Oren Eugene Sullivan is the disgraced South Carolina broker who recently pled guilty to mail fraud in connection to a multimillion dollar, decades-long Ponzi scheme. In January, Sullivan admitted in federal court that from 1995 through 2008 he ran the Ponzi scheme, selling fake investments to individuals and groups of investors, according to the U.S. Attorney’s Office in South Carolina.

So why does the Web site of the Certified Financial Planner Board of Standards still list Sullivan as a CFP in good standing, with no public disciplinary history? It’s a question that was first raised in a Feb. 14 article in Investment News.

As the story aptly points out, designating authorities are finding it more and more difficult to keep up with the bad deeds and misconduct of financial representatives like Sullivan.

Monitoring conduct is an arduous and difficult task. The CFA Institute, which says that 85% of its investigations begin as a result of self-disclosures and 10% from news reports and regulatory Web sites, has two investigators who monitor professional conduct. Most of that work is primarily done via the Internet, according to the Investment News article.

Other designation groups follow similar investigative routes, as well as perform internal investigations before deciding upon punishment. The process, however, can be a lengthy one, ranging from several weeks to a year or more.

Case in point: Oren Eugene Sullivan.

Records with the Financial Industry Regulatory Authority (FINRA) state that Sullivan sold clients nearly $4 million of fake promissory notes between 1995 and 2008. He repaid about $1.5 million before getting caught by authorities. In August 2009, Sullivan was barred by FINRA. In January 2010, he pled guilty to one fraud charge and faces a maximum of 20 years in prison and a fine of $250,000.

Somehow Sullivan’s actions didn’t mar his CFP designation with the CFP Board, however. Investment News did note that the CFP Board was aware of the allegations against Sullivan, but wouldn’t confirm whether they were actually investigating him.

Thousands of institutional and retail investors of Fannie Mae (FNM) and Freddie Mac (FRE) preferred stocks have witnessed the collapse of their investment portfolios following the government’s takeover of the two mortgage giants on Sept. 6, 2008. Many of these investors initially purchased huge concentrations of Fannie Mae and Freddie Mac preferred stock based on misleading information from their brokerages or financial advisers.

In some instances, investors were never told about the potential risks associated with investments in Fannie Mae or Freddie Mac. Instead, the stocks were described as conservative - investments designed to provide investors with consistent income via above-average dividends. After all, Fannie Mae and Freddie Mae stood as the nation’s mortgage giants. They were too big to fail. And, as so-called government-sponsored entities, investments in Fannie Mae and Freddie Mac were guaranteed or implicitly guaranteed by the federal government. At least that’s what many investors believed.

Instead, on Sept. 6, 2008, the federal government seized control of the too-big-to-fail lending companies, placing Fannie Mae and Freddie Mac into a government conservatorship under the Federal Housing Finance Agency (FHFA). In turn, the government’s bail-out wiped out Fannie Mae and Freddie Mac’s common and preferred stockholders. All dividends for the two companies were eliminated.

Several months prior to the near-collapse of Fannie Mae and Freddie Mac, on May 13, 2008, Fannie Mae announced plans to raise some $6 billion in capital by issuing an offering of 8.25% Non-Cumulative Preferred Stock, Series T. In reality, that amount could never sufficiently address the lender’s overall deteriorating financial health, which had nosedived as a result of mortgage-related losses, poor underwriting standards and risk management procedures. The full extent of Fannie Mae’s capital deficiencies was never disclosed to investors, however. Moreover, many investors were advised that the Fannie Mae Preferred Stock, Series T was a safe and stable investment suitable for conservative portfolios.

When the Treasury Department announced takeover plans for Fannie Mae in September 2008, the price of the Fannie Mae Series T Preferred Stock dropped dramatically, falling more than 88% from its initial offering price of $25 per share on May 13, 2008, to $3 per share on Sept. 8, 2008.

If you are an institutional investor or retail investor and were misled about your investments in Fannie Mae or Freddie Mac preferred stocks, we want to hear your story. 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). Leave a message in the Comment Box below or via the Contact Us form.

The fate of the Columbia Strategic Cash Portfolio Fund was sealed on Dec. 10, 2007, when losses on investments in mortgage and certain asset-backed securities combined with a $20 billion withdrawal from a single institutional investor forced Bank of America to shutter one of the largest U.S. short-term funds catering to institutional investors.

The Columbia Strategic Cash Portfolio Fund is run by Columbia Management, a unit of Bank of America. Described as an enhanced cash fund and a suitable substitute for money market accounts, the Columbia Strategic Cash Portfolio Fund went from $40 billion in assets to about $12 billion in a matter of months.

The reasons behind the forced liquidation of the Columbia Strategic Cash Portfolio can be traced to its exposure to risky asset-backed securities and structured investment vehicles (SIVs) tied to real-estate mortgages. Some of the SIVs associated with the fund were later downgraded by credit-ratings agencies, creating more losses for the fund.

Unlike traditional money-market funds, the Strategic Cash fund didn’t provide investors with a guarantee to maintain a $1-per-share net asset value.

At the time the Columbia Strategic Cash Portfolio was shuttered, only a few investors found themselves able to liquidate their positions. Other investors were given a pro rata share of the fund’s underlying securities in lieu of cash. And still other shareholders were told they could cash out at the fund’s current share price at a loss.

The liquidity problems associated with enhanced cash funds like the Columbia Strategic Cash Portfolio are reminiscent of those found in auction rate securities, investments once deemed as a safe haven for individual and institutional investors to park their cash. When the market for auction rate securities collapsed in February 2008, however, investors quickly discovered that their investments were far from cash-like.

And that’s exactly what many investors in the Columbia Strategic Cash Portfolio Fund have discovered. Case in point: Costco Wholesale Corporation. As reported May 16, 2008, by the Puget Sound Business Journal, Costco unsuccessfully tried to pull out of several enhanced cash funds in 2008, with $371 million that remained frozen in the Columbia fund and two similar funds. In turn, Costco was forced to report a $2.8 million write-down on investments in those funds because of the decline in their value, according to the company’s 2008 10-K filing with the Securities and Exchange Commission (SEC).

Other companies affected by the Columbia fund include Getty Images. As of March 31, 2008, Getty had $20.4 million invested in the Columbia Strategic Cash Portfolio Fund. According to the Puget Sound story, Getty reported a $400,000 loss because of the decline in the value of the fund.

Another company, SonoSite, Inc., had $8.2 million tied up in the Columbia fund as of March 31. Ultimately, the medical devices company reported $300,000 in losses from that investment.

In September, the Financial Industry Regulatory Authority (FINRA) announced that Robyn Lynn O’Hara, formerly of WFG Investments, had been barred from FINRA for securities violations. According to FINRA’s findings, O’Hara engaged in multiple trades in customers’ accounts at her member firms without customers’ authorization or consent. The findings further stated that O’Hara continued unauthorized trading in one account even after the customer instructed her to cease all trading.

Information posted in FINRA’s BrokerCheck provides additional insight into O’Hara’s professional background, with allegations of unauthorized trades and unsuitable investments dating as far back as 1992 when she working as a broker at J.W. Gant & Associates. In that particular case (FINRA Case No. 92-01617), FINRA eventually ruled O’Hara and J.W. Gant jointly liable for their actions, awarding some $6,500 in damages to the claimant.

That same year, 1992, O’Hara again faced allegations by FINRA of using high-pressure sales tactics and failing to execute a client’s instructions to sell certain securities in his account. O’Hara was fined $20,000 and suspended from association with FINRA for 20 days.

In another case (FINRA Case No. 09-02650) filed in July 2009. O’Hara is again accused of misrepresentation by a former client. The investor also is suing WFG Investments for failing to supervise O’Hara. The case is still pending with FINRA.

In total, O’Hara’s CRD shows at least five regulatory events related to securities violations. In addition, she’s been named in at least three customer complaints tied to securities fraud.

If you have questions about investments made with Robyn Lynn O’Hara or WFG Investments, please fill out the Contact Us form or leave a comment below. We want to hear your story and consult with you about your options.

Breach of fiduciary duty. Misallocated portfolios. Misrepresentation. In a nod to the growing dissatisfaction felt by investors over the actions - or inactions - of their financial advisers and stock brokers, new arbitration cases filed with the Financial Industry Regulatory Authority (FINRA) soared 65%, to 4,991, through August 2009, after climbing to 3,018 for the same period last year. The latest figures put new filings with FINRA on track to hit 7,000 by year end, up from 4,982 in 2008.

“I don’t anticipate it slowing down this year or next,” said Linda Fienberg, president of dispute resolution for FINRA, in a July 14, 2009, story appearing in the Washington Post. Fienberg added that more investors are prevailing in their cases this year than they had in the past.

The No. 1 complaint in investors’ claims through August 2009 is breach of fiduciary duty, followed closely by misrepresentation.

Do You Have A Claim Against Moran Asset Management?

Maddox Hargett & Caruso P.C. currently is investigating complaints by investors regarding The Moran Asset Management Group. Specifically, a number of retail investors have come forth with unsettling stories over the way in which representatives of Moran handled their investment portfolios. Some investors we’ve spoken with contend Moran abandoned its downside protection strategy in 2008 without telling clients. As result, some clients sustained significant financial losses in their portfolios. One investor says he suffered losses in the millions of dollars.

Headquartered in Naples, Florida, The Moran Asset Management Group is a fee-based wealth management firm associated with the Wells Fargo Advisors’ Private Investment Management program. The company was founded in March 1990 by Thomas M. Moran, a Managing Director - Investments, and Earl Sistrunk, CFA, Financial Consultant, with Wachovia Securities (now Wells Fargo Advisors).

According to Moran’s own Web site, the company utilizes more than 50 variables from 200 different research firms to arrive at the recommendations it makes for investors. It also employs some 15 different investment models. In several articles appearing in the financial press, Moran has often trumpeted its downside strategy as one of the central keys to its success. In the simplest terms, that strategy supposedly works as follows: If a stock is placed into an investor’s portfolio and falls in value by, say, 20%, it is sold. If a stock hits a 52 week high after being added to a portfolio and then goes down 20% from the 52 week high, it is sold.

According to some investors, however, Moran apparently decided to discard this particular strategy last year without disclosing the change in investment tactics to clients. In doing so, investors say they were unknowingly opening themselves up to added risks and the potential for huge financial losses.

Tell us about your relationship with Moran Asset Management Group. Please fill out the Contact Us form, or leave a comment below. We want to hear your story and consult with you about your options.

Frank Bluestein, a Detroit-area financial adviser, has been charged by the Securities and Exchange Commission (SEC) of luring elderly investors into refinancing their home mortgages in order to fund investments in a $250 million Ponzi scheme operated by Edward May and his company, E-M Management Company LLC (E-M). Bluestein’s latest run-in with authorities isn’t “new” news, however. More than two years ago, Michigan state securities regulators and the SEC were investigating Bluestein for the very crime he now is alleged to have committed. Bluestein denied similar allegations in a 2008 class-action lawsuit filed by investors who allege Bluestein bilked them out of millions of dollars. That case is still pending.

According to the SEC’s Sept. 28 complaint, regulators allege that Bluestein acted as the single largest salesperson in May’s Ponzi scheme and that Bluestein’s “role” was to specifically target retirees and elderly investors into attending so-called “investment seminars” held in Michigan and California. The purpose of the seminars was to lure potential investors into putting their money into May’s company, E-M.

“Bluestein convinced elderly investors to refinance their homes to invest in securities that he falsely claimed were safe,” said Merri Jo Gillette, Director of the SEC’s Chicago Regional Office. “His lies, false assurances, and unscrupulous tactics put many investors at risk of losing not only their life savings, but also their homes.”

Bluestein’s past gets even more sordid. A Nov. 27, 2007, article by Registered Rep reports that after Bluestein was fired from the brokerage firm GunnAllen Financial in October for reportedly selling unregistered securities, Bluestein set up shop down the street and began working under a new name, “Frank Julian,” as part of a so-called “research team” at a company called Freedom Road. (The name listed now, however, on Freedom Road’s Web site is, in fact, Frank Bluestein.) According to the Web site, Freedom Road provides stock selection and market education to individuals. Its advertising moniker is: Luck is not an investment strategy.

Information posted by Freedom Road on its Web site touts Bluestein as “picking hot stocks for over 40 years,” with a “unique approach [to finding] big opportunities in both dividend paying stocks and growth stocks with limited risk.” “After many years as one of the nation’s leading financial advisors, Frank is now sharing his million dollar secrets exclusively with members of Freedom Road. Frank’s vision is to share his hard earned experience and success with investors on a global scale.”

It’s what Freedom Road didn’t say about Frank Bluestein that has come back to haunt investors. Bluestein isn’t even registered with the Financial Industry Regulatory Authority (FINRA). According to the Registered Rep article, Bluestein’s CRD report shows that in October 2007, 10 customer disputes had been logged against him totaling some $1.6 million in alleged damages. On Oct. 12, the Michigan Office of Financial Regulation notified GunnAllen, Bluestein’s former employer, that Bluestein was under investigation. Shortly thereafter, Bluestein was fired from GunnAllen.

Fast forward to Sept. 28, 2009. The SEC charges Bluestein of civil fraud, sale of unregistered securities and other violations in connection to helping orchestrate a multimillion-dollar Ponzi scheme. Specifically, the SEC alleges that Bluestein facilitated May’s fraudulent scheme by raising approximately $74 million from more than 800 investors through the sale of E-M securities over a five-year period. Bluestein, through his company Maximum Financial, conducted numerous investment seminars to find new E-M investors.

Based on the SEC’s complaint, Bluestein, 59, allegedly misrepresented to investors that the investments he pitched were low-risk and falsely claimed he had conducted adequate due diligence about the investments. He also apparently left out one other key detail: Bluestein received at least $2.4 million in commissions from May and E-M, in addition to the $1.4 million in disclosed compensation he received from investor funds.

Tell us about your relationship with E-M Management Company. We want to hear your story. Please fill out the Contact Us form, or leave a comment below. We can consult with you regarding your options.

Bernie Madoff’s sons and other Madoff family members may soon be putting their over-the-top, extravagant lifestyles on the permanent backburner. Irving Picard, the man in charge of recovering assets from their convicted father for defrauded victims, stated in a Sept. 27 episode of 60 Minutes that he plans to sue Mark and Andrew Madoff, Madoff’s brother, Peter, and a niece for nearly $200 million.

Picard and David Sheehan, chief counsel, told 60 Minutes correspondent Morley Safer that the latest lawsuits will include charges of negligence and breach of fiduciary duty. In addition, the lawsuits will allege that family members personally profited tens of millions of dollars while working at Madoff’s New York investment advisory business.

According to the 60 Minutes interview, Sheehan believes about $36 billion went into the Madoff’s scheme. “About $18 (billion) of it went out before the collapse. And $18 (billion) of it is just missing. And that $18 billion is what we’re trying to get back,” Sheehan said.

Last December, Madoff confessed to one of the biggest frauds in Wall Street history when he admitted to conducting a decades-long $65 billion Ponzi scheme. He currently is serving a 150-year prison sentence.

The brokerage firms of Next Financial and LPL Financial have both been added as defendants in a Bexar County, Texas, lawsuit that claims an elderly San Antonio couple -Thomas H. Crouch, 93, and his wife, Dorothy, 89 - lost nearly $2 million because of a fraud scheme masterminded by financial adviser Jeremy McGilvrey. McGilvrey is the once-flamboyant owner of the now-defunct Hill Country Wealth and a registered agent for LPL and Next Financial.

According to an Aug. 14 article by the San Antonio News, the complaint in the Crouch case accuses McGilvrey, Hill Country Wealth President Lance Smith and others of “plundering” the elderly couple’s wealth by inducing them to make risky investments, buy stock in Hill Country Wealth and even lend the firm money. The lawsuit was filed by James Crouch, who serves as guardian for his father and stepmother. The elderly Crouch apparently suffers from Alzheimer’s disease and dementia, while his wife is being treated for depression and memory loss.

“McGilvrey and Smith embarked on a scheme to take as much money from their clients as possible, including the sale of the client’s solid, safe investments, in order to have cash in the accounts of Hill Country Wealth, and in the pockets of McGilvrey and Smith,” the lawsuit said.

Among the charges listed in the complaint: Fraud, sale of unregistered securities and civil conspiracy.

According to information posted on the Financial Industry Regulatory Authority’s Web site, McGilvrey’s employment history says he worked for LPL until June of 2008 when he was “permitted to resign” for “failure to properly supervise (a) registered representative with respect to reporting of (a) direct business transaction.”

His “next” stop, albeit short lived, was Next Financial. In May, he was fired for violating company policy by borrowing from a client. Reportedly those clients are the Crouches.

McGilvrey’s professional intrigue doesn’t end there. An Aug. 2 article in the San Antonio News says McGilvrey reportedly told prospective clients that he had received the “Top 100 Financial Advisors Award” from Money Magazine for four consecutive years. McGilvrey further cited articles about his investing prowess in the Wall Street Journal and Fortune Magazine. In reality, however, the award McGilvrey connected to Money Magazine hasn’t existed for 20 years. And the newspaper citations could not be found.

As for Next Financial, it is no stranger to lawsuits based on charges of failure to supervise its agents. In 2008, FINRA records show that Next Financial paid a $1 million fine because it “failed to create a reasonable system and written procedures for supervising branch offices, regional managers and registered representatives.”

The same FINRA report also states that a manager with Next Financial “churned customer accounts whereby customers lost $565,000 because no one at the firm was reviewing his transactions.”

Next Financial also is one of several independent broker-dealers with advisers selling private securities of an oil and gas partnership - Provident Asset Management LLC - that the Securities and Exchange Commission (SEC) charged last month of committing a $485 million Ponzi scheme.

In addition to the civil litigation, the Texas State Securities Board and San Antonio police are investigating possible criminal offenses by McGilvrey and others.

Meanwhile, McGilvrey - who once cultivated an image of wealth with his black Bentley convertible and trips to Las Vegas and Australia on a private jet - is missing in action. He has not been seen or heard from in months.

The controversy surrounding leveraged exchange traded funds (ETFs) shows no sign of letting up, and on Sept. 1, the Financial Industry Regulatory Authority (FINRA) announced plans to raise margin requirements for leveraged ETFs beginning Dec 1. FINRA’s Regulatory Notice 09-53 states that the “inherent volatility” of leveraged ETFs is one of the reasons for the new requirements.

The change in regulations comes on the heels of a lawsuit filed by a group of investors in August against ProShares and one of its leveraged inverse ETFs. The investors allege that ProShares misrepresented the UltraShort Financials ProShares Fund and that they were never informed shares in the fund should not be held for more than one single trading day.

Leveraged ETFs are considered a subset of traditional ETFs and attempt to generate multiples (i.e. 200%, 300% or greater) of the performance of the underlying index or benchmark they track. Some leveraged ETFs are “inverse” funds, which means they try to deliver the opposite of the performance of the index or benchmark they track. Leveraged ETFs can include among their holdings high-risk derivative instruments such as options, futures or swaps.

The complexity and potential risks associated with leveraged ETFs have garnered both the media spotlight and the attention of regulators who contend many retail investors do not fully understand how the products work. Both FINRA and the Securities and Exchange Commission (SEC) recently issued warnings highlighting the risks for investors in leveraged ETFs, particularly those who invest for the long term. In response, some brokerage firms announced new sales limits on client investments in leveraged ETFs, while others halted sales altogether.

In July, Massachusetts’ Secretary of State William Galvin launched an inquiry into how three leveraged ETF providers - Rydex, ProShares and Direxion - marketed and sold leveraged ETFs, as well as what they were telling brokers who sold the funds to clients. Detractors of leveraged ETFs, including FINRA and the Securities and Exchange Commission (SEC), contend retail investors may not fully understand the complexity of ETFs nor realize the products must be monitored on a daily or near daily basis.

Three years ago, there were no leveraged ETFs in existence. Today, there are more than 140 leveraged ETFs with about $30 billion in assets.