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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

 

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Klayman & Toskes, P.A. Comments on President Trump’s Executive Orders Targeting DOL Retirement Advice Rule and Dodd-Frank Wall Street Reform

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New York, NY – February 3, 2017 – The Securities Arbitration Law Firm of Klayman & Toskes, P.A. (“K&T”), www.nasd-law.com, comments on President Trump’s executive orders targeting the Department of Labor’s (“DOL”) retirement advice rule and Dodd-Frank Wall Street Reform.  President Donald Trump will be signing executive orders today instructing the DOL to halt implementation of its retirement advice rule and review Dodd-Frank Wall Street Reform.

The DOL’s retirement advice rule, also known as the fiduciary rule, was issued in 2016 by former president Barack Obama’s administration and is scheduled to take effect in April 2017. The DOL’s rule was created to reduce potential conflicts among financial advisers who provide retirement advice to their clients.  Under the rule, financial advisors are required to act in their client’s best interest, or as fiduciaries, when providing investment advice to their clients regarding individual retirement accounts and 401K plans.

According to founding partner of K&T, Lawrence L. Klayman, “The DOL rule establishes a fiduciary duty for all retirement accounts, with a provision for certain transactions, including variable annuities and equity-indexed annuities which provide for a ‘Best Interest Contract’ exemption.  President Trump’s executive order seeks to undermine and potentially eliminate the safeguards contemplated by the DOL’s rule, which was implemented to protect investors.”  Mr. Klayman continues, “Trump’s actions today seek to roll back all the progress that was made since the financial crisis, and is terrible news for investors.”

President Trump’s executive order geared towards dismantling the 2010 Dodd-Frank Wall Street reform law is consistent with promises he made during his presidential campaign.  Mr. Klayman explains, “Dodd-Frank was the most significant regulatory overhaul of Wall Street in decades and this executive order is an attempt to eliminate the safeguards instituted after the financial crisis of 2007-2009, a crisis many investors still haven’t recovered from.”

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.

 

Business people shaking hands in office

NOTICE TO UBS PUERTO RICO CUSTOMERS: Klayman & Toskes Files $8.5 Million Suit Against UBS as it Investigates Claims for Over-Concentration in Puerto Rico Government Bonds and Closed-End Bond Funds

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San Juan, Puerto Rico.  January 13, 2017 — The Securities Arbitration Law Firm of Klayman & Toskes, P.A., www.sueubspuertorico.com, together with Carlo Law Offices, P.S.C. located in Puerto Rico, announced today that they filed a claim against UBS Financial Services Incorporated of Puerto Rico and UBS Financial Services, Inc. (NYSE: UBS) (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 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 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 Claimant or properly disclosed, he would not have invested his hard-earned assets in these products.

The sole purpose of this release is to investigate, on behalf of our clients, the sales practices of UBS in connection with investment recommendations provided to their customers. Current and former customers of UBS who have information relating the investment advice provided by the firm, are encouraged to contact Lawrence L. Klayman of Klayman & Toskes, or Lcdo. Osvaldo Carlo of Carlo Law Offices, at (787) 919-7325, or visit us on the web at www.sueubspuertorico.com.

wall-street

NOTICE TO WELLS FARGO BROKERAGE CLIENTS: Klayman & Toskes, P.A. Launches Investigation into Wells Fargo Advisors’ Envision Investment Analysis Tool, Following $1 Million FINRA Fine for Failing to Supervise Client Presentation Reports

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New York, NY  – December 16, 2016 — The Securities Arbitration Law Firm of Klayman & Toskes, P.A. (“K&T”), www.nasd-law.com, has launched an investigation into Wells Fargo Advisors, a wholly-owned brokerage dealer of Wells Fargo (NYSE:WFC), for Financial Industry Regulatory Authority (FINRA) sales practice violations for failing to supervise client presentation reports, including those generated by the firm’s Envision investment analysis tool.

On December 5, FINRA accepted from Wells Fargo Advisors an Acceptance Waiver and Consent for $1 million in fines for “failing to establish a supervisory system reasonably designed to achieve compliance with applicable securities laws and regulations regarding the use and dissemination to customers of the [Wells Fargo Advisors’ client presentation report] Application”, which included assets “held away from the firms.”  According to FINRA, Wells Fargo Advisors’ “representatives were permitted to manually enter information regarding customers’ external accounts, assets and liabilities” into a centralized database maintained by the brokerage firm.  During the period from June 2009 and June 2015, more than 5 million reports were generated from the firm’s most popular client report system.

According to K&T, “Wells Fargo Advisors’ representatives who utilized Envision Presentation reports, in order to dispense financial advice may have violated FINRA sales practice rules and regulations.”  K&T is investigating potential sales practice violations from Wells Fargo Advisors’ use of the Envision Presentation report program, in conjunction with unsuitable investment strategies and recommendations.  Customers may have retired too early and/or taken undue risks with retirement plan proceeds as a result of unrealistic assumptions.  Wells Fargo Advisors may have failed to supervise the financial planning advice provided to its customers, while at the same time creating incentive programs for its advisors that encouraged behavior that was contrary to their customers’ best interest.

 

nyse

NOTICE TO MERRILL LYNCH PUERTO RICO BOND AND BOND FUND INVESTORS: Klayman & Toskes, P.A. Continues to Investigate FINRA Arbitration Claims against Merrill Lynch for its Margin Lending Practices Related to Concentrated Investments in Puerto Rico Bonds and Bond Funds

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San Juan, Puerto Rico–December 5, 2016.  The Securities Arbitration Law Firm of Klayman & Toskes, P.A. (“K&T”), www.nasd-law.com, continues to investigate FINRA arbitration claims against Merrill Lynch, a subsidy of Bank of America, N.A. (NYSE:BAC), for its margin lending practices related to concentrated investments in Puerto Rico bonds and leveraged closed-end bond funds (CEBFs). The Financial Industry Regulatory Authority (FINRA) recently fined Merrill Lynch $6.25 million for failure to supervise the recommended use of borrowed funds to invest in securities. Additionally, Merrill Lynch agreed to “pay roughly $780,000 in restitution to 22 customers who had 75% or more of their assets invested in Puerto Rico bonds and funds and suffered huge losses trying to liquidate them to meet margin calls.”  K&T is currently investigating the sales practices of Merrill Lynch’s for violations related to unsuitable concentration in Puerto Rico bonds and leveraged CEBFs.

K&T’s investigation focuses on recommendations by Merrill Lynch to use loans secured by their Puerto Rico bonds and leveraged CEBFs. Recommendations to use borrowed funds to invest in Puerto Rico bonds and leveraged CEBFs resulted in undue risks for investors with moderate to conservative risk tolerances.  Merrill Lynch investors suffered greater losses and margin calls from the use of borrowed funds provided by their parent company, Bank of America, N.A.

The sole purpose of this release is to investigate sales practice violations by Merrill Lynch on behalf of our clients. The sales practice violations may include unsuitable investment recommendationsmargin calls, conflicts of interestmisrepresentations and omissions of material facts and a failure to supervise.   Merrill Lynch customers who have information about the sales practices of the firm related to concentrated investments in Puerto Rico bonds, CEBFs through borrowed funds provided by Bank of America, N.A. are encouraged to contact Lawrence L. Klayman, Esq. or Steven D. Toskes, Esq. of Klayman & Toskes, P.A.  at (787)-919-7325, or visit our website at www.perdidasenbonospr.com/en/.

Compliance_Rules

NOTICE TO MERRILL LYNCH CUSTOMERS – Klayman & Tokses, P.A. Announces Investigation into Merrill Lynch Loan Management Accounts in Light of FINRA Sanctions for $7 Million in Fines and Restitution Regarding US and Puerto Rico Clients

By | Blog, Featured Investigations, FINRA Disciplinary Actions, FINRA Sales Practice Violations | No Comments

New York, NY – December 1, 2016 — The Securities Arbitration Law Firm of Klayman & Toskes, P.A. (“K&T”), www.nasd-law.com, announces an investigation into Merrill Lynch, a wholly owned brokerage firm of Bank of America (NYSE:BAC), for Financial Industry Regulatory Authority (FINRA) sales practice violations from its Loan Management Accounts (LMAs) following FINRA regulatory fines.  Yesterday, FINRA accepted from Merrill Lynch an Acceptance Waiver and Consent for $6.25 million in fines and approximately $780,000 in restitution to Puerto Rico customers, for inadequately supervising the use of Merrill Lynch loans for customer accounts.  According to FINRA, Merrill Lynch brokerage accounts received proceeds transferred from LMAs and purchased millions of dollars in securities, the majority being purchased on margin, within 14 days of the transfer.  FINRA concluded that these supervisory failures occurred from January 2010 to November 2014.

According to K&T founder, Lawrence L. Klayman, Esq. “The use of brokerage account assets as collateral for these loans greatly increased the risks assumed by Merrill Lynch customers.”    Mr. Klayman explains, “Our firm is investigating sales practice violations by Merrill Lynch for failure to supervise its financial advisors’ recommendations to customers concerning the use of LMA proceeds to purchase stock on margin.  Merrill Lynch’s advice to use margin loans signals a potential conflict of interest, which increased commissions for their financial advisors at the expense of customers who did not fully understand the risks associated with these loans.”

The sole purpose of this release is in furtherance of our investigation into Merrill Lynch’s sales practices related to Loan Management Accounts (LMAs) which may include violations for unsuitable recommendationsmargin abuse, breach of fiduciary dutymisrepresentations and omissions of material facts and a failure to supervise.   Current and former Merrill Lynch customers who have information about the sales practices of Bank of America and its brokerage firm, Merrill Lynch 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.

electronic-stock-board-medium

FINRA Fines Broker for Excessive Commissions from Risky Trading Strategies

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Released November 2016

Lucas Dylan Lichtman (CRD #5542092, Nanuet, New York) submitted an Offer of Settlement in which he was assessed a deferred fine of $7,500 and suspended from association with any FINRA member in any capacity for nine months. Without admitting or denying the allegations, Lichtman consented to the sanctions and to the entry of findings that he made unsuitable recommendations of an active trading investment strategy to his customer. The findings stated that Lichtman recommended that his customer engage in the unsuitable active trading investment strategy, despite the fact that he failed to understand the risks of the investment strategy being recommended, or the impact the staggering commissions and fees generated by this active trading investment strategy would have on his customer’s account. Lichtman did not have any reasonable basis to recommend such a strategy to his customer. As a result of the recommendations Lichtman and other representatives of his member firm made, 15 customer accounts paid over $1 million in commissions and fees.

Additionally, Lichtman did not know how to calculate or even understand cost-to-equity ratios and turnover rates, which are standard industry metrics used to measure whether an account is being excessively traded. Lichtman did not understand the impact of trading and costs on his customer’s account and on the specific transactions recommended as part of an investment strategy. Lichtman did not conduct any due diligence into the active trading investment strategy he was recommending, and he never reviewed his customer’s account, either individually or collectively, to determine if the active trading investment strategy was successful or suitable for his customer. Lichtman failed to perform any analysis of the active trading investment strategy’s costs, risks, potential benefits, volatility, or likely performance in a variety of market and economic conditions. The active trading investment strategy Lichtman recommended was not in the customer’s best interest.

The suspension is in effect from October 3, 2016, through July 2, 2017. (FINRA Case #2014039091903)

Source: FINRA, Financial Industry Regulatory Authority, Inc. 2016
Full Disciplinary Reports Available to the public at: www.finra.org

 

dollars-in-chains

FINRA Fines Broker $219,000 for Private Placement Violations

By | Featured Investigations, FINRA Disciplinary Actions | No Comments

Thomas Edward Brenner Jr. (CRD #1489233, Orrville, Ohio) submitted an AWC in which he was assessed a deferred fine of $30,000, suspended from association with any FINRA member in any capacity for 16 months, and ordered to pay deferred disgorgement of commissions of $189,000, plus interest. Without admitting or denying the findings, Brenner consented to the sanctions and to the entry of findings that he engaged in two separate private placements which were rife with supervisory and substantive violations.  The findings stated that in soliciting customers to purchase a private placement offering, Brenner provided customers with a private placement memorandum (PPM) for the offering and a program summary, the latter of which provided a brief summary of the offering. Both the PPM and the program summary contained several statements that claimed or implied that the investments were secured, or suggested a level of safety in the investments or reliability in forecasting returns by investors.

The findings also stated that in soliciting investors for another offering, Brenner provided each investor with an application form, a subscription agreement, a promissory note and an executive summary generally describing the offering. At various times while Brenner was soliciting investors in this offering, a founder of the offering told Brenner that a PPM was forthcoming. But, the PPM was not completed until after FINRA’s investigation of the offering began and well after Brenner had ceased soliciting investors. Hence, the PPM

was not provided to investors. By distributing a variety of documents to investors in each offering, Brenner negligently made untrue statements of material facts or omitted to state material facts necessary to make the statements made, in the light of the circumstances under which they were made, not misleading, and made statements which were not fair and balanced, and were misleading, exaggerated and unwarranted.

The findings also included that Brenner’s member firm’s WSPs designated him as the principal responsible for ensuring compliance with all procedures relating to private placements, including the due diligence requirements. Brenner, however, was not aware that he was the designated principal under the WSPs and did not have any experience in supervising private placements. Despite the express references in the firm’s WSPs to due diligence requirements for private placements, neither Brenner nor anyone else at the firm conducted the diligence the firm’s WSPs required. Brenner assumed that another principal of the firm had conducted the due diligence of one of the offerings. However, that principal was unaware of the offering and did not conduct any due diligence. Brenner’s review of the offering was limited to talking with the offering’s founder and discussing its business plan with a few people in the medical or pharmaceutical industries for the purpose of understanding the market demand for the self-owned toxicology laboratories.

The suspension is in effect from August 15, 2016, through December 14, 2017.

(FINRA Case #2015046056403)

Source: FINRA, Financial Industry Regulatory Authority, Inc. 2016
Full Disciplinary Reports Available to the public at: www.finra.org

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NOTICE TO CURRENT AND FORMER WELLS FARGO EMPLOYEES AND CUSTOMERS – Klayman & Tokses, P.A. Continues to Investigate Wells Fargo Cross Selling Incentive Programs Following Regulatory Probes

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New York, NY – November 4, 2016 — The Securities Arbitration Law Firm of Klayman & Toskes, P.A. (“K&T”), www.nasd-law.com, continues to inv estigate Wells Fargo (NYSE:WFC) and its broker dealer, Wells Fargo Advisors, for potential Financial Industry Regulatory Authority (FINRA) sales practice violations from its“cross selling” incentive  programs.  Yesterday, Wells Fargo reported in its SEC 10-Q filing, “the United States Department of Justice and the United States Securities and Exchange Commission, and state attorneys general and prosecutors’ offices, as well as Congressional committees, have undertaken formal or informal inquiries, investigations or examinations arising out of certain sales practices of the Company that were the subject of settlements” with regulators for $185 million on September 8, 2016.

The federal probes conducted by the SEC and other regulators is followed by Wells Fargo’s reported increase in reserves for potential litigation losses to $1.7 billion.  According to K&T founder, Lawrence L. Klayman, Esq. “Wells Fargo’s legal problems are focused on sales practices from cross selling incentive programs that violated financial industry rules and regulations.”  Mr. Klayman emphasizes, “Our firm is investigating potential sales practice violations which placed current and former employees, as well as customers of Wells Fargo in harm’s way.  Wells Fargo failed to meet its obligations to promote an ethical workplace which placed the Company’s pursuit of profits before their customers’ best interests.  Wells Fargo failed to supervise the ‘cross selling’ activities which violated financial industry rules and regulations.”

The sole purpose of this release is in furtherance of our investigation into Wells Fargo’s sales practices related to “cross-selling” efforts which may include; unsuitable recommendationsbreach of fiduciary dutymisrepresentations and omissions of material facts and a failure to supervise.   Current and former Wells Fargo employees and customers who have information about the sales practices of Wells Fargo and Wells Fargo Advisors 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.

SEC Whistleblowers

Individuals, including current or former employees with non-public information regarding Wells Fargo and Wells Fargo Advisors sales practices related to cross selling programs should consider the SEC Whistleblower Program. Under the SEC Whistleblower program, whistleblowers who provide unique information that results in an SEC enforcement action with sanctions exceeding $1 million, and awards can range from 10 percent to 30 percent of the money collected in a case.

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.

 

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