Financial Counsel by Eccleston Law

Eccleston Law Investigates SCI Real Estate Investment

Former clients of SCI Real Estate Investments, LLC (SCI) appear to have the possibility for legal
remedies for their losses. SCI is an entity which operates as a real estate company here in the United States. Specifically, SCI acquires multi-family and retail properties as 1031 exchanges and investments to individual real estate buyers.

On February 11, 2011, the Los Angeles-based company filed a voluntary petition for reorganization under Chapter 11 in the U.S. Bankruptcy Court for the Central District of California.
The confirmation hearing is set to take place on June 13, 2012 for the firm’s liquidation plan.

It turns out the most problematic offered by SCI is the SCI Capital Group Mezzanine Fund. This Fund invested in unsecured loans to SCI and its affiliates. The Fund, however, did not invest in real estate. The loans appear likely to be discharged by SCI’s bankruptcy filing. Further, SCI’s tenant-in-common (TIC) real estate investments have been negatively affected by the collapse of the real estate market.
This is a strong indicator of a complete loss for the investors who invested in TIC.

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

Eccelston Law represents individual and institutional investors nationwide to recover their investment losses caused by securities fraud, unsuitable investment recommendations, and 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.

REMINDER: New FINRA Rule 2111 Regarding Suitability

On May 18, 2012 the Financial Industry Regulatory Authority (FINRA) issued its Regulatory Notice 12-25 which provides additional guidance on the rule of suitability that will go into place on July 9, 2012. This new rule requires that a firm or an associated person "have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on information obtained through the reasonable diligence of the member or associated person to ascertain the customer's investment profile." FINRA Rule 2111. Furthermore, the new rule provides that a "customer's investment profile includes, but is not limited to, the customer's age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, risk tolerance, and any other information the customer may disclose to the member or the associated person in connection with such recommendation." FINRA Rule 2111.

FINRA Finds Both Claimant and Respondent/Counter-Clamaint Wells Fargo Advisors Liable on Breach of Promissory Note and Breach of Contract Theories

In March 2011, Jason Schlesinger filed a Statement of Claim with the Financial Industry Regulatory Authority (FINRA) alleging breach of contract and seeking $1 million in compensatory damages, punitive damages, costs, and attorneys' fees. He also sought a declaration that Wells Fargo, LLC may not enforce the promissory note against him. In the Matter of the FINRA Arbitration Between: Jason Martin Schlesinger, Claimant v. Peter Yan Hong; Wallace Lawrence Key; Wells Fargo Adivsors, LLC, Respondents v. Jason Martin Schlesinger, Counter-Respondent.

In particular, Schlesinger (Claimant) alleged that he was fraudulently induced to join Wachovia Securities by a couple of promises. Those promises were: "a position in which he would be the sole broker in a start-up hub office specializing in high net worth investors; and that he would have access to a pool of names of so called orphan accounts left from a previous merger of Wachovia Securities and Gold West World Savings." See Statement of Claim.

Claimant understood this to be a promise that he would be entitled to receive all the leads of the bankers in the new office since he would be the only broker in the office. Respondents denied these allegations and asserted affirmative defenses.

In Wells Fargo Adivsor's (Respondent/Counter-Claimant) Counterclaim, it asserted that Claimant breached a promissory note (Note) executed by Claimant. It was alleged that when Claimant joined Wachovia the Note was executed for $925,306 on April 14, 2008. Furthermore, on July 16, 2010 the Note was amended and went down to $792,776. Respondent/Counter-Claimant requested the principal balance due on the Note ($734,052.27) plus 3.25% annual interest, costs, and attorneys' fees.

The FINRA Arbitration Panel (Panel) did not find fraud on behalf of the recruiters Respondents Peter Yan Hong and Wallace Lawrence Key. The Panel did find, however, there was considerable confusion on the part of Respondents as to why Claimant was paid only $87,000 for his first year at Wachovia Securities. There was also confusion on how it was calculated.

Ultimately, the Panel found Claimant liable and he was ordered to pay $734,052.27 to Respondent/Counter-Claimant Wells Fargo Advisors. In addition, the Panel found Respondent/Counter-Claimant Wells Fargo Advisors liable to Claimant and ordered it to pay him $100,000. Thus, the net final award that Claimant owed was $634,052.27.

FINRA Finds Merrill Lynch Liable for Libel and Wrongful Termination

In January 2011, Nicole Cannava filed a Statement of Claim with the Financial Industry Regulatory Authority (FINRA) seeking $68,117 in compensatory damages plus interest, attorneys' fees, costs, and expungement of her Central Registration Depository (CRD) as a result of alleged libel on her Form U5 and for wrongful termination. In the Matter of the FINRA Arbitration Between Nicole Alise Cannava, Claimant, v. Merrill Lynch Pierce Fenner & Smith Inc., Respondent. Merrill Lynch denied the allegations and asserted affirmative defenses.

In April 2012, the FINRA Arbitrator hearing the dispute found Merrill Lynch liable and ordered it to pay Cannava $68,117. In addition, the Arbitrator found defamation and recommended the expungement of the answers to Question 14J(1) on Cannava's Form U4 and Questions 7F(1) on her Form U5.

In the section "Termination Disclosure" in Form U4, Question 14J states: "Have you ever voluntarily resigned, been discharged or permitted to resign after allegations were made that accused you of: [V]iolating investment-related statutes, regulations, rules, or industry standards of conduct? [F]raud or the wrongful taking of property? [F]ailure to supervise in connection with investment-related statutes, regulations, rules or industry standards of conduct?"

In the section "Termination Disclosure" in Form U5, Question 7F it states: "Did the individual voluntarily resign from your firm, or was the individual discharged or permitted to resign from your firm, after allegations were made that accused the individual of: [V]iolating investment-related statutes, regulations, rules or industry standards of conduct? [F]raud or the wrongful taking of property? [F]ailure to supervise in connection with investment-related statutes, regulations, rules or industry standards of conduct?"

Specifically, the Arbitrator recommended that the answers to the above questions be changed from "Yes" to "No," and also the Disclosure Reporting Pages that accompany the questions be enitrely expunged. Lastly, the Arbitrator recommended that the "Reason for Termination of Discharge" in the Form U5 be replaced with "Voluntary."

Succession Plans Become a Necessity with an Aging Base of Brokers

Many large institutions have been bustling around while attempting to implement a plan to retain business. This is because of older brokers who continue to age and who have even older clients. On April 18th, a six-person panel at the Securities Industry and Financial Markets Association (Sifma) addressed this issue of succession planning.

Chief administrative officer private wealth management at Robert W. Baird, Scott Falk, said there are two approaches that work well for their organization to talk transferring business to a younger advisor:

First, there are Baird qualified teams which is a creative group with various generations of advisors. Within this team there are certain rules and incentives to carry this on. Second, there is the codified succession planning. Baird has put together a binder of information and in turn formalized a program to make it easier for advisors to prepare in advance and accomplish succession plans.

Specifically, business growth begins to slow down, usually through attrition (either for health reasons or age), for advisors aged around 50. The problem typically comes to fruition when it comes time to sell their book and advisors do not have much left. It is said the most serious concern is when advisors reach the average age of 59 and do not have a plan in place to recruit younger representatives. Advisors fall victim to this problem when they fail to plan to transfer client relationships and the problem is right there in front of them. Not to mention, the number of advisors to take over the book is not very deep.

Another solution for this problem was created by RBC Wealth Management - US. That firm created a plan that creates a team with an "anchor," which facilitates conversation between the advisors. An "official" team, according to the firm, has to have a formal strategy with roles and responsibilities as well as a succession plan for death and/or disability.

There are other firms that have used different spins on the aforementioned plans to prevent this issue from occurring. Either way it is nice to see that firms are recognizing the issue of the aging base of brokers and have been active to implement plans to remedy the problem.

Eccleston Law Investigates Two Houston-area Firms Following SEC Charges of Fraudulent $10 Million Note Offering

The attorneys at Eccleston Law have launched an investigation of the firms Evolution Capital Advisors (“Evolution Capital”) and Evolution Investment Group I (“EIGI”) following charges that the firm raised more than $10 million from over 80 investors through several fraudulent note offerings. The notes were sold through Community Banker Security.On August 10, 2011, the Securities and Exchange Commission (“Commission”) filed suit in the United States District Court for the Southern District of Texas against the two firms for their roles in the fraudulent note offering. Evolution Capital was an investment adviser registered with the Commission until June 2010. The SEC alleges that, in the offerings, Evolution Capital and EIGI falsely promised that the notes were safe and secured by assets guaranteed by the United States government. The firms also falsely promised that they would use leverage to purchase the assets securing the notes. In fact, according to the SEC’s complaint, the assets securing the notes were subject to significant, undisclosed default and prepayment risk. Moreover, the defendants never obtained leverage to purchase the assets. The SEC further alleges that the defendants paid themselves more than $2.5 million in fees and expenses and used approximately $2.7 million from the second note offering to make Ponzi-like payments to investors in the first note offering. As a result of defaults and prepayments on the underlying assets, the failure to obtain leverage, and the excessive Ponzi-like payments and fees, the SEC alleges that the defendants do not have sufficient assets to repay investors in accordance with the notes. If you are an investor that has suffered losses investing with Evolution Capital Advisors or Evolution Investment Group I, please contact one of our attorneys at 312-332-0000 to discuss your recovery option. 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.

Eccleston Law Investigates AIC

The attorneys at Eccleston Law have launched an investigation of AIC following charges that the firm participated in the fraudulent sale of notes to investors. AIC was originally owned by Community Banker Security (“CBS”) and Waterford Investor Services. If you are an investor that has suffered losses investing with AIC, Community Banker Security, or Waterford Investor Services, please contact one of our attorneys at 312-332-0000 to discuss your recovery options. Eccelston Law represents individual and institutional investors nationwide to recover their investment losses caused by securities fraud, unsuitable investment recommendations, and 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.

Apple REIT Board of Directors Recommends Against Consolidating Apple REITs; Investors Still Stuck in Illiquid REIT Investments

Investors in Apple REITs sold by David Lerner Associates have little chance of getting their frozen funds of the illiquid real estate investments following the rejection of consolidation talks by a special committee of the Apple REIT board of directors. 

The recent 8-K reads as follows:

"As previously announced, the board of directors of Apple REIT Eight, Inc. (the “Company”) authorized the evaluation of a potential consolidation transaction in which the Company, Apple REIT Six, Inc., Apple REIT Seven, Inc. and Apple REIT Nine, Inc. would be combined, and designated a special committee of all of its non-management directors to continue the evaluation process. The board of directors of each of Apple REIT Six, Inc., Apple REIT Seven, Inc. and Apple REIT Nine, Inc. (the “other Apple REITs”) also appointed a special committee. The Company announced today that the special committee of its board, and the special committee of the board of each of the other Apple REITs, have recommended to their respective full boards not to move forward with the potential consolidation transaction at this time. The Company’s board and the board of directors of each of the other Apple REITs have accepted the recommendation of its special committee and determined not to move forward with the potential consolidation transaction at this time.

The Company will evaluate any future potential liquidity events as appropriate for the Company. These events which, as previously disclosed, the Company expects to pursue within approximately seven years of the initial closing in its best efforts offering of its units may include a listing of its common shares on a national exchange, disposition of all of its assets in a manner permitting distributions to shareholders or a merger, consolidation or other combination. The timing and taking of any of these actions would be subject to and conditioned on the Company’s board of directors determining the action to be prudent and in the best interests of the shareholders. However, the Company is under no obligation to take any of these actions, and these actions, if taken, might be taken after the seven year period mentioned above."

If you are an investor that has suffered losses investing with David Lerner in the Apple REITs, please contact one of our attorneys at 312-332-0000 to discuss your recovery options.

Robert Van Zandt Investor Recovery Continues Following Felony Charges for Operating Massive Ponzi Scheme

Investors who suffered losses with Robert Van Zandt may still be able to pursue their recovery options following the annoucnment that Robert Van Zandt was arrested  and charged in a 35 count indictment for operating a massive multi-million dollar Ponzi scheme spanning a number of years.

According to the indictment and statements, Robert Van Zandt turned real estate investment opportunities into a Ponzi scheme starting in approximately 2008 by guaranteed high rates of return to new investors in his real estate projects that may have been impossible to build. Instead of using it to develop real estate, Bob Van Zandt allegedly used to pay previous investors or for his own personal use.  It is believed that he raised over $4.6 million from February 2008 through January 2011 alone.

If you are an investor that has suffered losses investing with Robert Van Zandt, please contact one of our attorneys at 312-332-0000 to discuss your recovery options.

 

http://robertvanzandtlosses.com/

Wells Fargo Trainee Fee Case Dismissed

 

In November 2011, Wells Fargo Advisors, LLC. filed an arbitration claim against Kenneth Ray Koger. Allegedly,  Koger had violated the contractual terms of his Supplementary Training Agreement for
a Financial Consultant.

Koger represented himself in the case and said the following, “For the record, I hate… not only Trainee Fees but the very concept of a brokerage firm being able to recoup a portion of its cost in preparing trainees to become registered. “ Koger continued, “I know all too well what is taught during these training programs and the reasonable value of such a dubious education.”

The sole FINRA Arbitrator hearing this case denied Wells Fargo’s claims in their entirety.

Eccleston Law Actively Seeks Former Merrill Lynch Brokers With FACAAP Claims Against with Bank of America

Eccleston Law expects the wave of claims to recover benefits associated with FACAAP, Growth Award and Wealthbuilder programs to continue, following a second large arbitration award rendered in favor of two former Merrill Reps. Previously, an arbitration panel awarded two brokers a total of $1.17 million. The latest award is for $5.2 million in compensation damages and $5 million in punitive damages. According to the award, the basis for punitive damages was that Merrill Lynch directly and indirectly through its Senior Management intentionally, willfully and deliberately engaged in a systematic and systemic fraudulent scheme to deprive Merrill reps of their rights and benefits under its deferred compensation programs as well as other benefits to avoid liability after the change in control in September, 2008. Bank of America made fraudulent misrepresentations and coercive tactics against the reps to accomplish its unlawful objective.

If you are a former Merrill Lynch broker, please contact Jim Eccleston at the Eccleston Law Offices at 312-332-0000 to discuss your recovery options.

via financialcounsel.typepad.com

FINRA SANCTIONS CITIGROUP, MORGAN STANLEY, UBS, AND WELLS FARGO FOR UNSUITABLE ETF RECOMMENDATIONS

FINRA recently has announced that it has sanctioned Citigroup Global Markets, Inc; Morgan Stanley & Co., LLC; UBS Financial Services; and Wells Fargo Advisors, LLC. more than $9.1 million in total for selling leveraged and inverse exchange-traded funds or ETFs. FINRA alleges that these ETFs were sold without reasonable supervision while lacking a reasonable basis for recommending the securities.

Leveraged and inverse ETFs are particularly risky as they are associated with a daily reset, leverage and compounding. As a result, inverse ETFs could differ significantly from the performance of the underlying index when held for longer periods of time, especially in the volatile markets that existed during January 2008 through June 2009. Many risks typically are associated with holding leveraged and inverse ETFs for extended period in such uncertain markets. FINRA has discovered that some customers of these firms held leveraged and inverse ETFs for extended time periods during January 2008 through June 2009.

FINRA uncovered that during this time period, the sanctioned firms did not have the proper supervisory systems in place to monitor the sale of these leveraged and inverse ETFs . The firms also failed to conduct satisfactory due diligence regarding the risks of the ETFs. The sales of these ETFs were not recommended on a reasonable basis to their customers. Furthermore, FINRA alleges that the firms’ representatives continually made unsuitable recommendations to customers regarding these ETFs. The recommendations were found to be unsuitable on the grounds that some customers had conservative investment objectives or risk profiles, making them unqualified for such an investment.

If you are an investor who has suffered substantial losses investing in leveraged or inverse exchange-traded funds  through Citigroup Global Markets, Inc, Morgan Stanley & Co., LLC, UBS Financial Services, and Wells Fargo Advisors, LLC. your losses may be recoverable through securities arbitration. Please contact Jim Eccleston at the Eccleston Law Offices at 312-332-0000 to discuss your recovery options.