FinancialCounsel

SNSFE Investigating Michael Regan And Regan & Company Of Massachusetts Following SEC Ponzi Scheme Fraud Charges

SEC charges Massachusetts-based money manager in multi-million dollar Ponzi scheme. 

The SEC alleges that Michael Regan and his firm Regan & Company fraudulently obtained at least $15.9 million from dozens of investors nationwide by selling securities in his now defunct River Stream Fund. Regan provided fake account statements and tax forms to investors showing artificially inflated account balances and concealing that he did no securities trading at all for several years and suffered substantial losses on investments that he did make.  Regan falsely claimed that he earned an MBA from a major New York university and promoted a phony track record of successful securities trading and investment expertise.  Regan is not registered as an investment adviser with the SEC or any other securities regulator.

The SEC's complaint, filed in the U.S. District Court for the Southern District of New York, alleges that Regan misrepresented to investors that because of his trading expertise and successful investment track record, they could expect annual returns averaging 20 percent with minimal risk to their principal.  He promised investors that their money would be pooled into a "fund" that he would invest on their behalf in securities using a conservative, low-risk trading strategy that he claimed was based upon "short-term price trends."

The SEC alleges that Regan actually used less than half of the funds entrusted to him for trading purposes.  Instead of protecting the investors' principal and delivering the promised returns, Regan misappropriated millions of dollars in investor funds to satisfy withdrawal requests from some investors.  He used at least $2.4 million for his personal expenses, including support payments to various family members.

Separately, the U.S. Attorney's Office for the Eastern District of New York announced criminal charges against Regan for the same misconduct alleged in the SEC's complaint.

SNSFE lawyers are investigating this matter, including those entities and individuals who might have referred clients to Michael Regan and his firm Regan & Company. 

Source:  SEC Press Release 2009-143

SEC Chairman Mary Schapiro Outlines Improvements To Investor Protection And Market Integrity

Chairman Mary Schapiro recently testified before the Senate Subcommittee on Financial Services and General Government on the ways in which the Securities and Exchange Commission (SEC) is seeking to restore investor confidence.  Her remarks come at a time when both investor protection and market integrity need substantial improvement.  Let's highlight the key areas that the SEC is focusing upon.

Continue...

SNSFE Continuing To Investigate As New Hampshire Securities Regulator Sues UBS Over Sales Of Principal Protected Notes

The New Hampshire Bureau of Securities Regulation has filed a Cease and Desist order against UBS Financial Services alleging unfair sales practices and unsatisfactory supervisory procedures and for recommending unsuitable investments to more than 40 New Hampshire investors.  The action relates to products underwritten by the now defunct Lehman Brothers and sold to the public by UBS.  Over $2.5 million is at risk for New Hampshire investors.

The products in question are complicated investment vehicles, so-called "structured products," many of which were sold promising principal protection.  These are notes connected to complex derivatives that are linked to various investments, such as Asian and other foreign currencies.  In theory, if the market value of the investment declined at maturity, Lehman Brothers Bank would ensure that each investor receives his or her initial investment back.  However, because Lehman Brothers declared bankruptcy in September 2008, investors who held these notes stand to lose much if not all of their principal.

According to Jeff Spill, Director of Securities Regulation for Enforcement, "UBS presented these notes as simple, safe investments when in fact they are highly volatile and are subject to shifting market conditions.  The safety of these products was exaggerated.  We believe UBS engaged in unfair and unlawful sales practices when presenting these investments."

Putting the action in context, Director of Securities Regulation, Mark Connolly, explained, "The Bureau believes UBS sold these products to New Hampshire investors without adequately explaining the potential for loss. UBS also failed to alert customers as to the declining financial condition of Lehman Brothers, which would affect the principal protection on the investment.  The Bureau believes UBS wrongly sold complex products to investors in our State.  The company violated a long standing legal requirement that a broker must recommend investments which meet the goals of the investor and are within his or her tolerance for potential gains and losses."

"We believe that 'principal protection' meant one thing to investors, but something entirely different to UBS," Kevin Moquin, staff attorney for the Bureau said.  "New Hampshire investors would never have invested in derivative-based investments had they understood what they were buying."

Connolly stated, "UBS has not been proactive in addressing regulatory issues at either the Federal or State level.  We understand that other regulators have experienced similar inflexibility.  We publicly encourage UBS to examine how it conducts its securities business.  Changes need to be made."  Connolly summarized, "The environment has changed and the system will not tolerate insufficient standards for suitability and supervision."

SNSFE continues to investigate the actions and inactions, representations and misrepresentations made by UBS in connection with principal protected notes. 

Source:  New Hampshire Securities Regulation Press Release

A Primer On CFP Board's Ethical Standards And Enforcement Process

Recently I had the pleasure of participating in a panel discussion before an audience of financial planners to address customer complaint issues.  One of my co-panelists, Michael P. Shaw, CFP Board’s Managing Director of Professional Review and Legal, discussed CFP Board’s ethical standards and enforcement process.  That is a topic that should be of great interest not only to financial planners but also to investors who benefit from the work of CFP Board.  Let’s examine why.

Continue...

SNSFE Investigates James Putnam And Wealth Management LLC Of Wisconsin Following Charges Of Fraud And Kickbacks Filed By The SEC

A past NAPFA President has been charged in a kickback scheme.

A former president of the National Association of Personal Financial Advisors has been charged with taking kickbacks from unregistered investment pools in which his Wisconsin advisory firm placed $102 million in client assets.

James Putman, founder, majority owner and CEO of Wealth Management LLC in Appleton, Wisconsin and Simone Fevola, the firm's former president, a minority owner and chief investment officer, each accepted $1.24 million in undisclosed payments derived from investments made by the unregistered investment pools, according to a civil complaint filed by the Securities and Exchange Commission.  Putman could not be reached for comment on the charges by press time.

The SEC announced that it obtained an emergency court order freezing Wealth Management's assets because the firm is charged with engaging in a kickback scheme and other fraudulent conduct involving six unregistered investment pools it managed.  The SEC also alleges that Wealth Management, Putman and Fevola misrepresented the safety and stability of the two largest investment pools and placed clients into these investments even though they were inconsistent with some clients' objectives.

The ADV for Wealth Management LLC lists seven funds for which Wealth Management is a partner, manager or advisor, with a total value of approximately $104 million and minimum investments ranging from $50,000 to $1 million.  The largest of these funds is the WML Gryphon Fund, with $38 million in assets, and the WML Watchstone Partners fund with $50 million in assets.

According to the SEC's complaint, Wealth Management, Putman and Fevola caused clients to invest in the pools from May 2003 through August 2008, and Wealth Management claims to currently have approximately $102 million of its clients' assets invested in these pools.  The SEC's complaint alleges that the pools' assets are largely illiquid, the reported values of their assets appear to be substantially overstated, and Wealth Management and Putman have been providing redemptions to investors based on likely overstated valuations.

The SEC's complaint charges each of the defendants with violations of the antifraud provisions of the federal securities laws, and Putman and Fevola with aiding and abetting Wealth Management's violations.  In addition to seeking emergency relief, the SEC's complaint seeks permanent injunctions barring future violations of the charged provisions of the federal securities laws, disgorgement of the defendants' ill-gotten gains plus pre-judgment interest, and financial penalties from the defendants. 

The SEC's investigation is continuing as well as SNSFE's investigation. 

Source: SEC Release 2009-119