs and UBS PR CEBFs was fraught with excessive risk given the claimant’s investment objective and risk tolerance.

UBS failed to disclose to the claimant the risks associated with over concentrating the account in these securities. Had this information and the true nature of the risk of the recommended allocation been known to the claimant or properly disclosed, he would not have invested his assets in these products.

The law firm representing the claimant, Klayman & Toskes, in conjunction with Carlo Law Offices, is currently investigating, on behalf of their clients, the sales practices of UBS in connection with investment recommendations provided to their customers.

 

Klayman & Toskes, P.A. Wins $2.25 Million FINRA Arbitration Award in Favor of Retired UPS Executive With Concentrated Stock Position Against Citigroup Global Markets

By | Blog, Featured Cases, FINRA Sales Practice Violations, Securities Arbitration, Securities Concentration | No Comments

Boca Raton, Florida (GLOBE NEWSWIRE) February 10, 2016 – The Securities Arbitration Law Firm of Klayman & Toskes, P.A. (“K&T”), www.nasd-law.com announced a major victory today in winning a significant $2.25 million award against Citigroup Global Markets (NYSE: C) for FINRA securities arbitration Case No. 14-00199. The securities arbitration panel heard testimony for six days in Atlanta, Georgia before an award in the amount of $2.25 million was made in favor of a retired UPS executive, represented by attorneys, Steven D. Toskes, Esq. and Raymond Gentile, Esq. Citigroup has since paid the award. The Claimant alleged causes of action related to Claimant’s concentrated position in UPS stock (NYSE: UPS) including: breach of fiduciary duty; unsuitable investment strategy; failure to recommend risk management strategies  for a concentrated; leveraged position; negligence and gross negligence; and failure to supervise. Investors who suffered losses in concentrated stock positions should consider what recourse is available to recover their investment losses in stock held in full-service brokerage accounts. The Financial Industry Regulatory Authority, (FINRA) is a self-regulating organization with sales practice rules and regulations that governs the securities industry’s conduct to protect the investing public.

According to founding partner, Steven D. Toskes, “Our client worked over 37 years with UPS and accumulated shares through UPS’ Employee Stock Purchase Plan and Managers Incentive Program. Citigroup loaned funds using UPS stock and other securities as collateral but failed to implement a risk management strategy to protect the concentrated stock.” Mr. Toskes continues, “Any time a client has a concentrated, leveraged stock position, the prudent practice is to protect the downside to prevent a margin call through a risk management strategy such as a prepaid forward contract, collar or protective put option. This case was about the failure of Citigroup to protect our client’s UPS stock which represented the vast majority of his life savings”.

Concentrated stock positions represent a long term holding acquired through investment, inheritance or as an employee of the company. “Employees who participate in Employee Stock Purchase Plans (“ESPP”) can be particularly susceptible to concentrated stock positions and their respective financial advisors should ensure that these positions are protected from unforeseen market events by diversifying or hedging these positions accordingly” said Raymond Gentile, Esq. Full-service brokerage firms are obligated to give, and investors are entitled to rely upon, brokerage firms for competent, suitable investment advice concerning risk management strategies for concentrated stock positions. Brokerage firms are required to supervise the activities in brokerage accounts, and losses may be attributed to the failure to adequately supervise the financial advisor. Recommendations of unsuitable investments and/or maintaining unprotected concentrated stock positions are both causes of action that may be available to investors against their full-service brokerage firm in an individual securities arbitration claim filed with FINRA.

 

About Klayman & Toskes, P.A.

K&T is a leading securities law firm which practices exclusively in the field of securities arbitration and litigation, on behalf of retail and institutional investors such as non-profit organizations, public and multi-employer pension funds in large and complex securities matters. The Firm has offices in California, Florida, New York and Puerto Rico. Investors who have suffered investment losses from concentrated stock positions and the failure to implement risk management strategies should contact Steven D. Toskes, Esq. at 888-997-9956.

The Securities Arbitration Law Firm of Klayman & Toskes, P.A. Continues to Investigate Sales Practices Violations Related to Credit Suisse X-Links and Velocity Shares ETNs

By | Alternative Investments, Blog, Featured Cases, Featured Investigations, FINRA Sales Practice Violations, MArket-Linked Notes, Oil & Gas Investments, Securities Arbitration, Structured Securities Products | No Comments

Boca Raton, Florida (BUSINESSWIRE) – January 21, 2016 – The Securities Arbitration Law Firm of Klayman & Toskes, P.A., www.nasd-law.com, continues to investigate Financial Industry Regulatory (FINRA) sales practice violations related to Credit Suisse Securities USA (“Credit Suisse”) X-Links and Velocity Shares Exchanged Traded Notes (ETNs). Credit Suisse X-Links and Velocity Shares ETNs are issued by affiliated banks, Credit Suisse A.G and Credit Suisse Group A.G., ADR (NYSE:CS). In some instances, Credit Suisse X-Links and Velocity Shares performance is linked to oil prices, energy-related master limited partnerships and commodity indexes. Credit Suisse manages its proprietary X-Links and Velocity Shares ETNs, commonly known as structured securities products, to generate greater returns through the use of embedded derivatives designed to track the performance of a volatile security, index, commodity or currency, many times without any principal protections.

FINRA sales practice rules require a fair and balanced representation to investors that Credit Suisse X-Links and Velocity Shares ETNs are more complex and risky than a simple “interest rate” credit when based on a volatile index or commodity. Credit Suisse underwrites, manages and markets billions of dollars in Credit Suisse X-Links and Velocity Shares ETNs including the following:

  • Credit Suisse S&P MLP ETN (NYSE Arca: MLPO)
  • Credit Suisse X-Links Commodity Benchmark ETN (NYSE Arca: CSCB)
  • Credit Suisse X-Links Commodity Rotation ETN (NYSE Arca: CSCR)
  • Credit Suisse X-Links Cushing MLP Infrastructure ETN (NYSE Arca: MLPN)
  • Credit Suisse Velocity Shares 3X Long Crude ETN (NYSE Arca: UWTI)
  • Credit Suisse Velocity Shares 3X Natural Gas ETN (NYSE Arca: VGAZ)

In 2015, a Securities Exchange Commission (SEC) audit of major Wall Street brokerage firms led to a National Exam Program – Risk Alert Report after the review of sales practices violations related to Structured Securities Products, similar to Credit Suisse X-Links and Velocity Shares ETNs. According to the SEC examination, deficiencies were found in some brokerage firms’ supervisory and sales practices related to the determination of “suitability” and “levels of concentration” in customer accounts.

Our investigation of major Wall Street brokerage firms, including Credit Suisse relates to sales practices related to Credit Suisse X-Links and Velocity Shares ETNs. Brokerage firm violations of FINRA sales practice rules may include misrepresentations and omissions of material facts, conflicts of interest, unsuitable investment advice, securities concentration or the failure to supervise its financial advisors. Our investigation relates to investments in Credit Suisse X-Links and Velocity Shares ETNs designed to track the Price of Oil, MLP Pipeline Indexes, Commodities Baskets, and in some instances are leveraged up to 300%.

About Klayman & Toskes, P.A.

Klayman & Toskes, P.A., an experienced, qualified and nationally recognized securities litigation law firm, is currently investigating FINRA sales practice violations of major Wall Street brokerage firms related to the sale of Credit Suisse X-Links and Velocity Shares ETNs. Investors who have knowledge or experience related to the sales practices of brokerage firms and its financial advisors’ recommendations related to Credit Suisse X-Links and Velocity Shares ETNs, contact Steven D. Toskes, Esq. at 888-997-9956.

The Securities Arbitration Law Firm of Klayman & Toskes, P.A. Announces Investigation into FINRA Sales Practices Violations Related to Credit Suisse X-Links and Velocity Shares ETNs

By | Alternative Investments, Broker Misconduct, Featured Investigations, FINRA Sales Practice Violations, MArket-Linked Notes, Oil & Gas Investments, Securities Arbitration, Securities Concentration, Structured Securities Products | No Comments

Boca Raton, Florida (BUSINESSWIRE) – October 13, 2015 – The Securities Arbitration Law Firm of Klayman & Toskes, P.A., www.nasd-law.com, announces an investigation into Financial Industry Regulatory Authority (FINRA) sales practice violations by major Wall Street brokerage firms, including Credit Suisse Securities USA (“Credit Suisse”), related to Credit Suisse X-Links and Velocity Shares Exchanged Traded Notes (ETNs). Credit Suisse X-Links and Velocity Shares ETNs are issued by affiliated banks, Credit Suisse A.G and Credit Suisse Group A.G., ADR (NYSE:CS). In some instance, Credit Suisse X-Links and Velocity Shares performance is linked to oil prices, energy-related master limited partnerships and commodity indexes. Credit Suisse manages its proprietary X-Links and Velocity Shares ETNs, commonly known as structured securities products, to generate greater returns through the use of embedded derivatives designed to track the performance of a volatile security, index, commodity or currency, many times without any principal protections.

FINRA sales practice rules require a fair and balanced representation to investors that Credit Suisse X-Links and Velocity Shares ETNs are more complex and risky than a simple “interest rate” credit when based on a volatile index or commodity. Credit Suisse underwrites, manages and markets billions of dollars in Credit Suisse X-Links and Velocity Shares ETNs including the following:

  • Credit Suisse S&P MLP ETN (NYSE Arca: MLPO)
  • Credit Suisse X-Links Commodity Benchmark ETN (NYSE Arca: CSCB)
  • Credit Suisse X-Links Commodity Rotation ETN (NYSE Arca: CSCR)
  • Credit Suisse X-Links Cushing MLP Infrastructure ETN (NYSE Arca: MLPN)
  • Credit Suisse Velocity Shares 3X Long Crude ETN (NYSE Arca: UWTI)
  • Credit Suisse Velocity Shares 3X Natural Gas ETN (NYSE Arca: VGAZ)

On August 24, 2015, the Securities Exchange Commission (SEC) issued a SEC National Exam Program – Risk Alert Report which reviewed sales practices violations of major Wall Street brokerage firms related to supervision and sales of Structured Securities Products, similar to Credit Suisse X-Links and Velocity Shares ETNs. According to the SEC examination, deficiencies were found in some brokerage firms’ supervisory and sales practices related to the determination of “suitability” and “levels of concentration” in customer accounts.

Our investigation of major Wall Street brokerage firms, including Credit Suisse relates to sales practices related to Credit Suisse X-Links and Velocity Shares ETNs. Brokerage firm violations of FINRA sales practice violations may include misrepresentations and omissions of material facts, conflicts of interest, unsuitable investment advice, securities concentration or the failure to supervise its financial advisors. Our investigation relates to investments in Credit Suisse X-Links and Velocity Shares ETNs designed to track the Price of Oil, MLP Pipeline Indexes, Commodities Baskets, and in some instances are leveraged up to 300%.

About Klayman & Toskes, P.A.

Klayman & Toskes, P.A., an experienced, qualified and nationally recognized securities litigation law firm, is currently investigating FINRA sales practice violations of major Wall Street brokerage firms related to the sale of Credit Suisse X-Links and Velocity Shares ETNs. Investors who have knowledge or experience related to the sales practices of brokerage firms and its financial advisors’ recommended investment in Credit Suisse X-Links and Velocity Shares ETNs, contact Steven D. Toskes, Esq. at 888-997-9956.

The Securities Arbitration Law Firm of Klayman & Toskes, P.A. Announces Investigation into UBS ETRACS ETNs Linked to Declining Energy and Commodity Prices

By | Blog, Featured Investigations, MArket-Linked Notes, Oil & Gas Investments, Securities Arbitration, Securities Concentration | No Comments

Boca Raton, Florida (BUSINESSWIRE) – October 9, 2015 – The Securities Arbitration Law Firms of Klayman & Toskes, P.A., www.nasd-law.com, announces an investigation into UBS Financial Services, Inc. (UBS), a wholly owned subsidiary of UBS Group A.G. (NYSE:UBS), for Financial Industry Regulatory Authority (FINRA) sales practice violations related to UBS Exchange Traded Access Securities (ETRACS) whose performance is linked to declining commodity and energy prices. UBS manages ETRACS Exchange-Traded Notes (ETNs), commonly known as structured securities products, to generate greater returns through the use of embedded derivatives designed to track the performance of a volatile security, index, commodity or currency, many times without any principal protections.

FINRA sales practice rules require a fair and balanced representation to investors that UBS ETRACS ETNs are more complex and risky than a simple “interest rate” credit when based on a volatile index or commodity. UBS underwrites, manages and markets billions of dollars in UBS ETRACS NTNs to its customers, including the following:

  • UBS ETRACS Alerian MLP Index ETN (NYSE Arca: AMU)
  • UBS ETRACS 2X Monthly Leveraged S&P MLP Index ETN (NYSE Arca: MLPV)
  • UBS ETRACS Alerian MLP Infrastructure Index ETN (NYSE Arca: MLPI)
  • UBS ETRACS 2X Monthly Leveraged Long Alerian MLP Infrastructure Index ETN (NYSE Arca: MLPL)
  • UBS ETRACS CMCI Energy Total Return ETN (NYSE Arca: UBN)
  • UBS ETRACS CMCI Total Return ETN (NYSE Arca: UCI)
  • UBS ETRACS Bloomberg Commodity Index Total Return (NYSE Arca: DJCI)

On August 24, 2015, the Securities Exchange Commission (SEC) issued a National Exam Program – Risk Alert Report which reviewed sales practices violations of major Wall Street brokerage firms related to the supervision and sales of Structured Securities Products, similar to UBS’ proprietary ETRACS ETNs. According to the SEC examination, deficiencies were found in some brokerage firms’ supervisory and sales practices related to the determination of “suitability” and “levels of concentration” in customer accounts.

Our investigation relates to UBS’ sales practices related to its proprietary ETRACS ETNs. UBS’ violations of FINRA sales practice violations may include misrepresentations and omissions of material facts, conflicts of interest, unsuitable investment advice, securities concentration or the failure to supervise its financial advisors. Our investigation relates to investments in UBS ETRACS ETNs designed to track the Price of Oil, MLP Pipelines, Indexes, Commodities Baskets, and in some instances leveraged up to 200%.

About Klayman & Toskes, P.A.

Klayman & Toskes, P.A., an experienced, qualified and nationally recognized securities litigation law firm, is currently investigating FINRA sales practice violations of UBS related to the sale of its proprietary UBS ETRACS ETNs. Investors who have knowledge or experience related to the sales practices of UBS and its financial advisors’ recommended investment in UBS ETRACS ETNs, contact Steven D. Toskes, Esq. at 888-997-9956.

AEELA throws UBS under the Bus for the Management of Puerto Rico Government Bond

By | Featured Cases, News, Puerto Rico Bond Funds, Securities Arbitration | No Comments

Noticel.com
August 4, 2014

From 2010 to 2012 there was an increase of $ 50 million to over $ 300 million in the amount of assets of the Association of Employees of the Commonwealth (AEELA) managed by UBS, among these, bonds of the Corporation for Public Financing (PFC, for its acronym in English).

PFC bonds, maturing in early August, will be the first default in the history of the Government of Puerto Rico.

During that period, UBS AEELA acquired for about $ 179 million in bonds of Puerto Rico, which increased to $ 212 million the amount of related financial instruments of Puerto Rico in AEELA portfolio investments. This increase resulted in an increase in the concentration of assets in bonds AEELA Puerto Rico from 14% in 2010 to 30% in 2012.

The executive director of the organization, Claudio Paul Crespo said in a press release that “part of this additional investment in bonds, UBS was made AEELA acquiring for Puerto Rico bonds that were in your own portfolio. These bonds, which were transferred from the portfolio of UBS AEELA portfolio, remained lower than that of other instruments available in the credit rating market. In addition, UBS recommended AEELA purchase long-term bonds, which increased based on the fluctuation of interest and value of risk assets “.

He added that the investment portfolio by UBS AEELA proposal was substantially more risky than the “Barclays Aggregate Bond Index,” which was the model used for UBS investment AEELA. “UBS recommended to AEELA riskier than those in the investment model that these represented AEELA investments that were to follow,” he said.

The April 18, 2014, the Association lodged a complaint against UBS in the amount of $ 65.7 million. That complaint is based on actions that resulted in UBS alleged false representations, omissions, breach of contract, violation of fiduciary duty, unsuitable investment recommendations, neglect of portfolio diversification, negligent supervision of its employees, fraud, violations of the Financial Industry Regulatory Authority (FINRA), violations of the laws and regulations on investment and violations of the laws of Puerto Rico.

This claim was filed with FINRA in the US through the law Carlo Law Offices, PSC, represented by Mr. Osvaldo Carlo Linares, and Klayman & Toskes, PA, represented by Mr. Steven D. Toskes. “The law considers that the claim of AEELA is solid, it is based on a thorough study of investments and the applicable law,” said the Executive Director.

Association also referred three cases to the Justice Department on events in AEELA during the same period 2010-2012, among these purchases without auctions, possible violations of law and other irregularities linked to the Vacation Center Playa Santa, the program savings and loan origination system.

“As part of our commitment, we have assumed the duty to work for an impeccable administration, consistent with an institutional vision of sound administration. Employees and pensioners of the government of Puerto Rico can be confident that we have taken the steps to provide stability to the association and strengthen its financial position for the benefit of the heritage of all owners partners so that their savings will continue to grow and can receive no problems the services and benefits they so desperately need, “said Claudio Crespo.

AEELA has it taken steps to prevent the fiscal situation of the government affect the financial stability of the institution and its thousands of owners partners cleared.

The Securities Law Firms Klayman & Toskes, P.A. and Carlo Law Offices Comment on Recent Standard & Poor’s Credit Downgrade Decision To Cut Puerto Rico Public Finance Corp. Bond Credit Ratings

By | Blog, Featured Cases, FINRA Sales Practice Violations, Puerto Rico Bond Funds, Securities Arbitration | No Comments

SAN JUAN, Puerto Rico (Globe Newswire) – July 21, 2015 – The Securities Arbitration Law Firm of Klayman & Toskes, P.A. (“K&T”), www.sueubspuertorico.com, and Carlo Law Offices comment on Standard & Poor’s (“S&P”) decision to downgrade the credit rating on debt issued by Puerto Rico Public Finance Corp’s (“PRPFC”) in 2011 and 2012 from “CCC-” to “CC”. The S&P rating agency downgrade came after the PRPFC failed to transfer money to the bond trustee for the $58 million bond payment due Aug 1st. As a matter of practice, funds are transferred 15 days in advance of payment date. With this development, S&P warned that a default on the payment due by the PRPFC on August 1st has now become “a virtual certainty.” S&P stated, “We believe a default on the PFC bonds would be further demonstration of increasing unwillingness to pay debt in full and also raises the potential for future unequal treatment between various types of bondholders.”

In a recent report Bond Buyer asserted that, “Holders of that debt may have no recourse.” In support of this opinion PRPFC Series 2004B Bond Offering documents declare that, “The 2004 Series B bonds will not constitute an obligation of the Commonwealth of Puerto Rico or any of its political subdivisions or public instrumentalities (other than the corporation), and neither the Commonwealth of Puerto Rico nor any of its political subdivisions or public instrumentalities (other than the corporation) will be liable thereon. The Corporation has no taxing authority.”

Securities arbitration attorney, Steven D. Toskes comments on the recent events, “The 2016 Puerto Rico budgetary process has begun to buckle under the strain of excessive debt levels. Investors in PRPFC issued 2004 Series B bonds are most likely the first to be faced with an actual default in interest payments.” Mr. Toskes continues, “This pending default should lead investors to consider loss recovery options, including a Financial Industry Regulatory Authority (FINRA) arbitration claim for the failure to disclose the risks associated with concentrated investments in Puerto Rico Bonds that is the result of a brokerage firm’s failure to supervise its financial advisors.”

 

Klayman & Toskes, P.A. and Carlo Law Offices are dedicated to the rights of Puerto Rico investors. Puerto Rico investors who suffered losses as a result of FINRA sales practice violations may be able recover their losses in a FINRA arbitration claim. Klayman & Toskes, P.A., a leading securities and litigation law firm, practices exclusively in the field of securities arbitration and litigation, on behalf of retail and institutional investors against major Wall Street brokerage firms.

The Securities Arbitration Law Firm of Klayman & Toskes, PA Announces Investigation into Virtus AlphaSector Funds Managed by F-Squared Investments

By | Featured Cases, News, Securities Arbitration | No Comments

Boca Raton, Florida (GLOBE NEWSWIRE) June 25, 2015 — The securities arbitration law firm of Klayman & Toskes, P.A. (“K&T”), www.nasd-law.com, announced an investigation into sales practices related to investments in Virtus AlphaSector® Funds sold and marketed by brokerage firms and registered investment advisors (RIAs).  Virtus AlphaSector® Funds were managed by sub-advisor, F-Squared Investments.  F-Squared Investment has been the subject of Securities Exchange Commission (SEC) investigations into how F-Squared Investments’ historical performance had been calculated and misrepresented to investors.

According to the SEC, F-Squared Investments as part of a $35 million fraud settlement, admitted to the SEC fraud allegations.  The SEC charged co-founder Howard Present, and former chief executive, with making false and misleading statements to investors.  The SEC findings determined that investors were misled about historical performance and sales literature concerning mutual funds and separately managed accounts (SMA) by sub-adviser, F-Squared Investments recommended by Brokerage Firms and RIAs.

The Virtus Investment Partners Funds that offered investment strategies managed by sub-adviser, F-Squared Investments are as follows:

  • Virtus Dynamic AlphaSector®  (EMNAX),
  • Virtus Allocator Premium AlphaSector® (VAAAX),
  • Virtus AlphaSector® Rotation (PWBAX),
  • Global Premium AlphaSector®  (VGPAX), and
  • Premium AlphaSector® (VAPAX).  

Effective May 14, 2015, Virtus AlphaSector® Funds underwent a name change to Virtus Equity Trend. This change was due to the adviser, Virtus Investment Advisers, Inc., terminating the sub-advisory agreement with F-Squared Investments.

F-Squared Investments advised funds available to investors through mutual funds or SMA accounts were sold and marketed by brokerage firms and RIAs including, but not limited to, the following:

  • Ameriprise SPS Advantage
  • AssetMark, Inc.
  • Ausdal Financial Partners, Inc.
  • LPL Financial
  • RBC Wealth Management
  • Raymond James Financial, Inc.
  • Schwab Institutional
  • Stifel Nicolaus
  • UBS Financial Services
  • Wells Fargo Advisors

According to K&T founding partner, Lawrence L. Klayman, “Investors were misled by sales materials which contained fraudulent information about historical performance to garner investor business.” Mr. Klayman explains brokerage firm and RIA obligations, “In order to make suitable investment recommendations you must have knowledge of the investment manager, if the historical performance numbers are fraudulent, someone needs to be held accountable to investors.”

About Klayman & Toskes

K&T is currently investigating Financial Industry Regulatory Authority (FINRA) sales practice violations of brokerage firms and RIAs concerning Virtus AlphaSector® Funds and SMA accounts advised by F-Squared Investments. If you have knowledge or experience related to sales practices of brokerage firms and RIAs that recommended investments managed by F-Squared Investments, please contact Steven D. Toskes, Esq. of Klayman & Toskes, P.A., at 888-997-9956 or visit us on the web at http://www.nasd-law.com.

 

 

LPL Financial LLC Ordered To Pay Restitution To Investors and Fines To FINRA for Failure To Supervise Sale of Non-Traded REITs, Variable Annuities and Exchange Traded Funds

By | Blog, Featured Investigations, FINRA Sales Practice Violations, Non-Traded REITs, Securities Arbitration, Variable Annuities | No Comments

Financial Industry Regulatory Authority (FINRA) sanctioned LPL Financial, LLC with fines of $10 million for, “broad supervisory failures in a number of key areas, including the sales of non-traditional exchange-traded funds (ETFs), certain variable annuity contracts, non-traded real estate investment trusts (REITs) and other complex products”.  Additionally, FINRA ordered that $1.7 million in restitution be paid to investors by LPL Financial to certain customers who purchased non-traditional ETFs.

 

FINRA Examination Findings
According to FINRA regulators, “LPL’s supervisory breakdowns resulted from a sustained failure to devote sufficient resources to compliance programs integral to numerous aspects of its business.” This lack of resources resulted in transactions in complex investment products including non-traded REITs, variable annuities and exchange traded funds that were not properly supervised. The FINRA examination of LPL Financial supervisory procedures found the following:

 

Non-traditional ETFs: LPL Financial “did not have a system to monitor the length of time that customers held these securities in their accounts, concentration limits of those products in customer acclonts, and failed to ensure that all of its registered representatives were adequately trained on the risks of the products.”

 

Variable Annuities: LPL Financial “failed to supervise its sales of variable annuities, in some instances permitting sales without disclosing surrender fees, and in connection with certain mutual fund “switch” transactions, it used an automated surveillance system that excluded these trades from supervisory review.”

 

Non-traded REITs: LPL Financial “Failed to Supervise non-traded REITs by, among other things, failing to identify accounts eligible for volume sales charge discounts.”

 

FINRA examinations are intended to uncover failures to comply with rules and regulations designed to protect investors. According to the FINRA news release, LPL Financial “failed to report certain trades to FINRA and failed to ensure it provided complete and accurate information to FINRA and to federal and state regulators concerning certain variable annuity transactions.” FINRA found, “LPL failed to reasonably supervise its advertising and other communications, including its registered representatives’ use of consolidated reports. LPL did not monitor the creation or use of consolidated reports, and failed to ensure that these reports reflected complete and accurate information.” These findings assert that LPL Financial, in its communications with both regulators and investors, have not complied with securities industry sales practice rules and regulations.

 

Klayman & Toskes, P.A. is a securities litigation law firm dedicated to the protection of investor rights. We can help investors recover investments losses in non-traded REITs, variable annuities and exchange traded funds that are the result of LPL Financial violations of FINRA sales practice rules and regulations.

Do you have a question or need more information? Get in touch with us