Financial Counsel by Eccleston Law

Investment Advisers Unprepared For Succession and Thus Face Risks, TD Ameritrade Finds

While the average age of an RIA is 54 years, 60% don’t have a succession plan.  TD Ameritrade finds that RIAs understandably are busy building their businesses. 

But it doesn’t take more than a few war stories to highlight the importance of planning, documenting and implementing a succession plan.  Take the unfortunate case of an adviser who had just a handshake deal, until that adviser began suffering from a terminal illness, and the buyer backed out.  Or the poor adviser who suffered a heart attack.

What advisers need to realize is that a seller needs to plan from a position of strength, not weakness.  Buyers will discount the business value plenty absent exigent circumstances; don’t add to that de-valuation by including an element of desperation.

An effective succession plan can involve a lengthy term (for example, we have implemented five year buy-ins for internal successions).  By planning now, in an effective manner, advisers can lock in their business value and rest comfortably knowing that they and their clients will be taken care of.

Eccleston Law Investigates Charles Copeland and Copeland Wealth Management Following SEC Fraud Charges

The Securities and Exchange Commission recently filed a complaint in United States District Court in Riverside, California against Copeland Wealth Management, Copeland Realty,  and Charles P. Copeland for fraud and breach of fiduciary duty. The SEC alleged that as an investment adviser registered with the SEC, Copeland Wealth Management managed approximately $125 million in assets under management. The assets under management are primarily mutual funds and real estate funds. Copeland Realty, an unregistered investment adviser, allegedly acted as the general partner for 21 limited partnerships primarily invested in real estate. Charles Copeland, who is a certified public accountant, is the founder, co-owner and officer of both Copeland Wealth Management and Copeland Realty.

The SEC alleged that from 2003 through May 31, 2011, Charles Copeland, Copeland Wealth Management, and Copeland Realty raised over $62 million from over 100 investors, including many of Charles Copeland’s accounting clients, by selling interests in limited partnerships operated by Copeland Wealth Management and Copeland Realty. According to the SEC’s complaint, throughout the offer and sale of the limited partnerships, Charles Copeland, Copeland Wealth Management, and Copeland Realty made material misrepresentations and omissions regarding: (1) the use of investor funds, (2) conflicts of interest, (3) guaranteed returns, (4) the unauthorized trading of put options, and (5) the payment of undisclosed real estate commissions and other related compensation.

As of May 31, 2011, Copeland Wealth Management had approximately $144 million in assets under management comprised of $123 million invested primarily in mutual funds and $21 million invested primarily in real estate and real estate related loans through partnerships managed by Copeland Realty. Copeland Wealth Management is believed to have approximately 770 advisory accounts. Copeland Realty is believed to have acted as the general partner for 21 partnerships with 191 limited partners that have invested in real estate and real estate related loans. 

Eccleston Law represents individual and institutional investors nationwide to recover their investment losses caused by securities fraud, unsuitable investment recommendations, breach of fiduciary duty, negligence or other misconduct. We have extensive experience representing investors in arbitration and litigation disputes with securities broker-dealers and investment advisory firms, and have recovered tens of millions of dollars for investors.

If you are an investor that has suffered losses investing with Copeland Wealth Management, Copeland Copeland Realty, and/or Charles Copeland, please contact one of our attorneys at 312-332-0000 to discuss your recovery options.

Eccleston Law Actively Seeks Investors Suffering Losses with Steven Dolott of Delott & Associates

The attorneys at Eccleston Law are actively seeking investors who suffered losses investing with Long Grove, Illinois financial advisor Steven Delott of Delott & Associates, Inc.  According to the Illinois Securities Department, Steven Howard Delott was a registered representative of NFP Securities, which he disclosed Delott & Associates as an outside business activity.

According to the Illinois Securities Department, FINRA was investigated Steven Delott's Workshops and Annuity Training Classes that he conducted while a representative with NFP Securities, which resulted in a FINRA enforcement action against Delott for allegedly violating FINRA rules.  On February 17, 2010, Steve Delott entered into an AWC with FINRA which details the numerous alleged violations of NASD rules. 

Specifically, the AWC describes Delott as conducting seminars directed at senior citizens that focused almost exclusively on inducing seniors to purchase high commission equity indexed annuities ("EIAs"), as well as sales of single premium life insurance policies.  Delott also allegedly promoted reverse mortgage strategies to obtain more money from seniors to place in the annuities.  Steven Delott is also believed to have conducted annuity training classes to instruct attendees in the use of high-pressure and allegedly improepr sales techniques.  The marketing materials used during these seminars was not approved by NFP securites. 

Steven Delott was subsequently prohibited from associating with any FINRA member firm and assessed a deferred fine of $35,000.  On August 10, 2011, Steven Delott was also prohibited from offering or selling any securities in the State of Illinois.

Eccleston Law represents individual and institutional investors nationwide to recover their investment losses caused by securities fraud, unsuitable investment recommendations, breach of fiduciary duty, negligence or other misconduct. We have extensive experience representing investors in arbitration and litigation disputes with securities broker-dealers and investment advisory firms, and have recovered tens of millions of dollars for investors.

If you are an investor that has suffered losses investing with Steven Delott or Delott & Associates , please contact one of our attorneys at 312-332-0000 to discuss your recovery options.

 

Investment Advisory Firm M&A Activity Is Robust

Despite market volatility, merger and acquisition activity among investment advisory firms showed strong numbers in the 3^rd Quarter.  At Schwab, for example, there were 17 deals in the quarter totaling nearly $17 billion in acquired assets under management.  Year to date Schwab reports 44 deals totaling nearly $440 billion in assets under management.

The good news is that the robust activity is expected to continue.

That may be due in part to the average age of the RIA firm principal, which is 55 this year. It never is too early for investment advisers should plan their succession strategies.  Those strategies may involve an internal plan or an external plan.

Finally, several firms nationwide have notified us that they are seeking to grow their businesses through acquisitions, and are “buyers” in this market.  For further information about those buyers, please contact us.

 

Former FBI Agent John Robert Graves Indicted on Fraud Charges for Allegedly Defrauding Virginia Investors

A 10 count federal indictment was issued against former FBI agent John Robert Graves and Sara Turberville Graves of Fredericksburg, Virginia for allegedly defrauding at least 11 Virginia residents out of $1.3 million.

Authorities say that John Graves, who was an investmetn adviser and financial planner, founded his firm Brook Point Management to focus on selling insurance products, estate planning services, as well as investment advisory services. 

The indictment alleges that starting in June 2008 through July 2011, John Graves and Sara Graves devised a plan to raise money from investors to (among other things) fund a startup company, purchase shares in Brook Point Management, and fund a real estate investment.  In reality, the money was allegedly used to pay back earlier investors and for personal expenses such as credit card bills.  At least 11 investors were defrauded out of $1.3 million.

Eccleston Law represents individual and institutional investors nationwide to recover their investment losses caused by securities fraud, unsuitable investment recommendations, breach of fiduciary duty, negligence or other misconduct. We have extensive experience representing investors in arbitration and litigation disputes with securities broker-dealers and investment advisory firms, and have recovered tens of millions of dollars for investors.

If you are an investor that has suffered losses investing with John Graves, Sara Graves, or Brook Point Management, please contact one of our attorneys at 312-332-0000 to discuss your recovery options.

 

 

Eccleston Law Investigates Former LPL Financial Representative Jeffery Ogle Following FINRA Arbitration Claim

The attorneys at Eccleston Law have launched an investigation of former LPL Financial representative Jeffery Dean Ogle following FINRA reports that Littleton, Colorado-based Jeffery Ogle was terminated from LPL Financial for allegedly violating firm policies regarding customer loans and check writing authority.

In addition, according to FINRA records, Jeffery Ogle is already facing at least one securities arbitration claim alleging that, among other things, he sold unsuitable investments in Masterbuilt Estate Homes, Inc., a real estate development company which is purportedly owned by Jeffery Ogle's father.

Eccleston Law represents individual and institutional investors nationwide to recover their investment losses caused by securities fraud, unsuitable investment recommendations, breach of fiduciary duty, negligence or other misconduct. We have extensive experience representing investors in arbitration and litigation disputes with securities broker-dealers and investment advisory firms, and have recovered tens of millions of dollars for investors.

If you are an investor that has suffered losses investing with Jeffery Dean Ogle or in Masterbuilt Estate Homes, Inc., please contact one of our attorneys at 312-332-0000 to discuss your recovery options.

 

Former A.G. Edwards / Wachovia / Wells Fargo Adviser Sanctioned For Misleading Sales of Fannie Mae and Freddie Mac Securities

Tom D. Hamsher agreed to be barred from the industry in a recent Acceptance, Waiver and Consent (“AWC”) with FINRA. Hamsher first became registered as a General Securities Representative in July 1987. During the relevant time of June 1994 until his resignation in March 2009, Hamsher was a producing manager for A.G. Edwards & Sons, Inc. and its successor firms, Wachovia Securities, LLC and Wells Fargo Advisors, LLC. (collectively, the “Firm”) at a small branch office in Chillicothe, OH. Hamsher had no prior regulatory history.

The AWC alleged that from at least January 2006 to August 2008, Hamsher made misrepresentations and omitted to state material facts in conversations and correspondence with dozens of customers who purchased on his recommendation the preferred securities of financial institutions, including the Federal National Mortgage Association a/k/a “Fannie Mae” (“FNMA”) and the Federal Home Loan Mortgage corporation a/k/a “Freddie Mac” (“FMCC”).  Following Hamsher’s March 2009 resignation, his Firm subsequently settled about $8.9 million in customer claims.

Pointedly, the AWC alleged that Hamsher misrepresented that preferred securities issued by FNMA and FMCC were bonds, thus fostering the false impression among customers that these investments were less risky than stocks. Hamsher further misstated that a preferred security’s call date was the date customers would get their initial investment back at par value.  Similarly, Hamsher’s misrepresented that the securities were backed by the federal government, which misled investors into believing that their principal was guaranteed against loss.

The AWC alleged that Hamsher failed to adequately explain the characteristics of and the risks associated with the preferred securities of financial institutions. For example, he failed to disclose that any decision on the part of FNMA to redeem its preferred stock on the call date was optional and not a certainty.  Further, Hamsher failed to disclose that on or about:

• July 11, 2008, his Firm had removed FNMA and FMCC preferred stock from its recommended Fixed Income Priority List because of extreme price volatility;
• July 16, 2008, the Firm changed its ratings for financial companies’ preferred securities to unsuitable for new investment for conservative income investors; and
• July 17,2008, the Firm recommended that investors who could not tolerate extreme price volatility consider reducing their exposure to the preferred stocks of FNMA and FMCC when market opportunities arose.

The AWC alleged that Hamsher had misrepresented and omitted to state material facts to numerous customers in connection with the purchase or sale of securities, in violation of NASD Conduct Rules 2120 and 2110, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder.  Accordingly, FINRA imposed upon Hamsher a permanent Bar from association with any member firm in all capacities.

FINRA Issues Investor Alert About the Dangers of Non-Traded REITs

FINRA recently issued an investor alert aimed at highlighting the dangers of non-traded REITs and the potential pitfalls of such investments, such as the illiquidity and high fee structures. 

This second investor alert by FINRA is a sign that the securities regulator has intensified its scrutiny of these products.  Non-traded REITs are typically sold through independent broker-dealers, due to their high commission structures.  Financial advisors may be tempted to recommend these products in unsuitably high concentrations.

FINRA also recently issued a new rule proposal that would change how the value of non-traded REITs was reflected on account statements.  Previously, many broker-dealers showed an "estimated par value", which was typically what the investor purchased the securities for. However, using an "estimated par value" created the illusion of stability, which was often misleading when the book value of the underlying REIT investment declined.

Eccleston Law represents individual and institutional investors nationwide to recover their investment losses caused by securities fraud, unsuitable investment recommendations, breach of fiduciary duty, negligence or other misconduct. We have extensive experience representing investors in arbitration and litigation disputes with securities broker-dealers and investment advisory firms, and have recovered tens of millions of dollars for investors.

If you are an investor that has suffered losses investing in a non-traded REIT, please contact one of our attorneys at 312-332-0000 to discuss your recovery options.