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FINRA Arbitration filed against Kari Marlin Bracy and NYLife Securities, LLC

In July 2018, one of our clients filed a FINRA arbitration against Jacksonville Beach-based financial advisor Kari Bracy and her brokerage firm, NYLife Securities, LLC regarding the sale of Future Income Payments, LLC (FIP, LLC). This sale occurred without full and fair disclosure being made to our investor about the risks associated with this investment and the amount of the commission earned.

Our firm is representing one (1) of Kari Bracy’s investors, and are urging her other FIP, LLC investors to contact us to discuss their experiences.

If Kari Bracy was your financial advisor and you invested in FIP, LLC you may have a potential claim. We are investigating claims by investors for unsuitable investing in FIP, LLC, and Kari Bracy not properly disclosing the very high risks associated with this investment.

If you are an individual or institutional investor who has any concerns about the losses experienced in FIP, LLC or any other securities, please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing a securities arbitration case with FINRA.

SEC CHARGES TAMMIE STEELE and STEELE FINANCIAL, INC.

On Friday, September 14, 2018 the Securities and Exchange Commission charged an Indianapolis-based investment advisory firm and its sole owner (Tamara Steele and Steele Financial, Inc.) with selling approximately $13 million of high-risk securities to more than 120 advisory clients – many of whom are current or former teachers or other workers in public education – without disclosing that the firm and its owner stood to receive commissions of up to 18 percent from the sales.

Our firm is representing many of Tammie Steele’s and her brokerage firm’s investors, and are urging her BRS investors to contact us to describe their experiences.

The SEC’s complaint alleges that from December 2012 to October 2016, Steele Financial Inc. and Tamara Steele sold to advisory clients and other investors more than $15 million of the securities of Behavioral Recognition Systems Inc. (BRS), a private company previously charged with fraud by the SEC. All told, Steele and Steele Financial received commissions of cash and warrants from BRS that were worth more than $2.5 million. Steele and Steele Financial allegedly targeted their own advisory clients who generally did not invest in individual stocks, selling more than 120 clients approximately $13 million of BRS securities without disclosing that the defendants were receiving commissions from BRS. The complaint further alleges that the defendants created false invoices and took other steps to conceal their involvement selling BRS securities.
“We allege that Steele took advantage of her own advisory clients, including clients whom she herself described as ‘two-pension, two Social Security families,’” said Antonia Chion, Associate Director of the SEC’s Division of Enforcement. “Investment advisers must put their clients’ interests ahead of their own and make full and fair disclosure of financial conflicts of interest.”

The SEC’s complaint, filed in federal district court in Indiana, charges the defendants with violating the antifraud and broker-dealer registration provisions of the federal securities laws. The SEC is seeking disgorgement of ill-gotten gains with interest, penalties, and permanent injunctions.
If Tammie Steele was your financial advisor and had you invested in BRS Labs promissory notes or other BRS securities, you may have a potential claim. We are investigating claims by investors for unsuitable investing in BRS and Tammie Steele not properly disclosing the very high risks associated with this investment.

Here is an article relating to this post: https://www.ibj.com/articles/70514-sec-charges-local-investment-adviser-a-former-math-teacher-with-fraud

If you are an individual or institutional investor who has any concerns about the losses experienced in BRS Labs promissory notes or other BRS securities, please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing a securities arbitration case with FINRA.

Auto-Callable Structured Products – the Wall Street House Always Seems to Win

The Wall Street Journal, on September 12, 2018 (“FANG Stock Play Can Fall Short”), noted that investors looking to reap the gains of highflying technology stocks while avoiding risk – through the purchase of “auto-callable” structured note products – are finding they can’t do both.

These structured notes “are often sold to mom-and-pop investors seeking higher-yielding alternatives to government debt, which is reliably safe. Offering documents say that buyers can earn fixed payouts of as much as 25% of the purchase price annually without taking on the risk of outright common-share ownership. Yet many of these FANG-linked notes fail to produce returns anywhere near that stated range, according to an analysis of securities filings by The Wall Street Journal. Many times, the upfront fees that banks collected were higher than the total returns earned by investors.”

“That is partly because the notes – dubbed ‘auto-callable’ because a rise in the stock price contractually triggers their redemption – are often redeemed in less than a year, and sometimes in as little as a month. In many cases, the auto-callable provision leads investors to earn scant returns and receive their money back long before the stated term of the investment.”

As noted in the article, auto-callable notes “are unlike common shares, which offer purchasers unlimited potential gains as well as the risk of total loss. They are also unlike U.S. Treasuries, which pay out periodic ‘coupons’ and entitle holders to full repayment at maturity. Instead, the notes offer gains up to a certain, specified threshold and protect against only certain, specified equity losses. Typically, if the linked stock or basket of stocks trades below a designated barrier – say, 75% of its initial value – when the notes mature, investors can lose a share of their principal on par with losses on the stock or basket.”

The Wall Street Journal specifically notes that Citigroup Inc., UBS Group AG and Royal Bank of Canada are among the banks this year that have issued more than $1 billion of auto-callable structured notes that are linked to one or more of the four FANG stocks: Facebook, Amazon, Netflix and Google parent Alphabet.

So how does the Wall Street house win with these investments? Consider just the following 2 examples that were cited in this article:

“When Citigroup sold $16.3 million of auto-callable notes tied to Amazon.com shares in mid-February, the firm advertised a 10% potential annual coupon for three years. Three months later, Amazon shares were up more than 20% – but the note was called, meaning that investors who purchased it received a total payout of 2.5%” while Citigroup “collected 3.5% in fees.”

Similarly, “in March, UBS issued a $150,000 note tied to Netflix. It paid 20.58% annually as long as shares of Netflix weren’t above the effective purchase price on monthly review dates. After one month, the stock was up 5.9%. The note was called, paying a coupon of 1.7% of the purchase price” while UBS reportedly “collected 2.7% in fees.”

If you are an individual or institutional investor who has any concerns about your auto-callable or structured product investments with any brokerage firm, please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing an individual securities arbitration claim with the Financial Industry Regulatory Authority (FINRA).

FIP,LLC—Future Income Payments—Understand Your Rights

Maddox Hargett & Caruso, P.C. is representing investors across the US who have lost money in FIP, LLC that was recommended by their stockbrokers, insurance agents and financial advisors.

Numerous state regulators have already taken action against FIP,LLC for the sale of improper loans, which violates many state consumer protection laws.

An investment in FIP, LLC was a very risky investment that was unsuitable for most investors. According to our clients, the significant risks of this investment were not disclosed to them by their advisor.

Our firm continues to investigate claims against various brokerage firms, insurance agents and financial advisors for the improper sale of FIP, LLC. If you are an individual or institutional investor who has any concerns about the investment of your hard-earned funds into FIP, LLC, please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing a securities arbitration case with FINRA or a lawsuit.

Wall Street’s Sucker Bet – Leveraged Inverse Funds

The Wall Street Journal, on June 29, 2018 (“Investors Can’t Get Enough of Wall Street’s Sucker’s Bets”), noted that “people who compare Wall Street to a casino are usually just bitter about a bad experience,” but that “when it comes to some wildly popular products, though, the description fits.”

The products at issue are “funds that trade on the stock market, but have odds resembling a casino game”

As noted in the article, one of these popular products is the Direxion Daily Financial Bear 3X Shares fund “which has lost money on 54% of days and every calendar year since its launch in late 2008.”

“The fund produces three times the inverse of an index of financial companies, so it posted some spectacular gains during the financial crisis. They faded quickly. For example, the fund doubled in four sessions in January 2009 but gave up those gains in the next six. The following month it doubled again in seven days but lost 60% in the next four and then another 50% in the following seven sessions.”

More importantly, the WSJ article highlights the fact that “the savings-destroying combination of volatility and daily compounding is what makes these leveraged inverse funds losing propositions. A $10,000 investment in the Daily Financial Bear 3X fund made in 2008 is now worth about $2.”

If you are an individual or institutional investor who has any concerns about your leveraged inverse fund investments with any brokerage firm, please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing an individual securities arbitration claim with the Financial Industry Regulatory Authority (FINRA).

Private Placement Investments can be a Clear & Present Danger to Investors

The Wall Street Journal, on June 25, 2018 (“Private Placements Draw Troubled Brokers”), exposed the fact that “securities firms with an unusually high number of troubled brokers are selling tens of billions of dollars a year of private stakes in companies, often targeting seniors.”

“Even though only around 4 out of 10 brokerages sell private placements, these brokerages account for more than half of the 94 firms that FINRA expelled since 2013,” the WSJ analysis found.

As noted in this article, “the emerging trend could mean that unsuspecting investors will be exposed to losses or fraud in a market that has grown sharply in recent years.”

In a review of more than a million regulatory records, the Journal “identified over a hundred firms where 10% to 60% of the in-house brokers had three or more investor complaints, regulatory actions, criminal charges or other red flags on their records – significant outliers in the investment community.”

“The clustering of higher-risk brokers underscores regulator worries about the largely unpoliced market” and “sales of private placements are so lucrative to the brokerage firms that they are a perennial concern for regulators,” said Brad Bennett, a former enforcement chief at brokerage watchdog the Financial Industry Regulatory Authority. Issues on the regulators’ radar, he said, include whether the private placement offers a stake in a legitimate business, what selling perks or markups the brokers get, and how it is sold to investors.”

According to the analysis undertaken by the WSJ, “sales of private placements are surging, as part of a broader rise in private capital markets, fueling concerns among investor representatives about how the products are sold.”

“More than 1,200 firms sold around $710 billion of private placements last year, and sales for the first five months of this year are on track to top that record-setting tally,” the WSJ found.

If you are an individual or institutional investor who has any concerns about your private placement investments with any brokerage firm, please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing an individual securities arbitration claim with the Financial Industry Regulatory Authority (FINRA).

ProShares Short XIV Short-Term Futures ETF Drops Almost 90%

On Monday, February 5, 2018,  we watched one of the most volatile days in the history of the stock markets and its largest single day point drop. The ProShares Short XIV Short-Term Futures ETF (NYSE ARCA: SVXY), plunged by nearly 90% in after-hours trading.

If your financial advisor had you invested in the ProShares Short VIX Short-Term Futures ETF, you may have a potential claim. We are investigating claims by investors for unsuitable investing in this ETF and financial advisors not properly disclosing the very high risks associated with this investment.
If you are an individual or institutional investor who has any concerns about the losses experienced in the SVXY or any other investments that dropped significantly in the market volatility on or around May 5th , please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing a securities arbitration case with FINRA.

Greenwood Broker Robert Hayes Hoffman Banned for Life By the Securities Industry

The Financial Industry Regulatory Authority (“FINRA”) recently banned Robert Hayes Hoffman from the securities industry for failing to cooperate with an investigation into a customer complaint against him while he was registered with Woodbury Financial Services in Greenwood, Indiana.  He was registered with Woodbury from 2006 until March 2017.

FINRA records currently show 2 customer complaints against Woodbury and Hoffman, both of which are in FINRA arbitrations. In early 2017, a customer alleged that Hoffman and Woodbury made unsuitable investment recommendations, unauthorized trades and had traded the account(s) excessively. This customer has alleged damages of at least $3.2 Million.

In October of 2017, FINRA demanded that Hoffman provide “on the record testimony” about this customer complaint. Hoffman refused to testify and was subsequently barred from the industry by FINRA, as his refusal to testify violated FINRA rules.

A second customer complaint was filed in November 2017 alleging that Hoffman and Woodbury violated their fiduciary duties in multiple ways, including recommending unsuitable investments. The amount of the second investor’s damages has not yet been disclosed.

Our firm is investigating investor claims against Woodbury Financial and Robert Hayes Hoffman for the improper sale of unsuitable investments, unauthorized trading and excessive trading of investor accounts. If you are an individual or institutional investor who has any concerns about your investments with Woodbury Financial or Robert Hayes Hoffman, please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing a securities arbitration case with FINRA.

Discount Brokerage Firms May Be Hazardous to Investors’ Financial Health

A front page article in The Wall Street Journal on January 11, 2018 (“Advisers at Leading Discount Brokers Win Bonuses to Push Higher-Priced Products”) exposed the fact that Fidelity, Charles Schwab and TD Ameritrade employees win extra pay and other incentives to put clients in products that are more lucrative for them and the firm.

As noted in the article, while “investors who seek advice from discount brokerage firms might assume the counsel they get is impartial, given how these firms have rejected the old Wall Street model of working on commissions, in fact, advisers at some of the biggest discount brokerage firms make more money if they steer clients toward more-expensive products, according to disclosures from the firms and people who used to work at them. That means customers could end up with investment products and services that are costlier than they need.”

Among the findings that are highlighted in this article are the following:
“Fidelity representatives are paid 0.04% of the assets clients invest in most types of mutual funds and exchange-traded funds. They earn more than twice as much, 0.10%, on choices that typically generate higher annual fees for Fidelity, such as managed accounts, annuities and referrals to independent financial advisers. At Fidelity, sales incentives not only enhance pay directly but also help representatives win ‘Achiever’ bonuses that can be tens of thousands of dollars a year.

Charles Schwab employees with exceptional service and client satisfaction can qualify for the Chairman’s Club, winning a trip to a Hawaii or Florida resort. For advisers, sales volume also can be part of the calculation. The firm’s compensation practices could create ‘a financial incentive to recommend [managed accounts] over other products and services,’ said a 2016 Schwab disclosure of compensation practices.

TD Ameritrade discloses in a document on its website that sales bonuses could give financial consultants an incentive to make recommendations for asset retention with a view to their compensation rather than the best interest of clients.”
“The products and services for which employees of Fidelity, Schwab and TD Ameritrade are best paid charge an annual fee – a percentage of assets – to offer advice.”

According to The Wall Street Journal, “all three firms pay incentives to representatives for referring clients to independent investment advisers. These advisers charge clients an annual percentage of their assets, and the discount brokerage firms receive up to 0.25% annually on assets committed to the advisers.”

If you are an individual or institutional investor who has any concerns about your investments with any discount brokerage firm, please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing an individual securities arbitration claim with the Financial Industry Regulatory Authority (FINRA).

Rollover of Brokerage Accounts to Fee Based Advisory Accounts

The Financial Industry Regulatory Authority (FINRA) is cracking down on the rollover of retirement accounts and other brokerage accounts to fee-based advisory accounts. FINRA examiners are likely to ask more questions this year about the timing of and recommendations to switch these accounts.

This area is a new addition to the annual Regulatory and Examination Priorities Letter, whose 2018 edition was released on Monday as an aide to help firms focus their growing compliance, supervisory and risk management responsibilities, and serve as a warning to brokers about where FINRA disciplinary actions may occur.

The letter’s “sales practice risks” section focused on the rollover of retirement accounts from brokerage accounts to advisory accounts as a new priority area.

FINRA said it is closely watching the timing of recommendations to move customers from traditional commission-based brokerage accounts to fee-based advisory accounts, a twist on the issue of reverse churning that other regulators have identified as an issue for buy-and-hold clients.

“FINRA will review situations in which registered representatives recommend a switch from a brokerage account to an investment advisory account where that switch clearly disadvantages the customer, such as where the registered representative recommended that the customer purchase a securities product subject to a front-end sales charge in a brokerage account and then shortly thereafter recommended that account be transferred to a fee-based account,” the exam priorities letter said.

Our firm is investigating claims against various brokerage firms for the improper rollover of accounts from brokerage to advisory account. If you are an individual or institutional investor who has any concerns about the rollover of your retirement or other accounts from brokerage to fee-based advisory accounts, please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing a securities arbitration case with FINRA.


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