News and Articles

Monthly Archives: May 2020

Stifel, Nicolaus & Co. to Pay Around $1.9 Million in Restitution to More than 1,700 Customers

On May 28, 2020 FINRA announced that it has ordered Stifel, Nicolaus & Co., to pay approximately $1.9 million in restitution, plus interest, to more than 1,700 customers in connection with early rollovers of Unit Investment Trusts (UITs).  FINRA also fined the firm $1.74 million for providing inaccurate information to customers related to rollover costs incurred, and for related supervisory violations.  The Letter of Acceptance states that Stifel failed to establish and maintain a supervisory system and enforce written supervisory systems that were reasonably designed to achieve compliance with FINRA’s suitability rule regarding early rollovers of UITs.

A Unit Investment Trust (UIT) is an SEC-registered investment company that offers investors shares or units in a fixed portfolio of securities in a one-time public offering.  A UIT’s maturity date is often 15 to 24 months at which point the underlying securities are sold and the resulting proceeds are paid to investors.  UITs impose a variety of upfront sales charges.  A registered representative who recommended the sale of a customer’s UIT before its maturity date and used the sale proceeds to purchase a new UIT would cause the customer to incur greater sales charges than if the customer had held the UIT until maturity.  Because of the long-term nature of UITs, their structure, and their costs, short term trading of UITs may be unsuitable.

FINRA’s investigation found that from January 2012 through December 2016, Stifel executed approximately $10.9 billion in UIT transactions – $935.2 million of which were early rollovers.  It was also uncovered that the firm’s supervisory system and procedures were not reasonably designed to supervise the suitability of those early rollovers.  As a result, Stifel failed to identify that its representatives recommended potentially unsuitable early rollovers that, collectively, may have caused customers to incur approximately $1.9 million in sales charges that they would not have incurred had they held the UITs until their maturity date.  Additionally, Stifel sent approximately 600 letters to customers that contained inaccurate information or were missing information about the costs incurred by customers in connection with early UIT rollovers or switches.

In settling this matter, Stifel neither admitted or denied the charges, but consented to the entry of FINRA’s findings.

If you have not hired an attorney and wish to discuss any securities related question, please contact David A. Weintraub, P.A., 7805 SW 6th Court, Plantation, FL  33324.  By phone: 954.693.7577 or 800.718.1422.

 

SEC Shuts Down Fraudulent Investment Adviser Targeting Senior Citizens

On May 22nd, 2020, the Securities and Exchange Commission issued a press release detailing a Ponzi scheme designed to target the elderly. The SEC filed an emergency action and subsequently obtained a temporary restraining order and asset freeze against Paul Horton Smith Sr. and his various companies, which he used to organize the scheme. Smith Sr., according to the SEC’s complaint, offered and sold securities through his company Northstar Communications LLC.

Smith Sr. allegedly used his other companies to sponsor events, such as financial workshops and free-meal seminars, at which he would promise investors, often elderly people, guaranteed annual interest payments of anywhere from three percent to ten and a half percent if they invested in so-called private annuity contracts.” However, Smith Sr. did not invest the funds he raised in any securities. Instead, he would use those funds to pay returns to previous investors. This is a classic Ponzi scheme.

Smith Sr. and his entities stand accused of raising over $5.6 million from at least thirty-five investors and then paying $5.2 million to those investors in the form of interest payments or principal reward. He and his companies have been charged with violating the antifraud provisions of the federal securities laws. The complaint seeks civil penalties, injunctions, and the return of ill-gotten gains plus interest.

If you have not hired an attorney and wish to discuss any securities related question, please contact David A. Weintraub, P.A., 7805 SW 6th Court, Plantation, FL  33324.  By phone: 954.693.7577 or 800.718.1422.

 

 

COVID Investment Scams Strike Alabama – Alabama Reacts!

On May 21, 2020, the Alabama Securities Commission filed a cease and desist order against Johnnie Dancy, who pretended to be an investment advisor and who defrauded people through an e-mail phishing scam.  Dancy, through the rather amusing email address tiggerthorn3@gmail.com, solicited various investments, including penny stocks while promising a weekly profit of $5,000 per week.  He allegedly claimed that due to the COVID-19 crisis, penny stocks in the biotechnology and pharmaceutical industries had “HUGE SOMETIMES 1000 PERCENT RETURNS.”  Investment solicitations promising inordinately high profits and written in all-caps raised red flags, at least in Alabama.

Dancy advertised his investments by giving a few cherry-picked examples of stocks that gained value as a result of the crisis, such as Amazon.  He provided no evidence of his historical investment performance.  These scams target the vulnerable among us, notably the elderly. Dancy utilized a global pandemic to defraud the elderly and those who are struggling to make ends meet.

If it sounds too good to be true, it’s generally not true.  If you or someone you know come across investment solicitations that appear to be scams, stay away.  If you know someone who has already been victimized, they should contact an attorney.

If you have not hired an attorney and wish to discuss any securities related question, please contact David A. Weintraub, P.A., 7805 SW 6th Court, Plantation, FL  33324.  By phone: 954.693.7577 or 800.718.1422.

 

SEC Charges Three Individuals for Offering and Selling Fraudulent Oil and Gas Investment

On May 18, 2020 the Securities and Exchange Commission sued three Texas residents who used deceptive offering materials and promotional videos to sell $2.7 million in fraudulent oil and gas investments.  Defendants Paul R. Montgomery, Jr., Michael D. Fisher, and James H. Willingham, Jr. were charged after the SEC found that approximately 15 investors lost about $2.7 million by investing in joint venture interests in two oil and gas projects.  Defendants lured investors with, among other things, promises of 32% investment returns, as well as representations about Montgomery’s expertise and qualification in the oil and gas exploration industry.

The complaint alleges Defendants never drilled or reworked a single well for the projects.  Defendants misrepresented and/or omitted numerous material facts to investors that were fundamental to the nature and risks of the investment offerings.  Defendants distributed written offering materials in which they promised to use investor funds only for specified purposes, instead they misappropriated investor funds, spending hundreds of thousands of dollars for a number of uses not permitted in the offering documents, such as undisclosed commissions, and payments to Montgomery and Willingham.   In the end, investors suffered a complete loss of their funds.

In the interest of protecting the public from any further fraudulent activity and harm, the SEC brought this action against Defendants.  The Commission charged Montgomery and Fisher with aiding and abetting Willingham’s violations of the charged anti-fraud provisions.  Additionally, the SEC is seeking disgorgement of ill-gotten gains plus interest, civil penalties, and injunctive relief.  Willingham has agreed to be enjoined against future violations of the charged provisions, and to pay disgorgement, prejudgment interest, and civil penalty, the amounts of which will be determined by the court upon a motion filed by the SEC.

 

Morgan Stanley Smith Barney Agrees to Pay a $5 Million Penalty and Create a Fund to Benefit Harmed Investors

On May 12, 2020 the SEC announced that Morgan Stanley Smith Barney (MSSB) has agreed to settled charges that it provided misleading information to clients in its retail wrap fee programs regarding trade execution services and transaction costs.  It also agreed to pay a $5 million penalty that will be distributed to harmed investors.

The SEC issued a Cease and Desist Order in reference to MSSB’s marketing and client communications associated with the services rendered and costs incurred in MSSB’ retail wrap fee programs, which to some clients were misleading.  Wrap fee programs offer accounts in which clients pay an asset-based “wrap fee” that covers investment advice and brokerage services, including trade execution.  According to the investigation, from at least October 2012 until June 2017,  MSSB marketed its wrap fee account as offering clients professional investment advice, trade execution, and other services within a “transparent” fee structure; giving the impression that wrap fee clients were not likely to incur additional trade execution costs.  However, the Order alleges that MSSB had knowledge that some of its managers routinely directed wrap fee clients’ trades to third party broker-dealers for execution, which in turn resulted in additional transaction fees, these costs were embedded into the price of the security and not separately disclosed to clients.   Consequently, MSSB clients were unaware that they regularly paid execution costs in addition to MSSB’s wrap fee and in some instances, they incurred in transaction-based charges.  As a result, certain MSSB clients lacked complete and accurate information needed to assess the value of the services received in exchange for the wrap fee paid to MSSB and the costs associated with their accounts.

Without admitting or denying the SEC findings, Morgan Stanley Smith Barney consented to the SEC’s Order, which finds that the firm violated provisions of the Investment Advisers Act of 1940, imposes a $5 million penalty, and includes a censure and a cease-and-desist order.  The order also creates a Fair Fund to distribute the penalty paid by MSSB to harmed investors.

If you have not hired an attorney and wish to discuss any securities related question, please contact David A. Weintraub, P.A., 7805 SW 6th Court, Plantation, FL  33324.  By phone: 954.693.7577 or 800.718.1422.

SEC Obtains Judgement Against Two Florida Men in Ponzi Scheme Action

On May 11, 2020 the US District Court for the Southern District of Florida entered final judgments against Neil Burkholz and Frank Bianco for knowingly operating a Ponzi scheme.  Neil Burkholz, age 82, is a resident of Boca Raton, Florida.  He is the founder and co-CEO of Palm Management, and co-Founder and Manager of Shore Management.  Frank Bianco, age 70, is a resident of Pembroke Pines, Florida.   He is co-CEO of Palm Management, and co-Founder and Manager of Shore Management.  Both Defendants opened bank and brokerage accounts for the entities and their investment funds.  They are the only signatories on the bank accounts, and they exercised exclusive trading authority over the brokerage accounts.

The alleged fraudulent investment scheme raised more than $6 million from at least 55 investors, many of whom are senior citizens.  According to the complaint, to solicit and retain investors, Defendants falsely represented that they were advisers and fiduciaries who would profitably manage investor assets, when in reality, through at least two investment management companies, Defendants knowingly misappropriated investor assets by diverting them to pay other investors and by transferring funds to themselves and their spouses.    The SEC’s complaint alleged that Burkholz, Bianco, and their companies: Palm Financial Management and Shore Management Systems, solicited investors by falsely representing that their proprietary options trading strategies were highly profitable.  In effect, per the complaint, the defendants invested less than half of investor funds and those investments resulted in near-total losses.  Additionally, they misappropriated the remaining funds by using them to repay other investors and by transferring approximately $880,000 of investor funds to Burkholz, Bianco, and their spouses for personal use.  To conceal their misappropriation and trading losses, Defendants delivered false reports to investors giving the false impression they were generating positive returns.  In sum, Defendants were managing and operating a Ponzi scheme.

Without admitting or denying the allegations in the SEC Complaint, Burkholz and Bianco consented to the entry of a final judgement permanently enjoining them from violating antifraud provisions of the Securities Exchange Act and ordered them to disgorge $873,577 combined, and $1,841,650 in civil penalties.  Further, Bianco’s wife Suzanne Bianco, who the SEC named as a relief defendant, consented to the entry of a final judgment ordering her to disgorge$49,751 on a joint and several basis with Bianco, representing the amount of investor funds Bianco paid her, plus prejudgment interest.  Additionally, the Court ordered over $1.2 million in disgorgement and prejudgment interest against Palm Management and Shore Management.   After the SEC receives approval from the Court, it plans to establish a fair fund to distribute money received from defendants to harmed investors.

If you have not hired an attorney and wish to discuss any securities related question, please contact David A. Weintraub, P.A., 7805 SW 6th Court, Plantation, FL  33324.  By phone: 954.693.7577 or 800.718.1422.

Coronavirus & COVID-19 Losses

ATTENTION RISK AVERSE INVESTORS: David A. Weintraub has heard from investors who have suffered significant losses in the wake of the recent stock market crash. These losses may be recoverable if they were caused by unsuitable investments (or bad advice) by a financial advisor or broker. Have you suffered losses in excess of $100,000? We want to hear from you. Call us anytime at 800 718-1422.

Can I Sue my Financial Advisor or Stockbroker for Losses Linked to Recent Market Events?

The answer is yes. Stockbrokers and Financial Advisors have a duty to act in the best interests of their client. They may also have a duty to monitor your investments – to keep you informed and advise you whether to hold or sell your investments. Isn’t that what they advertise they will do? Isn’t that why you pay them for advice?
That is why you need an experienced attorney to review your portfolio and determine if the Financial Advisor acted negligently. Do not sit on the sidelines waiting to see if your investments will recover. Not only do you need sound financial advice from a qualified Financial Advisor, you may also need legal advice regarding the consequences of liquidating your portfolio versus holding your investments with your fingers crossed.

David Weintraub is available for a complimentary consultation at your convenience. Call him at 800-718-1422.

Son of Elderly, Disabled Couple was Arrested for Identity Theft and Exploitation of the Elderly  

On May 4, 2020, Attorney General Ashley Moody’s Medicaid Fraud Control Unit together with the Tarpon Springs Police Department arrested a Pasco County resident for exploiting both of his parents under the defendant’s care.  Ronald Rose, Jr., 48, withdrew thousands of dollars from his relatives’ bank accounts without approval to spend on personal expenses such as rent, vehicle payments and phone services.

Acting on information received from a Medicaid provider, the Attorney General’s MFCU Patient Abuse, Neglect and Exploitation Team began investigating the defendant for misuse of patient funds. The investigation revealed that Rose embezzled from the accounts of his late father, a 69-year-old man who suffered from dementia, and his 77-year-old mother, who is blind, according to an arrest warrant obtained by the Florida Attorney General’s Office. The son took a total of $71,642 from his parents’ accounts, the warrant said, and took out a $19,002 loan in his mother’s name without her knowledge.  Rose is being held in the Pinellas County jail without bail.

The defendant had power of attorney over his father and was supposed to be helping his mother with her finances, the warrant said, when the fraudulent transactions took place from 2016 to 2018.  Ronald Rose Jr. was arrested on two counts of exploitation of the elderly, a third-degree felony, one count of fraudulent use of personal identification information, a second-degree felony, and violating his probation in Hillsborough County.

Attorney General Ashley Moody said, “My office is committed to protecting seniors. Older Floridians should not have to worry about being taken advantage of by those entrusted with their care. Thank you, to my MFCU team, for stopping this unconscionable behavior and I look forward to my Office of Statewide Prosecution now holding the defendant responsible for these crimes.”

If you believe that you or one of your relatives has been a victim of elder exploitation, please call our law office for a complimentary consultation. We can be reached at (800) 718-1422.