Skip to main content


Representing Individual, High Net Worth & Institutional Investors

Offices in Indiana and New York City


Home > Blog > Monthly Archives: November 2013

Monthly Archives: November 2013

Update: UBS, Puerto Rico Muni Bonds

A unit of UBS AG has offered to repurchase shares of closed-end municipal bond funds invested in Puerto Rico muni securities from certain clients. The story was first reported Nov. 25 by Investment News.

During this past summer, the market for Puerto Rico’s $70 billion muni debt went south after Detroit filed for bankruptcy in July. UBS Financial Services of Puerto Rico is a huge player in the muni debt market in Puerto Rico, packaging and selling $10 billion in proprietary closed-end bond funds through the end of 2012.

Meanwhile, the net asset value (NAV) of the 14 UBS closed-end funds have plummeted.

Investors purchased the proprietary bond funds for $10 a share. According to the Investment News story, the NAV for the $375 million Puerto Rico Fixed Income Fund was $3.63 at the end of October, down 85% since the end of June. The NAV for the $449 million Puerto Rico Fixed Income Fund III was $4.08 at the end of last month, a decrease in value of 68% since June.

So far, investors who’ve been contacted by brokers have not been told a set price – or given a guarantee – for their shares.

Broker Who Worked for Firm Caught in Alleged Promissory Note Scam Barred by FINRA

For many investors, promissory notes tend to conjure memories of recent deals gone bad, especially those associated with Medical Capital Holdings or Provident Royalties. Both entities were charged with fraud by the Securities and Exchange Commission (SEC) and cost investors millions of dollars in financial losses.

Promissory notes are again back in the news. This time a broker who worked for a firm – Success Trade Securities – that is alleged to have sold more than $18 million in fraudulent promissory notes to 58 investors has been barred by the Financial Industry Regulatory Authority (FINRA).

The broker, Jinesh “Hodge” Brahmbhattm, worked for Success Trade Securities from 2009 until April. He was barred by FINRA last week.

Many of the individuals who invested in the fraudulent notes are current and former NFL and NBA players. As reported Nov. 20 by Investment News, one athlete, Jared Odrick of the Miami Dolphins, has filed an arbitration complaint with FINRA against Brahmbhatt, Success Trade and the company’s top executive, Fuad Ahmed.

The letter of acceptance, waiver and consent from FINRA doesn’t mention Brahmbhatt’s work with Success Trade as the reason he was barred from FINRA. Rather, it cites Brahmbhatt’s failure to appear and testify in August at a disciplinary hearing regarding Success Trade and Ahmed.

Earlier this spring, FINRA filed a cease-and-desist order against Success Trade and Ahmed. The order specifically instructed the two “to halt further fraudulent activities” and cited “the misuse of investors’ funds and assets.”

FINRA also filed a complaint against Ahmed and Success Trade, alleging “fraud in the sale of promissory notes issued by the firm’s parent company, Success Trade Inc.”

According to a Nov. 18 story by Yahoo Sports, Brahmbhatt had once been registered in a financial advisers program created by the NFL Players Association. He dropped his FINRA license in April, and told Yahoo Sports at the time that he had more than 30 clients who had purchased some $12 million of the allegedly fraudulent promissory notes from Success Trade.

Meanwhile, Odrick, the NFL player, filed his arbitration complaint with FINRA in April. He says in the complaint that he invested $625,000 in Success Trade notes and one other series of promissory notes beginning in 2011. Among other things, Odrick alleges that he was promised returns of 10% to 12.5%. The Success Trade note “was part of a large Ponzi scheme orchestrated by Success Trade, Ahmed and Brahmbhatt,” the complaint states.


Why It’s Easier to Scam the Elderly

Older adults are more likely to become victims of investment fraud and financial scams than the general public. In many cases, the root of this fraud is related to the so-called elder investing expertise of the financial advisers that seniors turn to for financial advice.

A simple search on the Internet of financial advisers for seniors will produce a multitude of different titles, including elder care financial specialist and senior financial adviser. For many older investors, it’s difficult to know if these individuals actually have the proper training and credentials they say they have to help investors with their money.

Earlier this year, the Consumer Financial Protection Bureau released a report on senior designations and what older Americans can do to prevent themselves from being scammed by financial advisers who may falsely claim to specialize in giving advice to seniors. According to the report, there are more than 50 senior designations in today’s marketplace by people recommending or selling products such as securities, investment opportunities, financial products, and insurance products like annuities and long-term care insurance.

Some of these designations are legitimate and require specific training and professional license; others, however, are simply window dressing.

The CFPB advises elderly investors to thoroughly check the background of any financial adviser with a senior designation behind his or her title. Among the resources you can use:

*The Financial Industry Regulatory Authority’s Broker Check Web site. Broker Check lets you search the professional backgrounds of securities brokers and investment advisers, as well as their firms.

*The Investment Adviser Public Disclosure (IAPD) database. IAPD provides instant access to registration documents filed by more than 25,000 SEC- or state-registered investment advisers. IAPD also provides access to registration information filed with the states by investment adviser representatives (certain individuals that are employed by an investment adviser).

*If your adviser sells insurance, the CFPB recommends that you contact your state insurance commissioner for additional information.

*If your adviser sells securities, your state securities regulator can provide additional information.


Enhanced FINRA BrokerCheck Web Site Released

The Financial Industry Regulatory Authority (FINRA) has unveiled a new and improved version of its BrokerCheck Web site that allows investors and other individuals to more quickly access and intuitively understand the professional background of investment professionals.

“Investors using BrokerCheck will encounter a more user-friendly interface that allows them to quickly find information that can help them decide if an investment professional is right for them,” said Derek Linden, FINRA Executive Vice President, Registration and Disclosure, in a statement.

The new changes let investors search both the BrokerCheck and Investment Adviser Public Disclosure (IAPD) record of any securities professional or firm directly from FINRA’s homepage.  BrokerCheck then presents the search results in a more user-friendly graphical timeline that details the industry professional’s employment status and history, industry registrations, and any reportable events such as customer disputes or disciplinary actions that may have occurred during his or her career.

FINRA also plans to make the new BrokerCheck widget available to third-party Web sites, allowing visitors to those sites direct access to securities professionals’ or firms’ BrokerCheck or IAPD reports without having to visit the FINRA or Securities and Exchange Commission (SEC) Web sites.

In 2012, members of the public used BrokerCheck to conduct 14.6 million reviews of broker or firm records.

Financial Fraud in America

Investment and financial fraud is a $50 billion a year crime – and one that can happen to the young, old, sophisticated investors and novices alike. A recent report from the FINRA Investor Education Foundation found that more than 8 in 10 respondents were solicited to participate in potentially fraudulent financial offers, with 11% of all respondents losing a significant amount of money after engaging in such deals.

Even though financial fraud and investment schemes are commonplace, many Americans don’t know the red flags of financial scams because they lack an understanding about the fundamentals of investing, such as realistic rates of return on their money. Older Americans are particularly vulnerable to financial fraud. According to the FINRA Foundation report, Americans age 65 and older are more likely to be targeted by fraudsters and more likely to lose money once targeted. Upon being solicited for fraud, older respondents were 34% more likely to lose money than respondents in their forties.

Additional highlights of the FINRA Foundation study include the following:

– Many Americans are vulnerable to fraudulent investment pitches promising unrealistic returns because they fail to realize what a reasonable return on an investment should be. For example, nearly half of respondents found a daily rate of return of more than 2% appealing. Claims of achieving “typical” returns of 110% per year were found attractive by 42% of respondents.

– 84% of respondents reported being solicited with at least one of the 11 types of potentially fraudulent offers.

– 67% said they had received an email from another country offering a large amount of money in exchange for an initial deposit or fee.

– 64% had been invited to an “educational” investment meeting that turned out to be a sales pitch.

– 18% had been asked to participate in an investment that offered a commission for referring other investors.

You can read FINRA’s entire report here.

Top of Page