Articles Tagged with omission

The Financial Industry Regulatory Authority (“FINRA”) has suspended financial advisor Hebert Frey from the securities industry for sixteen months.  Mr. Frey consented to the suspension after FINRA alleged that he excessively traded a customer’s account and placed unauthorized trades. The customer was a 54-year-old disabled homemaker.  FINRA also fined Mr. Frey $15,000 and ordered him to disgorge $76,137 in commissions.

The alleged conduct occurred while Mr. Frey was employed by Lincoln Douglas Investments, LLC in Mt. Vernon, Ohio, and Union Capital Company in Tucson, Arizona.

As discussed more fully below, Mr. Frey has a long history of customer complaints, run-ins with regulators, and employment terminations.  Throughout his career, Mr. Frey has been suspended six times by regulators, ordered to pay nearly $50,000 in fines, and been the subject of at least six customer complaints.

Iorio Altamirano LLP is currently investigating Royal Alliance Associates, Inc. broker Matthew Crafa who is reportedly facing three securities arbitration claims related to recommendations to invest in private placement securities issued by GPB Capital. The GPB notes, which are private securities offerings exempt from registration with the Securities and Exchange Commission (SEC), are inherently risky investments.  These investments are suitable only for highly sophisticated investors who understand the risks and can afford a significant monetary loss.  Unfortunately, many brokerage firms and brokers sold the GPB Capital securities to retirees and unsophisticated investors because they paid a high up-front commission.

Mr. Crafa has been a broker at Royal Alliance Associates, Inc. since 2011. Iorio Altamirano LLP is also investigating the sales practices and due diligence of Royal Alliance Associates related to its sale of GPB Capital funds.   Earlier this year, the SEC charged three people and their affiliated entities with running a “Ponzi-like scheme” that raised more than $1.7 billion by selling private placements issued by alternative asset management firm GPB Capital Holdings.  Royal Alliance Associates has faced numerous lawsuits from customers in the form of FINRA securities arbitration claims to recover investment losses.

Securities arbitration is a unique and complex practice area. Investors should seek out experienced counsel who can navigate the arbitration process and effectively advocate on their behalf.

On March 31, 2021, a FINRA Dispute Resolution Services arbitration panel in Columbus, Ohio, ordered UBS Financial Services, Inc. (“UBS”) to pay customers over $372,000 in compensatory damages and fees.  The claimants, Matthew and Lisa Fisher alleged that UBS and brokers Ortal Shachar and Richard Mark Held presented the Yield Enhancement Strategy (“YES”), an options strategy, as low risk. In actuality, the complexity and nature of YES exposed the Claimants to a significant risk of loss.

This order is the second arbitration award against UBS in March 2021 concerning YES and the third since December 2020.   On March 5, 2021, another FINRA arbitration panel in Denver, Colorado, ordered UBS to pay customers over $1 million in compensatory damages.     In December 2020, a FINRA arbitration panel in Boca Raton, Florida, awarded a customer nearly $90,000.

UBS has faced numerous lawsuits from customers in the form of FINRA securities arbitrations related to YES, a complex managed options strategy that UBS marketed as safe and market-neutral. The customers have claimed that the strategy was not suitable for them and that UBS materially misrepresented and omitted the risks of the strategy.

The Financial Industry Regulatory Authority (“FINRA”) has suspended stockbroker Victor A. Rigoni, III from the securities industry for three months.  FINRA accepted an Offer of Settlement submitted by Mr. Rigoni after FINRA’s Department of Enforcement filed a disciplinary complaint against Mr. Rigoni in August 2020.   The complaint alleged that from August 2012 through March 2019, Mr. Rigoni willfully failed to timely amend his Uniform Application for Securities Industry Registration or Transfer (Form U4) to disclose six unsatisfied federal and state tax liens totaling $164,521.  On average, Mr. Rigoni disclosed his tax liens almost three-and-a-half years late.  Mr. Rigoni also never disclosed a state tax lien of $11,304.

Mr. Rigoni has been associated with the following broker-dealers:

  • Cetera Advisor Networks LLC in Lake Forest, Illinois, from September 2019 to August 2020.

The Financial Industry Regulatory Authority (“FINRA”) has barred broker Jeremy Taylor Johnson from the securities industry.  FINRA expelled Mr. Johnson from the brokerage industry for refusing to cooperate with a FINRA investigation into the suitability and potential misrepresentations and omissions related to Johnson’s offer and sale of two securities offerings while associated with Torch Securities, LLC.

Mr. Johnson entered the securities industry in 2019 when he associated with Torch Securities, LLC (“Torch Securities”) and registered with FINRA as a Private Securities Offerings.  His employment ended in April 2021.

Securities and Exchange Commission Settlement

The Financial Industry Regulatory Authority (“FINRA”) has barred broker Chad Mackland from the securities industry.  Mr. Mackland was barred from the brokerage industry for refusing to cooperate with a FINRA investigation into alleged theft and fraudulent sales practices.

According to his BrokerCheck report, Mr. Mackland is facing four felony charges in the District Court of Pottawattamie County in Iowa.  He is accused of committing fraudulent sales practices and theft by deception.

Mr. Mackland was associated with Lion Street Financial, LLC in Council Bluff, Iowa, from December 2018 to February 2020.

On March 5, 2021, a FINRA Dispute Resolution Services arbitration panel in Denver, Colorado, ordered UBS Financial Services, Inc. (“UBS”) to pay customers over $1 million in compensatory damages.  The claims, which include breach of duty, violations of the Nebraska Securities Act, and professional negligence arising out of broker Jason Dworak’s recommendations concerning the UBS Yield Enhancement Strategy (“YES”).   The arbitration panel also awarded prejudgment interest to the customers.

The $1 million judgment is the second arbitration award against UBS within a matter of months.  In December 2020, a FINRA arbitration panel in Boca Raton, Florida, awarded a customer nearly $90,000.  The Florida arbitration panel concluded that the UBS YES was not suitable for the investor, Gerald S. Backman, a retired partner at corporate law firm Weil Gotshal & Manges.

UBS has faced numerous lawsuits from customers in the form of FINRA securities arbitrations related to YES, a complex managed options strategy that UBS marketed as safe and market-neutral. The customers have claimed that the strategy was not suitable for them and that UBS materially misrepresented and omitted the risks of the strategy.

This post is part of a series of investigative blog posts that spotlight modern-day boiler rooms that operate under the guise of a reputable brokerage firm.  Many of the broker-dealers featured in this series still use boiler room tactics such as cold-calling customers and high-pressure or aggressive sales tactics.  Other brokerage firms have a propensity for broker misconduct, such as excessive trading, churning, unauthorized trades, and misrepresentation.  Iorio Altamirano LLP is a securities arbitration law firm based in New York City. We represent investors nationwide who have suffered investment losses due to wrongful conduct by financial advisors and brokerage firms.  We are investor advocates.

Other Investigative Blog Posts:

David Lerner Associates, Inc. (“David Lerner Associates”) is facing numerous customer complaints related to its sale of Energy 11, L.P. (“Energy 11”) and Energy Resources 12, L.P. (“Energy 12”).  The complaints allege that Energy 11 and Energy 12 were not suitable investments and that David Lerner Associates failed to supervise the sales and marking of the investments.  The complaints also include allegations that David Lerner Associates and its financial advisors misrepresented material facts rattling to the risks associated with these illiquid, concentrated, and high-fee products.

Based on public records, Iorio Altamirano LLP believes that the following brokers at David Lerner Associates may have recommended Energy 11 or Energy 12 to customers:

Name CRD No. Branch Office
Lawrence Merl 2443190 White Plains, New York
Francisco Javier Cabral 5257195 White Plains, New York
David Todd Lerner 1255769 White Plains, New York
Rafael Klein 2865823 Westport, Connecticut
Glenn Howard Werner 6118112 Syosset, New York
Michael Joseph Norton 2617985 Syosset, New York
Martin Lerner 871038 Boca Raton, Florida
Richard Henry Eden 2145727 Lawrenceville, NJ
William Lee Campbell 1180015 White Plains, New York

If a broker at David Lerner Associates recommended Energy 11 or Energy 12 to you and you have suffered investment losses, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.

Energy 11, L.P. and Energy Resources 12 L.P.

Energy 11 and Energy 12 are illiquid, non-traded limited partnerships sold as private placement securities. The limited partnerships invest in the oil, gas, and energy sector, which has been extremely volatile the past several years.  Energy 11 and Energy 12 were not suitable for most conservative or retired investors.

Energy 11 and Energy 12 both sought to acquire interests in both producing and non-producing oil and gas properties located onshore in the United States.  In other words, Energy 11 and Energy 12 were speculating that non-producing leaseholds would eventually produce.

According to the prospectus for Energy 11 and Energy 12, David Lerner Associates was the exclusive dealer-manager and received 6% in selling commissions.  David Lerner Associates is also entitled to a contingent incentive fee of up to an amount equal to 4% of gross proceeds of units sold.  Based on public disclosures, it appears that David Lerner Associates has received over $35 million in seller commissions for selling Energy 11 and Energy 12 to its customers and is entitled to an additional $23.7 in contingent incentive fees.

According to public filings, David Lerner Associates’ marketing strategy included holding “seminars” and providing free “food” to prospective customers.  Energy 11 and Energy 12 reimbursed David Lerner Associates for its expenses.

David Lerner has also received several customer complaints related to brokers’ recommendations to purchase the Spirit of America Energy Fund (SOAEX).  To read more about the Spirit of America Energy Fund, please click on the following link: Spirit of America Energy Fund (SOAEX): How to Recover Investment Losses From David Lerner Associates, Inc.

Earlier this year, the Financial Industry Regulatory Authority (“FINRA”) suspended former David Lerner Associates financial advisor, Charles Bonilla, from the securities industry for five months for recommendations of what is believed to be SOAEX and Energy 11.  FINRA concluded that Mr. Bonilla lacked a reasonable basis to recommend these products because he did not perform reasonable diligence before making the recommendations and failed to understand their fundamental features and risks. To read more about the suspension of Charles Bonilla and FINRA’s allegations, click on the following link:  Former David Lerner Associates Financial Advisor, Charles Bonilla, Suspended by FINRA for Unsuitable Energy-Sector Securities – Boca Raton, FL

Customer Complaints

Broker Daniel T. Lerner has received numerous complaints related to Energy 11.   First, on April 29, 2019, a customer filed a securities arbitration complaint related to recommendations of Energy 11, the Great Art Fund (“GAF”), and an unnamed mutual fund.  Then, on July 2, 2020, another customer alleged “unsuitability, misrepresentation/omission, [and] breach of fiduciary duty,” resulting in $175,000 in damages.  Mr. Daniel T. Lerner received a third customer complaint on September 23, 2020.  According to his public disclosure report, the allegations included “unsuitability, misrepresentation, fraud, and breach of conduct in connection with Energy 11.”  This blog has previously written about Mr. David T. Lerner.

On February 28, 2020, a customer filed a securities arbitration complaint against broker Francisco Cabral and David Lerner Associates seeking $800,000 in damages.  The complaint alleged “unsuitability, misrepresentation/omissions, breach of fiduciary duty, [and] failure to supervise” arising out of recommendations related to Energy 11, a mutual fund, and a Unit Investment Trust.

Martin Lerner, another financial consultant with David Lerner, has been the subject of six customer complaints.  Most recently, a customer has filed a FINRA arbitration complaint alleging $100,000 damages caused by Energy 12 and an energy mutual fund, SOAEX.  The complaint alleges that the investments were unsuitable and that Matin Lerner and David Lerner Associates made material misrepresentations and omissions in connection with the recommendations.

Another customer alleged $300,000 in damages on October 27, 2020, arising out of a recommendation by broker Rafael Klein to purchase Energy 11 and an unnamed mutual fund.  The arbitration complaint alleged “unsuitability, misrepresentation/omission, breach of fiduciary duty, [and] failure to supervise.”  Another customer filed a securities arbitration complaint in August 2020, making similar allegations related to Energy 11 and Energy 12.

On October 14, 2020, a customer filed a FINRA arbitration complaint against broker Lawrence Merl and David Lerner Associates seeking $999,999 in damages, alleging that Mr. Merl’s recommendation to purchase Energy 11 was not suitable.  The complaint also alleged that Mr. Merl and David Lerner Associates made material misrepresentations connected with the recommendation to purchase the security.

An investor filed a FINRA arbitration complaint against broker Glenn Werner on October 21, 2020, seeking $250,000 in damages. The complaint alleged “unsuitability, misrepresentation, [and] breach of fiduciary duty” concerning recommendations related to Energy 11 and an unnamed mutual fund.

Broker Michael Norton has been the subject of eight customer complaints, including one pending complaint related to Energy 11.  The complaint, filed on November 13, 2020, alleged unsuitability and misrepresentation/omission.  The complaint alleged $50,000 in damages.

On November 17, 2020, a customer filed a securities arbitration complaint against stockbroker Richard Eden.  The complaint alleges “unsuitability, misrepresentations/omission, unauthorized trade, [and] breach of fiduciary duty” related to Energy 11.

How to Recover Financial Losses

When an investor suffers investment losses due to misconduct by a financial advisor or broker-dealer, the investor can file a securities arbitration claim against their financial advisor and/or broker-dealer to be compensated. Filing an arbitration claim is similar to filing a lawsuit and suing your broker for compensation.

Brokerage firms like David Lerner must properly supervise financial advisors and customer accounts. Brokerage firms must also establish and maintain a reasonably designed system to oversee account activity to ensure compliance with securities laws and industry regulations.  When a brokerage firm fails to sufficiently supervise its financial advisors or the investment account activity, it may be liable for investment losses sustained by customers.

Securities arbitration is a unique and complex practice area. Investors should seek out experienced counsel who understands the FINRA forum and can navigate the arbitration process to effectively advocate on their behalf.

If you or a loved one were a customer of David Lerner and either sustained financial losses or suspect that the firm did not have your best interest in mind when recommending investments or account transactions, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP.  August Iorio can be reached at august@ia-law.com or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY.   Iorio Altamirano LLP pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

 

See also:

Iorio Altamirano LLP Files Securities Arbitration Claim Against David Lerner Associates, Inc. Related to Unsuitable Recommendations Made by President and CEO Martin Walcoe

How to Recover Puerto Rico Bond Losses From David Lerner Associates, Inc.

 

 

Several customers have filed securities arbitration claims against David Lerner Associates Inc. (“David Lerner Associates”) related to brokers’ recommendations to purchase the Spirit of America Energy Fund. The energy mutual fund invests 80% of its assets in energy and energy-related companies.  Class A shares of Spirit of America Energy Fund (NASDAQ: SOAEX) have declined from over $91 per share in August 2014 to around $14 per share in early March 2021. Class C shares of Spirit of America Energy Fund (NASDAQ: SACEX) have declined from over $47 per share in January 2017 to around $13 per share in early March 2021.

Based on public records, Iorio Altamirano LLP believes that the following brokers at David Lerner Associates may have recommended SOAEX to clients:

Name CRD No. Branch Office
Richard Marc Lerner 5163045 Syosset, New York
Martin Lerner 871038 Boca Raton, Florida
Gary W Isler 1514385 Lawrenceville, New Jersey
David Oser 1537076 White Plains, New York
Alan Lowenfels 4512765 White Plains, New York
William Campbell 11880015 White Plains, New York
Francisco Cabral 5257195 White Plains, New York
Daniel T. Lerner 1255769 White Plains, New York
Rafael Klein 2865823 Westport, Connecticut
Glen Howard Werner 6118112 Syosset, New York
Michael Joseph Norton 2617985 Syosset, New York

If a broker at David Lerner Associates recommended the Spirit of America Energy Fund to you and you have suffered investment losses, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.

The Spirit of America Energy Fund

The Spirit of America Energy Fund primarily invests in energy-related entities such as exploration companies, production companies, transmission companies, and Master Limited Partnerships (MLPs). The fund’s investment objective is to provide investors long-term capital appreciation and current income. The energy fund is not likely suitable for customers with conservative risk tolerances, short-time horizons, or liquidity needs.

In addition to the energy fund’s poor performance, investors also paid high fees.  Class A shareholders may have paid up to 5.75% of the offering price in sales charges on purchases and an additional 1% deferred sales charge if the shares were redeemed within 12 months of the purchase.  Class A shareholders were also subject to additional annual fees related to operating expenses, including a management fee (.95%) and distribution and/or service (12b-1) fees (.25%).

As the following example shows, as is often the case, the brokers did pretty well by recommending this high fee mutual fund while the customers were left with large losses.

Hypothetical Example:

  • A customer invested $300,000 into Class A shares of the fund in March 2015 when the shares traded at $71 / share.
  • The brokerage firm, David Lerner Associates, for example, would receive a maximum front load fee of $17,250 (5.75% of $300,000).
  • The customer’s original investment would be worth approximately $55,700 today, assuming a share value of $14, excluding other fees, such as the management fee.
  • In this example, the firm that recommended the fund would have made over $17,000 in sale charges. At the same time, the investor suffered losses of $244,300.

The investor might be able to recover financial losses if the broker’s recommendation to purchase or hold the fund was not in the customer’s best interest.

The customer may also be able to recover losses if the broker or firm misrepresented or omitted material facts about the fund in connection with making the buy or hold recommendation.

David Lerner has also received numerous customer complaints related to its sale of Energy 11, L.P. (“Energy 11”) and Energy Resources 12, L.P. (“Energy 12”), illiquid limited partnerships that invested in the oil, gas, and energy sector.   To read more about Energy 11 and Energy 12, please click on the following link: Energy 11, L.P. and Energy Resources 12 L.P.: How to Recover Investment Losses from David Lerner Associates, Inc.

Earlier this year, the Financial Industry Regulatory Authority (“FINRA”) suspended former David Lerner Associates financial advisor, Charles Bonilla, from the securities industry for five months for recommendations of what is believed to be SOAEX and Energy 11.  FINRA concluded that Mr. Bonilla lacked a reasonable basis to recommend these products because he did not perform reasonable diligence before making the recommendations and failed to understand their fundamental features and risks. To read more about the suspension of Charles Bonilla and FINRA’s allegations, click on the following link:  Former David Lerner Associates Financial Advisor, Charles Bonilla, Suspended by FINRA for Unsuitable Energy-Sector Securities – Boca Raton, FL

How to Recover Financial Losses

When an investor suffers investment losses due to misconduct by a financial advisor or broker-dealer, the investor can file a securities arbitration claim against their financial advisor and/or broker-dealer to be compensated.

Brokerage firms like David Lerner must properly supervise financial advisors and customer accounts. Brokerage firms must also establish and maintain a reasonably designed system to oversee account activity to ensure compliance with securities laws and industry regulations.  When a brokerage firm fails to sufficiently supervise its financial advisors or the investment account activity, it may be liable for investment losses sustained by customers.

Securities arbitration is a unique and complex practice area. Investors should seek out experienced counsel who understands the FINRA forum and can navigate the arbitration process to effectively advocate on their behalf.

If you or a loved one were a customer of David Lerner and either sustained financial losses or suspect that the firm did not have your best interest in mind when recommending investments or account transactions, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP.  August Iorio can be reached at august@ia-law.com or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY.   Iorio Altamirano LLP pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

 

See also:

How to Recover Puerto Rico Bond Losses From David Lerner Associates, Inc.

Broker Spotlight: Daniel T. Lerner of David Lerner Associates, Inc. Facing Three Pending Securities Arbitration Complaints – White Plains, New York

Iorio Altamirano LLP Files Securities Arbitration Claim Against David Lerner Associates, Inc. Related to Unsuitable Recommendations Made by President and CEO Martin Walcoe

 

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