Category Archives: Stockbroker Misconduct

Kelvin Koma, a former financial adviser with JP Morgan Chase Bank, has been barred from associating with any member of the Financial Industry Regulatory Authority (FINRA). FINRA imposed the sanction over allegations that Koma obtained ATM cards belonging to customers of his member firm’s affiliated bank and then used the cards to make unauthorized withdrawals from customers’ accounts for his own personal use.

Other recent disciplinary actions taken by FINRA include those against:

• William J. Gray, former financial adviser for AXA Advisors LLC. Gray was barred from association with any FINRA member in any capacity for allegedly forging the signatures of a customer, as well as those of brokers of his member firm, on paperwork related to the customer’s purchase of a variable annuity.

• Dermot A. Graham, former registered representative with PFS Investments. Without admitting or denying the allegations, Graham consented to FINRA’s entry of findings that he wrongfully and without authorization converted $8,666.12 in funds for his own use by securing debit or credit cards linked to customers’ accounts and used the cards for his personal benefit without the individuals’ knowledge or consent.

• Ronald Dwayne James, former registered representative with TD Ameritrade. James was barred from associating with any FINRA member over allegations that he conducted securities transactions in a customer’s account without that customer’s prior authorization or consent.

If you suffered investment losses because of fraud, unauthorized trading, conversion or misrepresentation on the part of the above individuals, please contact us.

MetLife Securities and three affiliates – New England Securities Corp., Walnut Street Securities, and Tower Square Securities – are facing a fine of $1.2 million by the Financial Industry Regulatory Authority (FINRA) for failing to properly monitor and review their brokers’ email correspondence with the public. One of those brokers is Mark Salyer, who stole nearly $6 million from his customers through private securities transactions he initiated to raise capital for various real estate development companies.

In January 2009, the Securities and Exchange Commission (SEC) barred Mark Salyer from associating with any broker, dealer or investment adviser.

The $1.2 million fine also resolves allegations that MetLife supervisors failed to properly monitor brokers’ participation in outside business activities and private securities transactions.

According to FINRA, the failures allowed Salyer and another MetLife Securities broker to engage in undisclosed outside business activities and private securities transactions while working at MetLife Securities. Eventually, those failures cost MetLife Securities customers millions of dollars.

Investors who had accounts MetLife Securities and its three affiliates – New England Securities Corp., Walnut Street Securities, and Tower Square Securities are encouraged to contact us and tell us your story. Please leave a message in the Comment Box below or on the the Contact Us form.

The Financial Industry Regulatory Authority (FINRA) has won approval from the Securities and Exchange Commission (SEC) to expand its BrokerCheck Service and make the disciplinary records of brokers permanently available online to the public.

Previously, a broker’s record generally became unavailable two years after he or she left the securities industry. FINRA estimates there are more than 15,000 individuals who have exited the securities industry after being the subject of a final regulatory action and whose disciplinary history is not currently available via BrokerCheck.

Disclosure records for former brokers will be available on BrokerCheck beginning Nov. 30.

“This is an important step for investors and for investor protection,” said FINRA Chairman and CEO Richard Ketchum. “Individuals previously barred by FINRA and other regulators have surfaced in a number of recent frauds in other parts of the financial industry that cost unsuspecting investors millions of dollars. It has never been more critical for investors to research the backgrounds of the financial professionals they deal with than it is today.”

In approving the BrokerCheck expansion, the SEC said “it is possible that a (former broker) could become a financial planner or work in another related field where his securities record would help members of the public decide if they should accept his financial advice or rely on his advice or expertise.”

In 2008, individuals used BrokerCheck to conduct 11.6 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck.

Individual arbitration claims filed with the Financial Industry Regulatory Authority (FINRA) totaled 5,545 through Sept. 30 – up 60% from the same period last year. Linda Fienberg, who serves as president of dispute resolution for FINRA, told Barron’s last month that she expects to see 7,500 cases filed by the end of the year.

The record of cases filed was set in 2003, with 8,945 cases filed.

In other investor news, the proposed Investor Protection Act of 2009 is up for a vote on Nov. 4. The bill, among other things, would give the Securities and Exchange Commission (SEC) the ability to ban mandatory arbitration.

Separately, FINRA has expanded a pilot program that allows investors who are filing eligible claims the opportunity to select an arbitration panel composed of three public arbitrators instead of two public and one non-public.

In its second year, the program will expand from 11 to 14 broker/dealers, and the number of eligible cases will increase from 276 to 411, a rise of nearly 50%. Only the investor filing the claim can elect to participate in the program and the firms cannot choose which cases are eligible.

Taking much-needed steps to strengthen investor protections, the House Financial Services Committee has begun the first of several congressional hearings on reforming the securities industry. Initial discussions concern the Investor Protection Act of 2009, with the focus on hedge fund registrations, the creation of an agency to oversee the insurance industry and a law to protect consumer investors. As part of the proposed legislation, the Securities and Exchange Commission (SEC) would be allowed to make fiduciary duty the standard for any broker/dealer or investment adviser who dispenses investment advice about securities.

“Over the years, full-service brokers have been allowed to portray themselves to the public as ‘financial advisers’… all without having to act in their clients’ best interests, which is the true hallmark of an advisory relationship,” said Barbara Roper, director of investor protection for the Consumer Federation of America, in a July 25 article appearing in the Salt Lake Tribune.

Currently, brokers/dealers are held to a suitability standard. They are required to make recommendations deemed generally “suitable” for an investor. Investment advisers, on the other hand, are subject to an overarching fiduciary duty under the Investment Advisers Act of 1940. As fiduciaries, they have a duty to act in the best interests of their clients and to make full and fair disclosure to clients regarding conflicts of interest. Broker/dealers do not.

The distinctions, albeit subtle, mean broker/dealers are, among things, free to receive higher commission and fees for recommending certain investments or financial products to clients, despite the fact another product may be a better option. At the same time, many broker/dealers market themselves as “advisers,” creating further confusion for investors.

According to a 2008 study commissioned by the SEC and conducted by the RAND Corporation, the majority of investors do not understand the distinctions between investment advisers and broker/dealers – even when those distinctions are explained to them.

On Oct. 8, during a second House Financial Services Committee hearing, the following question was posed to lawmakers: Which is the higher standard, fiduciary or suitability?

The six witnesses, each of whom represented a broad spectrum of the financial services industry, replied: The fiduciary standard.

If the past year of the Bernie Madoff debacle, the crisis on Wall Street and repeated charges levied by the SEC on several broker/dealers and financial advisers for allegedly operating “mini-Madoff” Ponzi schemes and other investment scams has taught us anything, it’s that advisers, financial planners and broker/dealers who dispense investment advice must be held accountable for their words and actions. A first step toward making this happen is imposing a fiduciary duty standard for all financial professionals.

The bottom line: Allowing investment advisers and broker/dealers to operate under different statutory and regulatory frameworks not only creates confusion in an already complex industry but ultimately renders a disservice to investors. Adoption and enforcement of a strict, universal fiduciary standard of care to broker/dealers, as well as investment advisers is a step in the right direction to restoring investor confidence in the financial services industry.

Tell us about your investment losses. Leave a message in the area below or on the the Contact Us form. We want to counsel you on your legal options.

Last year, the Montana State Auditor’s Office took a rather unusual approach to educate investors about the dangers of investment fraud. It teamed up with the AARP to produce Fraud Under the Big Sky, an hour-long documentary highlighting two major cases of securities fraud in Montana, including one that involved stockbroker Thomas J. O’Neill and Piper Jaffray & Co.

The O’Neill/Piper Jaffray case reveals how O’Neill “churned” the accounts of his clients, making an excessive number – more than 6,000 – of unauthorized trades in order to generate huge commissions for himself. Many of O’Neill’s clients were elderly. Evidence later showed that one of the victims was a 92-year-old man, who had seven speculative trades made in his account while in a coma. A final trade was conducted hours after he had died. O’Neill pleaded guilty in U.S. District Court in January 2005 to wire and securities fraud for activities from 1997 to 2001. In April 2005, he was sentenced to two years in prison for defrauding clients.

This year, in February 2009, O’Neill filed a lawsuit in a Butte district court against his former employer, accusing Piper Jaffray of destroying hand-written records while he worked for the firm that could have been used to help in his defense. The complaint also alleges that the records provide evidence that O’Neill had followed Piper Jaffray’s business plan and that the firm also reviewed and approved all of O’Neill’s transactions.

O’Neill’s complaint further accuses Piper Jaffray of knowing its business plan was fraudulent yet allowing him to continue implementing it.

Based in Minneapolis, Piper Jaffray’s origins date back to 1895. Over the years, the company evolved into one of the most powerful brokerage and investment firms in the United States. At the same time, however, Piper Jaffray also acquired a slew of investor complaints, regulatory sanctions and allegations of securities fraud, unauthorized trading and misuse of research for financial gain. On the latter allegation, Piper Jaffray reached a settlement in 2003 with the Securities and Exchange Commission (SEC), NASD, NYSE, NASAA, and the New York Attorney General and agreed to pay a $32.5 million fine.

Tell us about your situation with Piper Jaffray by leaving a message in the Comment Box below or via the Contact Us form. We want to counsel you on your legal options.

Smaller brokerage firms and broker/dealers often fly under the radar when it comes to internal compliance and enforcement, despite the fact that many of these firms have serious arbitration and customer complaints lodged against them. Case in point: Woodbury Financial Services.

According to information listed in the BrokerCheck section of the Financial Industry Regulatory Authority (FINRA), in June 2009 the Vermont Securities Division charged and fined Woodbury Financial Services for violations involving supervisory failures. The incident in question concerned two Woodbury Financial agents who were alleged to have made unsuitable recommendations to clients regarding variable annuity contracts.

Earlier in 2009, Woodbury Financial was again sanctioned and fined by securities regulators. This time, the Arizona Corporation Commission fined Woodbury $250,000, as well as ordered the company to reimburse investors for the losses they suffered in a scam conducted by two former Woodbury Financial agents, Mayra Jeanette Angulo and Mark Islas of Tucson. The Commission ordered the duo to pay $914,317 in restitution and $150,000 in administrative penalties for defrauding at least 30 investors, some of whom were residents of Mexico.

According to the Commission, Angulo and Islas opened brokerage accounts and post office boxes for some customers and, in several instances, used their own post office boxes for clients or used the same post office box for several different customers. While distributing fictitious brokerage accounts statements, Angulo and Islas funneled money from their customers’ accounts to themselves and family members.

In the Arizona case, Woodbury Financial Services was forced to reimburse investors some $2 million.

Other serious marks on Woodbury’s CRD record include violations of the Missouri Securities Act of 2003 for allowing several brokers affiliated with the company to conduct business in the state of Missouri without having first attained proper licensing.

In terms of arbitration disputes, in 2000, FINRA (Case No. 00-05078) awarded an investor more than $150,000 in damages for her claim against Woodbury Financial on causes of action that included violation of the Georgia Securities Act; violations of the federal securities laws; breach of contract; common law fraud; breach of fiduciary duty; and negligence and gross negligence.

In another claim (Case No. 01-06167), this one settled in 2001, FINRA found Woodbury liable for more than $110,000 in a claim involving misrepresentation, breach of fiduciary duty, failure to supervise and unsuitability.

Woodbury Financial Services is a subsidiary of The Hartford Financial Services Group of Hartford, Conn. As an independent broker/dealer, Woodbury Financial offers life insurance, variable annuities, alternative investments, and brokerage services. The company has more than 1,850 independent representatives located throughout the United States.

Tell us about your relationship with Woodbury Financial Services. Please fill out the Contact Us form, or leave a comment below. We want to hear your story and consult with you about your options.

In September, the Financial Industry Regulatory Authority (FINRA) announced that Robyn Lynn O’Hara, formerly of WFG Investments, had been barred from FINRA for securities violations. According to FINRA’s findings, O’Hara engaged in multiple trades in customers’ accounts at her member firms without customers’ authorization or consent. The findings further stated that O’Hara continued unauthorized trading in one account even after the customer instructed her to cease all trading.

Information posted in FINRA’s BrokerCheck provides additional insight into O’Hara’s professional background, with allegations of unauthorized trades and unsuitable investments dating as far back as 1992 when she working as a broker at J.W. Gant & Associates. In that particular case (FINRA Case No. 92-01617), FINRA eventually ruled O’Hara and J.W. Gant jointly liable for their actions, awarding some $6,500 in damages to the claimant.

That same year, 1992, O’Hara again faced allegations by FINRA of using high-pressure sales tactics and failing to execute a client’s instructions to sell certain securities in his account. O’Hara was fined $20,000 and suspended from association with FINRA for 20 days.

In another case (FINRA Case No. 09-02650) filed in July 2009. O’Hara is again accused of misrepresentation by a former client. The investor also is suing WFG Investments for failing to supervise O’Hara. The case is still pending with FINRA.

In total, O’Hara’s CRD shows at least five regulatory events related to securities violations. In addition, she’s been named in at least three customer complaints tied to securities fraud.

If you have questions about investments made with Robyn Lynn O’Hara or WFG Investments, please fill out the Contact Us form or leave a comment below. We want to hear your story and consult with you about your options.

Breach of fiduciary duty. Misallocated portfolios. Misrepresentation. In a nod to the growing dissatisfaction felt by investors over the actions – or inactions – of their financial advisers and stock brokers, new arbitration cases filed with the Financial Industry Regulatory Authority (FINRA) soared 65%, to 4,991, through August 2009, after climbing to 3,018 for the same period last year. The latest figures put new filings with FINRA on track to hit 7,000 by year end, up from 4,982 in 2008.

“I don’t anticipate it slowing down this year or next,” said Linda Fienberg, president of dispute resolution for FINRA, in a July 14, 2009, story appearing in the Washington Post. Fienberg added that more investors are prevailing in their cases this year than they had in the past.

The No. 1 complaint in investors’ claims through August 2009 is breach of fiduciary duty, followed closely by misrepresentation.

Financial investment advisors and stockbrokers could face new rules and regulations in the future under draft legislation sent to Capitol Hill by the U.S. Treasury. The legislation is designed to strengthen investor protections and includes such provisions as establishing consistent standards for anyone who gives investment advice about securities, improving the timing and quality of disclosures, and requiring accountability from securities professionals. The legislation also would establish a permanent Investor Advisory Committee to keep the voice of investors present at the Securities and Exchange Commission (SEC).

To view the draft legislation in its entirety, go to treas.gov/press/releases/tg205.htm