Today the North American Securities Administrators Association (NASAA) announced a massive LPL Financial settlement with state securities regulators relating to over a decade of sales of unregistered securities by LPL brokers.

Under the terms of the LPL Financial settlement, the firm agreed to repurchase from investors certain securities that were sold to them since October, 2006.  LPL will also have to pay civil penalties to the states, which could be as much as a $26 million penalty.

What happened?   State securities regulators have been investigating LPL Financial for years regarding failures to have reasonable policies and procedures.  In the last year, NASAA’s task force has focused on investigating LPL’s procedures to prevent LPL brokers from selling unregistered, non-exempt securities.

The sale of unregistered, non-exempt securities violates most states’ securities law and federal securities laws.  Often those securities do not disclose important information to the prospective buyer, like the riskiness of the investment, lack of liquidity or ability to sell the investment, or true financial history of the investment.  Sellers may get high commissions and other incentives to pitch these products to investors, even if the product is not suitable or in the best interest of that investor.

Under the agreement, LPL will repurchase from investors unregistered, non-exempt securities sold since October 1, 2006 to LPL customers by their broker.  Not only will LPL repurchase, it will pay 3% interest from the date of sale.  Other terms were agreed upon for customers who have since sold or transferred their qualified securities out of their LPL account.

Is this a good deal?  Yes, for many cheated investors, it’s an unusually good deal. NASAA is an association of state securities regulators.  Those state regulators help investors by cracking down on bad broker conduct by national firms like LPL Financial.  The dollars from civil penalties issued by regulators occasionally go back to compensate the victims — but not usually.  The key to this LPL Financial settlement is that the firm agreed to buy back the securities from investors and pay 3% interest.  For many investors, especially those with smaller amounts of affected securities, that’s a very good result for a recovery without private litigation.

However, investors that otherwise qualify for the buy-back may have strong, valid, private claims for relief against LPL Financial that might result in a better outcome.   It depends on the facts, and an experienced securities attorney can help you make that evaluation.

Failure to have reasonable supervisory and compliance procedures, failures to reasonably supervise its brokers, and unlawful broker conduct all are violations of FINRA rules and may state blue sky securities laws.   In some states like Oregon, brokerage firms may have joint and several liability with the bad broker, and the statutory remedy for these violations can be repayment of the original purchase price, plus interest at 9% from date of purchase, less any dividends or money otherwise received from the investment.  It may also include payment of attorney fees.  These are claims that an experienced securities fraud attorney like Darlene Pasieczny can bring on behalf of an investor in FINRA arbitration.

If you are an LPL Financial customer, or customer of any brokerage firm, and you have concerns about what you were sold for your investment portfolio, call us today for a free initial consultation.   Sudden large drops in portfolio value for a moderate or conservative investor, or discovering you cannot easily sell an investment, are some of the Red Flags that you may have securities claims for recoverable losses.  Don’t wait – statute of limitations may apply to set deadlines of when you can file a claim.

If you have concerns about how your money is being handled by your financial professional, or concerns that you or a loved one might be the victim of financial exploitation, call me at (503) 358-8292. Again, consultations are free, and confidential.

The securities attorneys at the Investor Defenders practice group of Pasieczny Law LLC are investigating potential claims against this broker.

Public records from the Financial Industry Regulatory Authority (FINRA) show that in August 2018, Daniel Noah Winger (CRD# 1542674) entered into an Acceptance, Waiver and Consent (“AWC”) agreement in which Winger was barred from associating with any FINRA member in all capacities.

Daniel Noah Winger was most recently registered with PFS Investments Inc. in Federal Way, Washington.

The Facts and Violative Conduct alleged in the AWC include that, between April 2015 and April 2018, Daniel Noah Winger converted the funds of an elderly customer in violation of FINRA rules 2150(a) and 2010.  The elderly customer gave checks to Winger totaling approximately $100,000.  The AWC alleges that Winger used the customer’s funds for his own personal use.

Brokers are licensed and regulated by FINRA and state regulatory agencies.  FINRA rules, state securities laws and state common law offer protections for investors from unlawful broker conduct such as:  negligent portfolio mismanagement, selling away, overconcentration, unsuitable investment recommendations, excessive trading (“churning”), failure to supervise, misrepresentations about investments, or outright conversion and theft.

Common Red Flags of broker misconduct include lack of communication from your broker, discovering that you cannot liquidate investments that you thought you could sell, or discovering that large portions of your portfolio are used to purchase “alternative investments” like interests in Limited Partnerships, Limited Liability Companies, or promissory note investments.   The Investor Defenders have compiled a list of Ten Red Flags for Investors, which you can see by clicking on this link.

If you were a client of Daniel Noah Winger, and suspect that financial losses in your brokerage account may have been caused by broker misconduct, call the Investor Defenders.  We represent investors in the United States with securities claims against brokers and brokerage firms for financial losses caused by unlawful conduct.

The securities attorneys at the Investor Defenders practice group of Pasieczny Law LLC are investigating potential claims against this broker.

Public records from the Financial Industry Regulatory Authority (FINRA) show that Jamewon Jeewon Shin (CRD# 2436899) was suspended as of August 13, 2018, from associating with any FINRA member for failure to provide information or keep information current pursuant to FINRA Rule 9552(d).

Jameson Jeewon Shin was most recently registered with LPL Financial LLC in Bellevue, Washington, and was previously registered with Wells Fargo Advisors, LLC in Seattle, Washington.

FINRA records show that the names James J Shin, James Shin, Jameson Jee Won Shin are related to Jameson Jeeswon Shin.

Brokers are licensed and regulated by FINRA and state regulatory agencies.  State securities laws and state common law offer protections for investors from unlawful broker conduct such as: negligent portfolio mismanagement, selling away, overconcentration, unsuitable investment recommendations, excessive trading (“churning”), failure to supervise, misrepresentations about investments, or outright conversion and theft.

Common Red Flags of broker misconduct include lack of communication from your broker, discovering that you cannot liquidate investments that you thought you could sell, or discovering that large portions of your portfolio are used to purchase “alternative investments” like interests in Limited Partnerships, Limited Liability Companies, or promissory note investments.   The Investor Defenders have compiled a list of Ten Red Flags for Investors, which you can see by clicking on this link.

If you were a client of this broker, and suspect that financial losses in your brokerage account may have been caused by broker misconduct, call the Investor Defenders.  We represent investors in the United States with securities claims against brokers and brokerage firms for financial losses caused by unlawful conduct.

Customer Concerns Grow About Energy Stock Concentration and George Merhoff

Our office continues to investigate Cetera Investments and its representative George Merhoff Jr. Since our last reporting, even more investors have called us to report that they suffered significant losses in their accounts as a result of having virtually all of their investments in energy stocks. We continue to evaluate how widespread this problem is for our clients and potentially others who were customers of George Merhoff. Mr. Merhoff is currently a registered representative of Cetera Investments, and was previously a registered representative of Pacific West Securities, Inc.

If you are or were a customer of George Merhoff and are willing to share your information with us that might help us in this investigation, or if you have lost money in another investment or have concerns about the conduct of another financial advisor, please call our office at (503) 358-8292 for a confidential, and free no obligation consultation.

Is Your Investment Portfolio Over-Concentrated in Energy Stocks?

Here is why we are conducting our investigation: When a portfolio is heavily weighted in one particular industry sector, we refer to it as a non-diversified, over-concentrated account. Over-concentration increases volatility and risk in investment portfolios. Licensed securities stockbrokers and have an obligation under the law and FINRA Rule 2110 to recommend only suitable investments and trading strategies, based upon the particular customer’s risk tolerance, investment objectives, investment experience, time frame, and other factors when recommending an investment. If a broker recommends the same types of concentrated energy sector portfolios to a broad array of clients, regardless of their needs for safety and moderation, that suggest that the securities laws may have been violated.

What is FINRA and what is the Suitability Rule?

FINRA (the Financial Industry Regulatory Authority) is the self-regulatory organization that is authorized by Congress to regulate the securities industry.

That includes brokers and brokerage firms. FINRA has various rules to do this including Rules 2110 and 2111, which provide that a broker’s investment recommendations must be “suitable” for the customer. Suitability includes reasonable-basis suitability (that the investment or investment strategy is suitable for at least some investors), customer-specific suitability (the recommendations are suitable for that specific customer), and quantitative suitability (that a series of recommended transactions, even if suitable in isolation, when considered together are not excessive and unsuitable for that customer). Violations of the FINRA suitability rules may implicate other laws such as negligence and breach of fiduciary duty, and financial losses caused by the unlawful conduct may be recoverable by the investor.

Do you have questions about losses in accounts managed by Cetera Investments or George Merhoff?

The fact that you invested with Mr. Merhoff or Cetera does not necessarily mean that there was wrongdoing. However, if your account was over-concentrated in energy stocks and you did not ask for those investments, we would like to hear from you. Bob Banks, a nationally recognized securities attorney, has fought for investors in court and FINRA arbitration since 1985. He has successfully represented investors in over-concentration cases where there has been a failure to diversify investments. He leads the Investor Defenders practice group at Pasieczny Law LLC. If you have lost money in an investment, or if you have any concerns about the conduct of your financial adviser, please contact us, or call our office at (503) 358-8292 for a free no obligation consultation.

The Chief of Enforcement at the Division of Finance and Corporate Securities Consumer & Business Services Department (DFCS), Van Pounds,  was both quoted in Molly Young’s recent Oregonian article about high return investments and Salem investment adviser Kevin Winder.  Winder lost his license for selling promissory notes to clients in businesses in which he had a personal interest. Misrepresenting investments is not a new storyline, but it is uniquely tragic for every new set of victims. You can read the full story here.

Use Caution When Advisors Recommend Alternative Investments With High Return Rates

As a general rule Banks says, “If you can’t sell your investment at will, and you can’t find out its true value on any given day, then you should avoid it. Some private investments are certainly legitimate, but so many of them involve far more risk than the investor understands. Don’t risk it unless you really understand the potential for loss.”

Investor Defender attorney Darlene Pasieczny represent investors in securities industry disputes in FINRA arbitrations across the U.S. The Investor Defenders at Pasieczny Law LLC know the rules, and we fight for our clients in recovering investment losses. Contact us at (503) 358-8292.

This is not  the first time that LPL has been in the news for problems with REITs. In March of 2013 Investment News reported that the Montana State Auditor’s Department was concerned with the sale of REITs to unsophisticated investors. The New York Times collaborated the story and also questioned LPL’s broader compliance efforts.

We applaud The New Hampshire Bureau of Securities and the Montana State Auditor’s Department for taking action, and wish other state securities regulators would do the same.  Unfortunately, the New Hampshire action can only benefit New Hampshire investors. Our firm has successfully represented investors nationwide in claims against LPL Financial and other firms selling non-traded REITS, both in court and in the FINRA arbitration process. Our claims have most commonly been based on the fact that our clients were not told that the REITs and other so-called alternative investments they were sold could not be sold in the public market, and were laden with undisclosed fees. We continue to investigate firms that sell these products and welcome calls from investors with questions about their investments that they cannot sell.

The sanction also reflects FINRA’s frustration with Oppenheimer, which failed to make more than 300 required filings to FINRA about Hotton and other brokers in a timely manner, and failed to provide timely responses to requests for information.

Hotton’s FINRA BrokerCheck report shows 30 reported disclosure events including 24 customer disputes and 2 criminal events.

Pasieczny Law LLC attorneys Robert S. Banks, Jr. and Darlene Pasieczny have over 35 years combined experience in representing investors in securities industry disputes in court and FINRA arbitration across the United States. Our clients include institutional investors, pension funds, municipalities, fiduciaries such as trustees, as well as individual investors. If you have concerns about your financial advisor or investment portfolio, contact us. For more information about Pasieczny Law’s Investor Defenders litigation team and securities litigation, visit our investment claims page.

With energy demands and a desire for energy independence increasing globally, investments in traditional and alternative energy resources are being promoted more often and are becoming attractive to more investors. Some examples include: wind turbines, solar panels, biodiesel, ethanol, coal, oil, gas, hydrogen, wave, geothermal, oil sands, and liquefied natural gas. Many of these investments are highly risky and are usually not appropriate for all investors. It is not unusual for unscrupulous promoters to follow the headlines and take advantage of unsuspecting investors by engaging in fraudulent practices.

Promoters sometimes prey on investors interested in socially responsible products by labeling them as “green energy” investment opportunities. The phrase “green energy” implies that the products are ecologically friendly when in fact the promoters may be operating a fraudulent shell company and not producing anything.

What are the Common Ways Energy Investment Products may be Offered?

• Commodities: The purchase of energy products today in order to make money from price changes in the future.
• Exchange Traded Funds (ETFs): Intended to mirror the performance of a particular energy segment or index. For more information on ETFs, click here.
• Private Placements: Energy investments are often sold through a private placement memorandum purchased through a subscription agreement. For more information, click here.
• Crowdfunding: Energy investments soon may be made available to the general public through an online crowdfunding portal. For more information, click here.
• Limited partnerships: Purchasing membership units in an energy investment partnership where the investors’ liability is limited and the general partner makes all managerial decisions.
• General partnerships: Purchasing membership units in an energy investment partnership where the investors’ liability is not limited and the investor may receive tax benefits from the investment.
• Joint Venture: An investment in a specific project or for a finite period of time sometimes involving fractional interests in energy leases.
• Stock in energy companies: Purchasing stock from a particular company that does business in the energy segment.
• Bonds or secured notes: Purchasing a debt instrument from a particular company that does business in the energy segment.

With these Barclays products, the investor is guaranteed a return of 100% of the principal, but only after holding them to maturity. Here that period is seven years. There are annual coupons, but investors cannot know what their interest rate is going to be until they get their coupon payment. These investments are sold with promises of higher potential returns, but the annual coupon payment can be as low as 0.3%. The interest rate is linked to the price of certain stocks. The coupon calculations are set so that if the underlying equities do well, investors still only get up to the maximum coupon cap.

Many reports of Inland American REITs link them to Ameriprise Financial.

As a class JP Morgan has called them “Reverse Exchangeable Notes”, Barclays “Reverse Convertible Notes”, UBS “Reverse Convertible Notes”, and Morgan Stanley “ELKS”.

Behringer-Harvard is among the largest and most popular of REITs, with over $4B in assets. In the fourth quarter of 2012 it was the target of a class-action suit accusing the company of masking poor performance and misleading investors.

Among the hundreds of structured CDs offerings by major issuers this one distinguishes itself by its complexity. It pays off quarterly based on the number of days the S&P 500 exceeds a pre-determined level, with two other factors for interest and leverage. That interest factor fluctuates through the life of the CD. After the first year, that interest factor is dependent on the difference between a stated rate and the six-month LIBOR at the interest reset date. That calculated rate must fall between 0% (the minimum rate) and a maximum interest rate that changes during the entire term. This is what comes back to the investor, assuming the issuer hasn’t called back the paper, which it can do at any time. As to whether this was an earnest market calculation by the financial engineers at JPMorganChase, we cannot say, but the calculation seems to build in a number of basic protections for the issuer and a number of basic question marks for the investor.

Thanks to securities expert Craig McCann and his associates at the Securities Litigation and Consulting Group for highlighting and researching this particular product.

Hines Global REIT, as its name suggests, invests in U.S. properties and also in the U.K., Poland, Russia, and Australia.  It was launched in August 2009.  As of 2011 it was paying a yield of $6.90 to investors while showing a negative earnings margin, calculated on GAAP, of $2.64 per share.  The issuer advises its investors to anticipate a liquidity event some time between 2017 and 2019, although, as usual, its board reserves the right to schedule, reschedule or postpone any liquidity event at its sole discretion.

Phoenix-based Cole Credit Property Trust III executed an IPO on June 20, 2013, transforming itself from a non-traded REIT to a traded company on a major exchange.  This was actually only one event in a remarkable chain of ongoing events:  a controversial takeover battle through April with a rejected buyout bid which may be the subject of litigation; an IPO unfortunately scheduled on a day with a 2% slump in the markets AND as talk of rising interest rates put price pressure on the entire REIT sector; the company’s announcement of a limited Dutch-auction tender offer on all shares; and speculation about how the market would price Cole in a free market.

“Timberland” is not just a pleasant-sounding brand name.  Started in 2006, this REIT now manages about 300,000 acres of commercial timberland in central Georgia and Alabama.  Its history, however, includes FINRA assessing a sizable $300,000 fine in 2011 for making misleading statements in its promotional materials, along with other issues discovered in a lengthy investigation.  More recent events in 2013 include a downward adjustment in the share price and resignations from the board of directors.  Interested investors are encouraged to do their own research into the REIT and its founder, Leo F. Wells III.