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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.

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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.

 

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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/.

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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

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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.

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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

 

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FINRA Fines Broker $219,000 for Private Placement Violations

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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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FINRA Fines Eight Firms a Total of $6.2 Million for Supervisory Failures Related to Variable Annuity L-Shares

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Released November 2, 2016

WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that it has fined eight firms, including VOYA Financial Advisors, five broker-dealer subsidiaries of Cetera Financial Group, Kestra Investment Services, LLC, and FTB Advisors, Inc., a total of $6.2 million for failing to supervise sales of variable annuities (VAs). FINRA also ordered five of the firms to pay more than $6 million to customers who purchased L-share variable annuities with potentially incompatible, complex and expensive long-term minimum-income and withdrawal riders.

FINRA imposed sanctions against the following firms.

FINRA ordered the firms to pay the following to investors.

  • Voya was ordered to pay at least $1.8 million to customers in this category.
  • Cetera Advisors Networks, First Allied, Summit Brokerage Services and VSR were collectively ordered to pay customers at least $4.5 million.

The L-share VAs at the heart of this action are complex investment products combining insurance and security features designed for short-term investors willing to pay higher fees in exchange for shorter surrender periods. L-shares also had the potential to pay greater compensation to the firms and registered representatives than more traditional share classes. Each of the firms in this action lacked an adequate system to supervise variable annuities with multiple share classes, and failed to provide its registered representatives and principals with reasonable guidance regarding the narrow class of customers for whom the costs and features of L-share variable annuities were suitable.

These failures were compounded by the fact that the short-surrender L-Shares were often sold with complex and expensive guaranteed income and withdrawal riders that provided benefits only over longer holding periods.

FINRA found that VOYA and four of the Cetera Group firms failed to identify “red flags” of broad patterns of potentially unsuitable sales of this product combination.

Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, “The complexity and expense of variable annuities require exceptional diligence in the training and supervision of the representatives who sell them and of the sales themselves. When a firm cannot explain why a significant number of clients are paying up for the short-term flexibility of L-shares while at the same time buying riders that only have value over the long term, it is clear that these supervisory obligations are not being met.”

These actions also included additional violations by Voya, Cetera Advisors Networks, Cetera Financial Specialists and VSR for failure to monitor rates of variable annuity exchanges at their respective firms.

First Allied was further found to have failed in its supervision of the sale of structured products and non-traditional exchange-traded funds. Lastly, First Allied and Kestra permitted the use of consolidated statements by their registered representatives without proper oversight.

In settling these matters, the firms neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

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 WELLS FARGO AND MORGAN STANLEY CLIENTS – Klayman & Toskes, P.A. Investigates Cross Selling Incentive Programs Following FINRA Targeted Examination Letter to Brokerage Industry

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New York, NY – October 31, 2016 — The Securities Arbitration Law Firm of Klayman & Toskes, P.A. (“K&T”), www.nasd-law.com, has opened an industry-wide investigation of brokerage firms into potential Financial Industry Regulatory Authority (FINRA) sales practice violations of “cross selling” incentive programs following targeted examination letter to member firms.  According to FINRA, the Targeted Examination Letter sent is designed to review “cross selling programs” used by brokerage firms for FINRA sales practice rules and regulations.  This investigation follows regulatory actions against Wells Fargo (NYSE:WFC) and Morgan Stanley (NYSE:MS) for “cross selling” programs which violated securities industry regulations.

The FINRA investigation includes requests for information from member firms concerning incentives paid to brokerage firm employees to “promote bank products of the affiliate or parent company (“affiliate/parent”) to broker-dealer retail customers through referrals or direct sales.”  FINRA’s request for information covers the time period of January 1, 2011, through September 30, 2016 for member firms, with a November 30th deadline to comply with request.  According to K&T founder, Lawrence L. Klayman, Esq. “Our investigation focuses on whether brokerage firms violated investor rights in the pursuit of corporate profits.”  Mr. Klayman explains, “Investors may have sustained damages due to brokerage firms’ failure to supervise the ‘cross selling’ activities of their employees and financial advisors, and those brokerage firms should be held responsible.”

The sole purpose of this release is to determine whether Wells Fargo, Morgan Stanley, or other brokerage firms violated FINRA sales practice rules related to “cross-selling” efforts which may include; unsuitable recommendations, breach of fiduciary duty, misrepresentations and omissions of material facts and a failure to supervise.   Investors who have information about the sales practices of brokerage firms and their financial advisors are encouraged to contact Lawrence L. Klayman, Esq. or Raymond Gentile, Esq. of Klayman & Toskes at (888) 997-9956, or visit our website at www.nasd-law.com.

FINRA Submits Rule to SEC to Protect Against Elderly Financial Fraud

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The Financial Industry Regulatory Authority (FINRA) has submitted new rule changes for the Securities Exchange Commission (SEC) to approve which is designed to help prevent elder financial fraud.  The proposed rule changes will require brokerage firms to “make reasonable efforts” to obtain contact information for “trusted” individuals who are designated by elderly account holders.  The “trusted” individuals, such as close friends and family members, would be contacted by brokerage firms in the event of suspicious activities related to an elderly person’s investment accounts.  In a recent press release, FINRA proposed changes that would allow brokerage firms to place a temporary hold on suspicious disbursements and alert “trusted” contact persons about the hold on account recent activities.  This change would allow elderly investors the benefit of inquiries from family members to investigate whether unscrupulous individuals may have defrauded them.  Currently, there are no provisions that allow brokerage firms to contact non-account holders or to place a temporary hold on fund withdrawals which have been flagged for suspicious activities.

FINRA proposed plan changes include providing space for a “trusted” individual’s contact information on new account application templates, which brokerage firms can use on a voluntary basis.  The proposed rule changes submitted to the SEC occurs roughly three months after Congress approved legislation that grants immunity to brokerage firms and financial advisors for reporting elder financial fraud.

Klayman & Toskes, P.A. represents elderly investors that are victims of financial fraud who suffer damages from violations of FINRA sales practice rules and regulations related to misappropriation of funds,  misrepresentations and omissions of material facts, conflicts of interest, unsuitable investment advice and brokerage firms’ failure to supervise its financial advisors.  Klayman & Toskes, P.A. is dedicated to the protection of the rights of elderly investors and their families.

About Klayman & Toskes, P.A.

Klayman & Toskes, P.A. is a leading national securities law firm practices areas include 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. Klayman & Toskes, P.A. has office locations in California, Florida, New York and Puerto Rico.

 

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