Recovery Options for Solaris Opportunity Fund Investors

The Securities and Exchange Commission recently announced that the U.S. District Court in Chicago has entered an order of permanent injunction against Oakbrook, Illinois resident Patrick G. Rooney (“Rooney”) and his company Solaris Management, LLC .   Solaris Management managed various hedge funds including the Solaris Opportunity Fund LP.

The SEC alleged that Rooney and Solaris had changed the investment strategy of its Solaris Opportunity Fund LP (the “Fund”) by concentrating the Fund’s assets in a financially-troubled microcap company, Positron Corp.

The SEC alleges thatnRooney concealed not only the position in Positron but the fact that he had become Positron’s Chairman in 2004.  Both Rooney and Solaris Management concealed the Fund’s position in  Positron and Rooney’s role as  Positron’s Chairman from the Fund’s investors for more than four years.

Rooney finally disclosed the relationship to investors in March 2009; however, the SEC alleged that Rooney falsely represented that the purpose of the investment in Positron was to “safeguard the Fund’s investments.” The SEC determined that “a concentrated, undiversified, and illiquid position in a cash-poor company with a lengthy track record of losses” benefited no one but Rooney himself.

It appears that Rooney and Solaris breached fiduciary obligations owed to the Fund and to investors in the Fund by concentrating the Fund’s assets in Positron and by concealing this investment from the Fund’s investors.

Blau & Malmfeldt invites investors in Solaris Opportunity Fund 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.

SEC Fines John Thomas Financial for Role in Fraudulent Hedge Funds

Securities Broker-dealer firm John Thomas Financial Inc. (JTF) and its chief executive Anastasios “Tommy” Belesis recently reached a settlement agreement with the Securities and Exchange Commission in an enforcement action relating to their roles in the management of two fraudulent hedge funds.  These hedge funds — John Thomas Bridge and Opportunity Fund LP, and John Thomas Bridge and Opportunity Fund II, LP – were managed by an affiliate of JTF.

The SEC has also determined that the hedge funds’ manager breached fiduciary duties owed to the hedge funds when he caused the hedge funds to pay millions of dollars in fraudulent management fees; that JTF aided and abetted the managers’ breaches of fiduciary duties; and that JTF itself received improper finder fees when the hedge fund made various investments.

The SEC’s cease and desist order suggests that Belesis caused these hedge funds — which he pushed on his broker-dealer firm’s customers — to be looted.  It appears that these funds were ultimately run for Belesis’ benefit at the expense of his firm’s broker customers.

According to the SEC’s cease and desist order:  “the Manager abandoned his fiduciary duties to the Funds and negotiated arrangements whereby the borrowing companies – in which the [hedge funds] were invested and from which the [hedge funds] sought repayment – would pay unwarranted finder fees to Respondent JTF out of the proceeds received from the [hedge funds]. Thus, the Manager of the Funds, when negotiating bridge loans between the [hedge funds] and the borrowing companies, placed the interests of Respondents above the interests of the [hedge funds]….”

The settlement requires Respondent JTF to pay a civil fine to the SEC of $500,000.

Investors who were sold investments in these hedge funds by JTF may have claims against JTF for unsuitable investment recommendations and fraud.  It is possible that investors in these funds may recoup losses by pursuing claims in arbitration against JTF at FINRA Dispute Resolution.

Blau & Malmfeldt invites JTF customers who invested in the John Thomas Bridge Opportunity Fund LP and/or the John Thomas Bridge and Opportunity Fund II, LP 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.

Former Ameriprise Registered Representative Stuart Epley Agrees to Suspension

Former Ameriprise Financial Services, Inc. (Ameriprise) registered representative Stuart Epley recently entered into a settlement agreement with FINRA over allegations that he entered unauthorized trades on behalf of customers.

Specifically, FINRA alleged that Epley effectuated 87 transactions on eight customer accounts without obtaining authorization from these customers.  FINRA also alleged that Epley mismarked 24 order tickets to purchase leveraged ETFs as “unsolicited” when in fact Epley had specifically recommended these investments to his customers.  According to FINRA, Epley marked the order tickets as “solicited” because Ameriprise prohibits its brokers from recommending these investments.

Through the settlement, Epley agreed to a three month suspension during which time he is prohibited from working for any FINRA member firm in any capacity.

Ameriprise had a responsibility to oversee Epley’s business activity and to create a supervision system reasonably calculated to prevent its brokers from violating FINRA rules.  Customers of Epley who suffered losses as a result of his misconduct may recover losses by pursuing claims in arbitration against Epley and Ameriprise at FINRA.

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.

Oppenheimer Fined for Municipal Bond Sales Practices

The Financial Industry Regulatory Authority (FINRA) recently fined Oppenheimer & Co., Inc. $675,000 for charging customers unfair prices for municipal securities transactions and failing to implement an adequate supervisory system.  FINRA also ordered Oppenheimer to pay more than $246,000 in restitution to the customers.   The firm’s head municipal securities trader, David Sirianni, received a $100,000 fine and a 60-day suspension .

According to FINRA’s investigation, from July 1, 2008, through June 30, 2009, Oppenheimer marked up 89 customer transactions in amounts ranging from 5.01 percent to 15.57 percent higher than its contemporaneous cost.  54 of these transactions saw markups above 9 percent.

Sirianni accomplished this by buying municipal securities from a broker-dealer on Oppenheimer’s behalf. Then, for at least a night, the bonds remained in inventory before they became available for resale to the firm’s customers at an “unfair price” as determined solely by Sirianni.

FINRA determined that Oppenheimer failed to adequately supervise Sirianni.  Specifically, FINRA determined that Oppenheimer’s supervisory system was “deficient because supervisory personnel relied solely on a surveillance report that only captured intra-day transactions to review the fairness of markups/markdowns in municipal securities transactions.”

Blau & Malmfeldt invites Oppenheimer customers who purchased municipal bonds 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.

J.P. Turner & Company Ordered to Pay Restitution to Customers Who Purchased Leveraged and Inverse ETFs

The Financial Industry Regulatory Authority (FINRA) recently ordered J.P. Turner & Company, LLC, to pay $707,559 in restitution to 84 of its customers after determining that the broker-dealer firm engaged in improper conduct in connection with leveraged and inverse exchange-traded funds (ETFs).

Leveraged and inverse ETFs are complicated and risky investment products that are unsuitable for many investors.  FINRA found that J.P Turner’s registered representatives sold these products to many customers despite the fact investments were plainly unsuitable for them.  In addition, FINRA found that J.P. Turner failed to train its registered representatives with respect to these products.

It appears that many of J.P. Turner’s registered representatives also engaged in improper mutual fund “switching.”  A broker-dealer firm has the obligation to detect unsuitable switches that result in unjustified commissions and sales charges for customers.  FINRA found that 2,800 unsuitable mutual fund switches resulted in 66 customers paying commissions and sales charges in the amount of more than $500,000.

It is possible for customers of J.P. Turner to recover losses above and beyond the restitution payments that they will receive as a result of FINRA’s regulatory action by pursuing claims against J.P. Turner in arbitration.

Blau & Malmfeldt invites J.P. Turner customers to contact us at 312-443-1600 for a free consultation.  Blau & Malmfeldt is a law firm that represents investors across the United States in securities, commodity futures, partnership and shareholder rights disputes.

JP Morgan Chase Registered Representatives Barred After Converting Elderly Customer’s Funds

The Financial Industry Regulatory Authority (FINRA) recently announced that it has barred two former registered representatives of JP Morgan Chase Securities, LLC, Fernando L. Arevalo and Jimmy E. Caballero, after determining that they converted approximately $300,000 from an elderly widow with “diminished mental capacity,” and subsequently failed to fully cooperate with its investigation.

According to FINRA’s investigation, the elderly customer liquidated two annuities and deposited approximately $300,000 of proceeds into a bank account that Arevalo had opened for her on April 18, 2013.

Caballero then withdrew the funds using a cashier’s check and deposited the funds into a joint account that he had previously opened in his name and the name of the widow’s at a different bank on May 1, 2013.

The bank questioned the deposits.  Arevalo then picked up the elderly customer and drove her to the bank to confirm that she  had deposited the funds.

Caballero and Arevalo then misappropriated the funds for their personal use.  The widow was neither aware of the withdrawals and purchases nor did she authorize any of the transactions.

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.

FINRA Suspends Former National Securities Corporation Registered Representative Jaime Andres Diaz

FINRA recently filed a complaint against Jaime Andres Diaz, a registered representative of securities broker-dealer firm National Securities Corporation from July 2007 to December 2011.

In 2012, Diaz was suspended from FINRA after failing to respond to requests for information.

FINRA alleges that between December 2009 and November 2011, Diaz took approximately $850,000 from four of his clients (one of whom was elderly), and an additional $50,000 from a representative who worked at his firm.

Diaz told his clients that their money would be used to invest in New York City real estate and restaurants, but he instead used the funds for personal use and to pay earlier investors.

Diaz is also accused of “selling away” from his member firm because he participated in private securities transactions without informing the firm, violating FINRA rules.

FINRA alleges that Diaz knowingly defrauded his clients and acted manipulatively, and that he made improper use of his clients’ funds. He also failed to respond to multiple requests for information, further violating FINRA rules, and filled out his firm’s semi-annual compliance questionnaire with false answers.

National Securities Corporation had a duty to enforce a supervision system reasonably calculated to ensure that its registered representatives were acting in compliance with applicable laws and regulations.  It appears that National Securities Corporation failed in this respect and it is possible that victims of Diaz may recover losses by pursuing claims against National Securities Corporation for its failure to adequately supervise Diaz.

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.

Piper Jaffray Settles With SEC in Wenatchee, WA Municipal Bond Fraud Case

In November 2013, Piper Jaffray and its employee Jane Towery reached a settlement with the SEC in an enforcement action relating to their roles in a $41 million securities offering.  The securities in question were bond anticipation notes (BANs) that were issued to finance a public hockey arena located in Wenatchee, Washington.  Piper Jaffray , an investment bank headquartered in Minneapolis, MN, was the sole underwriter of these securities.  Towery is a managing director at Piper Jaffray focusing on municipal finance.

Apparently, the offering documents for this securities offering contained numerous misstatements of material fact.  While another investment bank prepared documents containing these misstatements before Piper Jaffray was retained, Piper Jaffray apparently did nothing to verify the statements and in fact ignored an independent consultant’s findings that the project was not financially viable.

The SEC alleged: “[Piper Jaffray and Towery] did little to verify significant portions of the content, implicitly relying on the efforts of others. Nevertheless, Towery and Piper never contacted the other underwriter and never determined the extent of its due diligence activities.”

Concerning Piper Jaffray’s failure to head the warning of the consultant’s findings, the SEC alleged: “Towery did not ask for or review all the required documents, including the independent consultant’s report that she believed at the time was a feasibility report and the various pro form as prepared by Global. Piper did not have policies and procedures reasonably designed to ensure that Towery’s due diligence was appropriate or that she followed Piper’s policies and procedures.”

Through their settlement agreements, Piper Jaffray and Towery will be censured and will play civil monetary penalties of $300,000 and $25,000, respectively.

Investors who purchased these securities from a Piper Jaffray registered representative may have claims against Piper Jaffray for misrepresentation and unsuitability.

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.

FINRA Fines Broker-Dealer Firm Merrimac Corporate Securities, Inc. for Failure to Supervise Registered Representatives

FINRA recently fined Merrimac Corporate Securities, Inc. $100,000 after determining that the firm failed to supervise two of its registered representatives in violation of NASD Rules 3010 and 2110 and FINRA Rule 2010.

The registered representatives, Richard Pizzuti and Daniel Voccia, convinced 30 individuals to invest more than $4 million in a company that they controlled between 2006 and 2009.  It appears that these investments were unsuitable for many of these customers.

Merrimac contended that it will be unable to pay the fine. FINRA has recommended that Merrimac pay off the fine in $10,000 installments over the course of 10 months.  FINRA recommended that Merrimac cut certain of its business expenses in order to be able to make the installment payments.

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.

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.