Articles Tagged with Unsuitable

Iorio Altamirano LLP continues to investigate potential claims involving investments in L Bonds offered by GWG Holdings, Inc. (Nasdaq: GWGH), as GWG Holdings defaulted on its obligation to bondholders and missed interest payments on January 15, 2022.

According to GWG Holdings’ most recent filing with the United States Securities & Exchange Commission (“SEC”), on January 15, 2022, the company missed interest payments of approximately $10.35 million and principal payments of approximately $3.25 million to L Bond owners.

According to the filing, under the Amended and Restated Indenture, dated October 23, 2017, GWG Holdings, Inc. has a 30-day grace period to make the interest and maturity payments.  If GWG Holdings, Inc. fails to make the interest or maturity payments within the grace period, an event of default under the Indenture will result.  At that time, the trustee or noteholders holding at least 25% in the aggregate outstanding principal amount of Bonds may elect to accelerate the L Bonds, causing them to be immediately due and payable, subject to certain conditions and notices.

Investors who purchased GPB funds in 2016 through a broker-dealer need to act now to preserve their legal rights. Failure to file an arbitration claim may prevent recovery of investment losses. Time is running out. GPB investors should act in 2022.

Key Takeaways:

  • Investors can potentially recover investment losses by filing claims against broker-dealers or investment-advisory firms that sold GPB private placement offerings for large commissions.

David Gentile, the disgraced founder and former CEO of GPB Capital Holdings LLC, has sued GPB Capital. Mr. Gentile seeks to make GPB Capital, which an independent court-appointed monitor is now overseeing, cover the legal costs for his defense against criminal and civil securities fraud.

In February 2021, Mr. Gentile was criminally charged with securities fraud, wire fraud, and conspiracy in federal court. The criminal complaint alleged that Mr. Gentile, among others, engaged in a scheme to defraud investors by misrepresenting the source of funds used to make monthly distributions to investors and the amount of revenue generated by two of GPB’s investment funds, GPB Holdings, LP, and GPB Automotive Portfolio, LP.

Separately, the SEC has charged Mr. Gentile, GPB Capital, and related entities with running a Ponzi-like scheme that raised roughly $1.8 billion from securities issued by GPB Capital. The SEC believes that as many as 17,000 retail investors nationwide have been defrauded.

Over the past calendar year, GPB Capital investors have won over $2.4 million in monetary awards in 10 out of 11 (nearly 91%) arbitration claims that have proceeded to a final hearing.  According to public records, many other claims filed against broker-dealers who sold the private placements offered by GPB Capital have been settled for monetary compensation.

The judgments and awards come after years of filing lawsuits and arbitration claims by GPB Capital investors.

For our latest posts related to GPB Capital, please click here.

Energy 11, L.P. is an illiquid, non-traded limited partnership sold as private placement security exclusively by broker-dealer David Lerner Associates, Inc. The limited partnership invests in the oil, gas, and energy sector, which has been extremely volatile the past several years.  Energy 11 was not suitable for most conservative or retired investors.

On November 5, 2011, the Chairman and Chief Executive Officer of Energy 11 GP, LLC, the general partner of Energy 11, L.P. (“Energy 11”), sent a letter to investors of Energy 11 notifying them that partial distributions would resume after a nearly two-year hiatus. The amount of the distribution will be 50% of the regular monthly distribution.

In March 2020, Energy 11 suspended monthly distributions to its limited partners as the partnership took on massive debt.  Unbeknownst to many investors, the distributions were merely a return of the limited partner’s original capital investment, not a dividend.   Energy 11 currently owes 21 months of unpaid distributions to its limited partners, totaling approximately $42 million.

Between July 2013 and June 2018, limited partners invested $675 million into GPB Automotive Portfolio, LP, which was sold as a private placement offering by broker-dealers and registered investment advisory firms across the country. Financial advisors, who received large commissions for selling limited partnership units of GPB Automotive, lured investors into this high-risk and illiquid security by emphasizing a high rate of return and monthly distributions.  Unfortunately for investors, distributions have not been paid since December 2018.

With the recent announcement that GPB Automotive Portfolio, LP agreed to sell Prime Automotive for $880 million, limited partners have been wondering what that means for them.

Below, we delve into GPB Automotive LP’s latest quarterly filing with the SEC to look for answers.

Iorio Altamirano LLP, a leading securities arbitration law firm, has filed a case through the Financial Industry Regulatory Authority (FINRA) Dispute Resolution Services’ arbitration forum against Aegis Capital Corp.

The claim, which Iorio Altamirano LLP filed on behalf of an investor in the GPB Automotive Portfolio, LP fund, seeks to recover investment losses as a result of the investment advisor’s recommendation to invest in GPB Capital.

GPB Capital sold unregistered and high commission limited partnership interests in a total of eight alternative-asset investment funds. The GPB Funds were marketed to independent broker-dealers and investment advisers who would, in turn, sell the GPB Funds to their retail investors. There are serious concerns that broker-dealers may have failed to conduct reasonable due diligence about the GPB Funds and GPB Capital.

On November 8, 2021, the Financial Industry Regulatory Authority (“FINRA”) and Aegis Capital Corp. (“Aegis Capital”) entered into Letter of Acceptance, Waiver, and Consent No. 2016051704305 (the “AWC”).  After conducting an investigation, FINRA alleged in the AWC that from July 2014 through December 2018, Aegis Capital failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures (WSPs), reasonably designed to achieve compliance with the suitability requirements of FINRA Rule 2111 as it pertains to excessive trading. As a result, Aegis Capital failed to identify trading in hundreds of customer accounts that were potentially excessive and unsuitable, including trading conducted by eight Aegis Capital registered representatives in the firm’s Melville and Wall Street branches whose trading in the accounts of 31 firm customers resulted in an average annualized cost-to-equity ratio (or break-even point) of 71.6%, an average annualized turnover rate of 34.9, combined customer costs (including commissions, markups or markdowns, margin interest, and fees) of more than $2.9 million, and cumulative losses of $4.6 million.

Additionally, the FINRA AWC alleged from July 2014 to June 2019, Aegis Capital failed to establish, maintain, and enforce a supervisory system, including WSPs, reasonably designed to achieve compliance with the suitability requirements of FINRA Rule 2111 when selling leveraged, inverse, and inverse-leveraged Exchange-Traded Funds (Non-Traditional ETFs) to retail customers. As a result, Aegis Capital failed to identify customers who purchased and held Non-Traditional ETFs for extended periods of time or whose purchase was inconsistent with their recorded investment objective, risk tolerance, or finances.

Customers of Aegis Capital, including customers that have been notified that they may be receiving restitution, should consult with a securities arbitration law firm.  If you or a loved one were a customer of Aegis Capital, contact  New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of your legal rights.

The Financial Industry Regulatory Authority (“FINRA”) has suspended stockbroker Leonard Marzocco from the securities industry.  Mr. Marzocco consented to the suspension after FINRA alleged that between June 2019 and December 2019, while associated with Woodstock Financial Group, Inc. (“Woodstock Financial Group”), Mr. Marzocco excessively and unsuitable traded a customer’s account, in violation of FINRA Rules 2111 and 2010.   As part of the agreement, Mr. Marzocco also agreed to pay $27,078 in restitution and a fine of $5,000.

Mr. Marzocco was registered as a broker with Woodstock Financial Group, Inc. in Nesconset, New York, from June 2019 to December 2019.   Prior to joining Woodstock Financial Group, Mr. Marzocco was a registered stockbroker with First Standard Financial Company LLC in Miller Place, New York, from June 2017 to June 2019.

This is the second time Mr. Marzocco has been suspended for excessive trading.  In July 2020, Mr. Marzocco contended to an 11-month suspension after FINRA alleged that he engaged in quantitatively unsuitable trading in a customer’s account.  The findings stated that Marzocco’s trading of the accounts resulted in high turnover rates and cost-to-equity ratios, as well as significant losses. The customers suffered collective losses of $196,331 and paid $81,523 in commissions and fees. Marzocco also recommended a significant number of trades using margin in the customer accounts. In particular, Marzocco recommended using margin to a customer, even though he was aware that the customer’s financial circumstances made it unsuitable for him.

The Financial Industry Regulatory Authority (“FINRA”) has barred stockbroker David Melilli from the securities industry for refusing to cooperate with a FINRA investigation into whether Mr. Melilli, among other things, exercised discretion without written authorization in a customer’s account.  The investigation was launched after Cambridge Investment Research, Inc. terminated Mr. Melilli in January 2020, alleging that he placed discretionary trades without authority.

Mr. Melilli was associated with Cambridge Investment Research, Inc. in Moorestown, New Jersey, from September 2019 to February 2020.   He was previously registered with SagePoint Financial, Inc. in Moorestown, NJ, from January 2010 until August 2019.

Customers of Mr. Melilli, Cambridge Investment Research, Inc., or SagePoint Financial, Inc. who have suffered financial losses, or suspect that Mr. Melilli did not have their best interest in mind when recommending investments or making account transactions, can contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of their legal rights.

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