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A Chicago securities law firm, Blau & Malmfeldt aids investors in pursuing claims in arbitration against brokers. Read the latest securities fraud news on Blau & Malmfeldt.

FINRA Fines LPL Financial, LLC for Failure to Supervise Alternative Investment Sales

Last month, FINRA hit LPL Financial, LLC with a $950,000 fine for failing to supervise its registered representatives’ sale of alternative investments.  FINRA also ordered LPL to conduct a comprehensive review of its “policies, procedures, and training and remedy failures.”

FINRA determined that between 2008 and 2012, LPL representatives often recommended that their customers concentrate savings in alternative investments such as non-traded REITs, and in doing so, ignored state regulations that impose concentration limits on the sale of such investments, as well as concentration limits specified in the offering documents of certain investments.

Many alternative investments carry with them very high commissions.  As these commissions are paid from offering proceeds (and therefore do not appear on the customers’ brokerage statements), they are not readily apparent to the customers.  These high commissions often impair the entity and make it ultimately difficult for many alternative investments to succeed.  Despite these problems, and despite the fact that many alternative investments sold between 2006 and 2009 have failed, many brokerage firms such as LPL are pushing more of these investments on their customers.  2013 in fact saw more alternative investment sales than any prior year.

Blau & Malmfeldt is a law firm headquartered in Chicago, Illinois that represents investors nationwide in securities, commodity futures, and shareholder rights disputes.  Contact us at 312-443-1600 to learn more about the services that we offer.

 

Recovery Options for Victims of Lynn Alan Simon’s Ponzi Scheme

In June 2013, FINRA announced its suspension of Lynn Alan Simon of Newburgh, Indiana, a former registered representative in CFD Securities’ Kokomo, Indiana office  Simon had operated two Evansville, Indiana businesses as its sole owner under the names Financial Security Planning and The Insurance Shoppe.

FINRA suspended Simon for  “selling away” from CFD Securities – i.e., for selling  securities that were not approved by CFD Securities.

Things only went downhill from there for Simon.  In September 2013, Simon was arrested for allegedly bilking more than $1 million from at least a dozen local investors. He currently faces three counts of securities fraud, Class B felonies, and a charge of unlawful sale of a security, a Class C felony.

Simon’s fraud began to come to light in April 2013 when his wife contacted the Sheriff’s office after he went missing for two days. Two weeks later, an Evansville-based client of Simon, filed a complaint with the Indiana’s Secretary of State after he had stopped receiving interest payments on an investment that he had made with Simon.  Simon remained missing until September 2013, at which time the authorities tracked him down and arrested him.

Court documents reveal that numerous elderly clients lost money through Simon’s “investments.”  Clients were apparently promised high rates of returns on their investments–as high as 11%.  Simon allegedly presented typewritten promissory notes to his customers, showing a rate of return and a maturity date.

In typical Ponzi scheme fashion, Simon apparently used money from new customers to pay interest and principal to old customers while misappropriating a great deal of customer money.

It is possible for Simon’s victims to recover their losses from CFD Securities by pursuing a case in either court or in arbitration at FINRA Dispute Resolution.  Securities industry rules required CFD Securities to adequately supervise Simon and it appears that CFD Securities failed in this respect.   CFD Securities may also be liable to Simon’s victims as a “controlling person” under the Indiana Securities Act.

Blau & Malmfeldt invites Simon’s customers to contact us at 312-443-1600 for a complimentary case evaluation.  Blau & Malmfeldt is a law firm that represents investors across the United States in securities, commodity futures, partnership and shareholder rights disputes.

National Futures Association Fines Forex Dealer Firm FXDirectDealer LLC

The National Futures Association (NFA) recently issued a $1.1 million fine and a $1.8 million restitution order against FXDirectDealer LLC (FXDD). The New York City-based firm is registered with NFA as a futures commission merchant (FCM)  and a forex dealer.  It has been an NFA member since December 2009.

FXDD deals in rolling spot forex contracts.  Spot forex contracts differ from currency futures markets in various respects.  One of the most significant differences is that there is no centralized exchanges for spot forex contracts.

The firm’s compliance officer, listed principal and designated FOREX associated person, James E. Green, has also been subjected to disciplinary action.

The NFA decision, issued by its hearing committee, came after two complaints (June 29 and October 23, 2012) were initiated by its business conduct committee. The actions followed two annual NFA audits; one commenced on March 1, 2011 and the second one in June 2012.

From the 2011 audit, the complaint cited a number of “deficiencies associated within the firm’s recordkeeping, its anti-money laundering (AML) program and other areas of the firm’s operations.”

Charges filed against FXDD included “failing to supervise the trade integrity of the firm’s electronic trading systems; failing to maintain complete and accurate records; and failing to review the use of promotional material.”

NFA also investigated FXDD’s order execution practices and learned the firm “treated price slippage differently.” This led to charges against it for allegedly utilizing asymmetrical price slippage settings that favored the firm over customers.

The complaint also accused the firm of “making improper price adjustments in customers’ accounts; converting customer funds; willfully submitting misleading information to NFA and others; and failing to treat all customers equally when giving price adjustments.”

And in final charges, the NFA alleged that FXDD neither created nor implemented “adequate screening procedures to determine whether persons and entities with whom FXDD intended to do forex business were required to be registered with the Commodity Futures Trading Commission (CFTC) and Members or Associates of NFA.”

The NFA’s 2012 annual audit focused on FXXD’s AML program. It discovered annual AML training had not been conducted by the firm, which led to the October 23 complaint. Charges against FXXD included the following: “failing to implement an adequate AML program and failing to adequately supervise the firm’s AML program.”

FXDD submitted a settlement offer related to its price slippage practices, paying $1,828,261 in restitution to customers who underwent “unfavorable” price slippage on “limit-fill-or-kill” trades from December 10, 2009 through June 29, 2011.

In addition, from the $1.1 million fine, $914,131 has been attributed to FXDD’s unfavorable price slippage practices.

On a final note, in a related Commodity Futures Trading Commission action, FXDD will pay a $914,131 penalty to the agency.

FXDD has neither admitted nor denied these allegations.

Blau & Malmfeldt is a law firm that represents investors across the United States in securities, commodity futures, partnership and shareholder rights disputes.  Contact us at 312-443-1600 to learn about the services we offer.

Recovery Options for Bridge Equity Investors

On September 13, 2013, the commissioner of securities in Georgia revoked the registrations of broker Paul J. Marshall and his companies, known collectively as “The Bridge Entities.”

Marshall owned and controlled Bridge Securities, LLC; Bridge Equity, Inc., and FOGFuels, Inc.

The revocation of registration came after the Atlanta Division of the United States District Court for the Northern District of Georgia ordered a freeze on Marshall’s assets, following a complaint filed by the Securities and Exchange Commission against Marshall on September 11, 2013.

The SEC alleged that Marshall misappropriated at least $2 million from his advisory clients up until at least July 2013. The complaint claims that Marshall told his clients to transfer funds into his personal bank accounts so that he could make investments. Marshall instead used the money to cover personal expenses.

To cover up his fraudulent actions, according to the SEC, Marshall gave his clients fraudulent account statements that listed investments that did not exist and investment returns that were illusory.

Marshall was a FINRA-registered broker at the Atlanta-based American Wealth Management, Inc., from 2008 to 2011. He was registered with Oppenheimer & Co, Inc., in Longboat Key, Florida, from 2004 to 2008, and worked with Bear, Stearns & Co., Inc., from 2002 to 2004.

 Marshall formed Bridge Equity in December 2010. In January 2011, Marshall left American Wealth Management, and formed Bridge Securities soon after.

Bridge Securities had eight advisory clients by April 2011, with assets totaling around $3 million. A number of the advisory clients were elderly.

Marshall advised his clients to invest in a variety of securities, including J.P. Morgan mutual funds. He misleadingly told his clients that Bridge Securities had established a working relationship with J.P. Morgan, adding that Bridge Securities was now “powered by J.P. Morgan,” and instructed his clients to transfer money into J.P. Morgan accounts.

Marshall had complete control over these accounts, and told his clients that the funds would be used to purchase securities. He used $2 million from these accounts to cover his own alimony payments to his ex-wife, private school tuition and summer camps for his children, and luxury vacations. Marshall’s clients were given fictitious account statements claiming that the clients’ money had gone towards securities.

Additionally, one of Marshall’s clients transferred approximately $100,000 to a J.P. Morgan account controlled by Marshall under the impression that the money would be invested in FOGFuels, an environmental company owned by Marshall that purportedly seeks to create alternative fuels. The client was told that the money would go towards FOGFuel’s marketing materials, corporate expenses, and research and development for the company. Instead, the money went towards Marshall’s other personal expenses.

The SEC alleges that Marshall, the Bridge Entities, and FOGFuels acted with an intent to deceive clients, seriously violating the law.

The commission ordered a temporary restraining order against Marshall and his employees and associates, in addition to placing a freeze on his assets and requiring disgorgement of any ill-gotten gains.

Please contact Blau & Malmfeldt at 312-443-160, or email Paul Malmfeldt at pmalmfeldt@blau-malmfeldt.com for a no-obligation consultation regarding possible recovery options.  Blau & Malmfeldt is a law firm that represents investors throughout the United States in securities, commodity futures, partnership and shareholder rights disputes.