Former Dawson James Broker Jason Knapp Arrested for Ponzi Scheme

The PostStar.com reported on December 20, 2012, that Jason T. Knapp, age 29,  of Corinth, New York, has been arrested in connection with a nationwide Ponzi scheme, which at the present time appears to have involved hundreds of thousands of dollars. According to  reports there are currently investigations related to Knapp’s actions in Florida, Arizona, Rochester, New York City and Maryland.

According to the PostStar, Knapp had previously worked for Dawson James Securities, Inc. of Boca Raton, FL, and had raised investment capital in connection with a company call SteepleChase Group, claiming returns on investment would be over 18%. It is alleged that he used new investor’s money to pay prior investors and spent a portion of the money earmarked for investment on personal travel including trips to casinos.

Knapp is charged with second-degree larceny for allegedly stealing $60,000 from a New York investor. The article reports that several victims are from Boca Raton, FL.

State Police report that Knapp fled when he learned of the investigation, but was located and arrested in Maryland, arraigned in Lake Town Court and jailed in Hamilton County for lack of bail.

Rex Securities Law has been helping investors recover investment losses from stock brokers, investment advisors and brokerage firms for 25 years. We represent investors nationwide and beyond and there is no charge for the initial consultation.

Please contact us at 561 391 1900 if you have information related to this matter or questions about losses in your investment accounts.

Rex Securities Law

Broker Makes Trades for Deceased Client-Fined & Suspended

FINRA maintains  a  website  where the public can gain access to the employment, regulatory, licensing and disciplinary history of all registered stock brokers. We suggest that you review the information (CRD) for any broker you anticipate entrusting with your hard earned dollars. See this page for more information on the FINRA BrokerCheck website. 

Here is a recent event contained in a broker’s CRD that you may find interesting.

In November 2012,  a broker from Portland Maine, Peter C. Bishop, settled a rules violation allegation by the Financial Industry Regulatory Authority (FINRA) by submitting an “AWC” and agreeing to a one month suspension and a $10,000 fine. An AWC is a Letter of Acceptance, Waiver and Consent and is a fairly common method whereby FINRA, who is the regulatory agency charged with licensing and disciplining brokers, resolves disputes with stock brokers and brokerage firms.

Bishop, according to FINRA records, formerly worked for RBC Capital Markets and Ameriprise Financial, was discharged by RBC for “violating company policy by entering trades in account of deceased individual”. According to the FINRA records, Bishop place four trades in a deceased client’s account after having been notified by the family of the death.

I think we can all agree that this is a good rule for brokerage firms to have and enforce.

Maine’s security regulator imposed an additional fine of $5,000 and imposed other conditions and restrictions for a two year period.

Reviewing the CRD of any broker you contemplate doing business with is a prudent move.

If you have questions about the way your brokerage account has been handled or if you have losses that seem out of line with the risk you agreed to take, contact us for a no charge consultation. We have been helping investor recover stock market losses across the nation for nearly 25 years.

Visit our website for more information about our firm and investment loss recovery.

Rex Securities Law
561 391 1900

TIMBER! Wells Timberland REIT Value Plummets

Following in the footsteps of many other non traded real estate investment trusts, on December 14, 2012, the board of directors of Wells Timberland REIT lowered the estimated value
to $6.65. This represents a substantial reduction from the original
offering price of $10 per share, however, investors will be further
shocked to learn that the real value (vs. the company’s estimated value) is even less. As we have previously reported (here and here)
, since Wells Timberland is a non traded REIT the only market is likely
to be one of the privately operated secondary markets where it may
trade for a discount of 25-35% from  the company’s estimated value.
Investors who paid $10 on the offering may find that actual value is
less than half of that now.

You may recall that last year, in
November 2011, FINRA fined Wells Investment Securities, Inc. $300,000
for using misleading marketing materials in the sale of Wells Timberland
REIT, Inc.Trust. Here is a link to FINRA’s press release.

Wells Securities was the wholesaler for the public offering of Well
Timberland REIT, which invested in timber producing real estate. FINRA
found that from May 2007 to September 2009, Wells distributed over 100
advertising and marketing materials that contained misleading,
unwarranted or exaggerated statements. In addition the Wells ads did not
make it clear that the investment did not yet qualify as a REIT for tax
treatment, one of the selling points highlighted to potential
investors.

Many
investors were sold Wells Timberland and other non exchange traded
REITs with the promise of steady and dependable distributions of income
and with no warning that liquidity may be an issue. If you made your
investment based upon misrepresentations from the selling broker, you
may be able to recover all or part of your losses through FINRA
arbitration. 



Robert H. Rex, Esq. been helping investors recover investment losses for
over twenty years. We represent clients nationwide. Consultation is
free.

Rex Securities Law
561 391 1900

FINRA Hits J.J.B. Hilliard, W.L. Lyons, LLC with $184K Award

An arbitration panel in Columbus, Ohio, of the Financial Regulatory Authority (FINRA) ruled in November 2012, that J.J.B. Hilliard, W.L. Lyons LLC (Hilliard) must pay an investor over $184,000 in losses and attorneys fees & costs. In addition, the panel ruled that Hilliard was also liable for FINRA hearing session fees of $9,000. 

The customer in this case claimed that the investment strategy employed by Hilliard was unsuitable and out of line for her investment objectives. 

Stock brokers have a duty to make suitable recommendations to investors, after taking into account the age, health, level of financial sophistication and liquid net worth of the individual.

If you have suffered losses in your brokerage account you may be able to recover some or all of those losses through FINRA arbitration, a process that is much more expeditious and less costly than court litigation. 

Please do not hesitate to contact us if you have questions about the way your brokerage account has been handled. We have been helping investors recover stock market losses for 25 years. 

Nationwide representation. Free consultation.

Visit our webpage for more information or call us.

561 391 1900 

FINRA Announces December 2012 Disciplinary Actions

FINRA Announces December 2012 Disciplinary Actions

The
Financial Industry Regulatory Authority (FINRA) issues a report on
disciplinary and other actions involving registered brokers, investment
advisers and brokerage firms every month. 


Here are significant Florida related actions for December 2012. Follow this link to the FINRA website for the entire report for actions nationwide for the month of December 2012 as well as to access  earlier time periods.

Falcon Research, Inc. Clearwater, Florida submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $10,000. The firm consented to the described sanctions and to the entry of findings that it permitted a person registered solely as a general securities principal to prepare, author and approve a research report that the firm issued. The findings stated that the report contained a rating but failed to define the meaning of each rating used in its rating system. The report failed to disclose the percentage of all securities the firm rated, to which the firm would assign a buy, hold/neutral or sell rating, or to disclose the percentage
of subject companies within each of these three categories for whom the firm had provided investment-banking services within the previous 12 months. The report referred to
important disclosures that are located at the end of the document, however, the disclosure was not prominent. The findings also stated that the report failed to contain research
analyst certifications required by SEC Regulation AC and found various other regulatory issues.

Statetrust Investments Inc. – Miami, Florida, submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $20,000. The firm consented to the described sanctions and to the entry of findings that it failed to report transactions in TRACE-eligible securities to TRACE within 15 minutes of the execution time, failed to report the correct trade execution time for transactions in TRACE-eligible securities to TRACE, and failed to report the correct contra-party’s identifier for transactions on TRACE-eligible securities to TRACE.

Shari Robin Frimer Eastport, New York and Thomas Joseph Heaphy Jr. of , Boynton Beach, Florida submitted an Offer of Settlement in which Frimer was fined $32,407.50, which includes disgorgement of financial benefits of $17,407.50, and suspended from association with any FINRA member in any capacity for seven months. The amount of the fine has been reduced to reflect Frimer’s payment of a $20,000 fine to the State of Florida Office of Financial Regulation. Heaphy was fined $40,827.50, which includes disgorgement of financial benefits of $30,827.50, and suspended from association with any FINRA member in any capacity for nine months.

Frimer and Heaphy consented to the described sanctions and to the entry of findings that they participated in private securities offerings by selling securities offerings to customers and receiving selling compensation for their sales. The findings stated that prior to participating in the private securities transactions, Frimer and Heaphy did not provide written notice to their member firm and did not receive the requisite approval from their firm to participate in the transactions.  The findings also stated that Frimer guaranteed, in writing, to a customer that he would be able to sell shares of a stock within a certain time period for his cost to acquire them. The findings also included that Frimer sent, or caused to be sent, marketing newsletters regarding a company to firm customers, without requesting or receiving the firm’s approval to disseminate the newsletters. The newsletters were not fair and balanced, failed to provide a sound basis for evaluating the facts in regard to the company, and contained exaggerated, unwarranted, and misleading claims and unreasonable and unwarranted forecasts. FINRA found that Heaphy willfully failed to timely amend his Form U4 to disclose a material fact, a lien placed on his property for unpaid taxes, and willfully failed to disclose the material fact on the Form U4 that a member firm filed for him. Frimer’s suspension is in effect from November 5, 2012, through June 4, 2013. Heaphy’s suspension is in effect from November 5, 2012, through August 4, 2013.

According to FINRA records Shari Frimer is not currently registered. She last worked for Emmet A Larkin Co. and prior to that for Scottsdale Capital Advisors. Likewise, Heaphy is not currently registerd having last worked for Forge Financial Group and prior to that Scottsdale Capital Advisors.

Michael Wayne Hendrick – Indialantic, Florida submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for 20 business days. Hendrick consented to the described sanctions and to the entry of
findings that he effected trades in his customer’s account at the direction of the customer’s spouse. The findings stated that the firm did not accept the account as discretionary,
and the customer did not give Hendrick written authority to exercise discretion over the account. In addition, the customer’s spouse did not have written authority to direct
trading in the customer’s account. The findings also stated that on that same day, Hendrick mismarked order tickets in securities as unsolicited when the trades were actually solicited, thus causing the firm’s books and records to be inaccurate concerning these trades.

The suspension was in effect from October 15, 2012, through November 9, 2012. According to FINRA records Hendrick last worked for Charles Schwab and is not currently registered.

William Edward Hesse -Freeport, Florida submitted
a Letter of Acceptance, Waiver and Consent in which he was suspended from association with any FINRA member in any capacity for three months. In light of Hesse’s financial
status, no monetary sanction has been imposed. Hesse consented to the described sanction and to the entry of findings that he failed to reasonably supervise an individual and failed to reasonably review trades and wire transactions directed by a client of the individual for potentially suspicious activity and other irregularities. The finding stated that despite several red flags, Hesse did not identify an
y of the activity in the accounts the client controlled to be suspicious or irregular,
and failed to take any supervisory action to prevent the client from engaging in a cherrypicking scheme. The client had the ability to reallocate trades among the accounts that he controlled.

The suspension is in effect from October 15, 2012, through January 14, 2013.

FINRA records indicate that Hesse is not currently registered and last worked for Wm. H. Murphy & Co.

Thomas Homer Morrow II – Jupiter, Florida was barred
from association with any FINRA member in any capacity. The sanction was based on
findings that Morrow failed to register with FINRA despite functioning as a representative
for a member firm. The findings stated that Morrow traded in the firm’s proprietary account on the firm’s behalf, sharing in the profits from his trading and causing the firm’s capital requirement to increase from $5,000 to $100,000. The findings also stated that Morrow created and maintained the trading blotters for the firm’s proprietary trading account. The findings also included that although Morrow conducted trading without oversight from the firm, his activities were controlled by the firm and was therefore, an associated person of the firm. FINRA found that Morrow failed to appear and testify at a FINRA on-the-record interview.

Morrow is not currently registered.

Alissa Marie Ponzurick fka Alissa Marie Youngblood
Palm Beach Gardens, Florida submitted a Letter of Acceptance, Waiver and Consent in which she was fined $5,000 and suspended from association with any FINRA member in any capacity for three months. Ponzurick consented to the described sanctions and to the entry of findings that after a co-worker advised her that they had earned a $200 bonus, but without confirming from her team leader how she could collect the bonus, Ponzurick submitted a reimbursement form to her member firm claiming approximately $200 in mileage expenses based on the purported use of her personal car for business travel. The findings stated that Ponzurick had not actually incurred such expenses.

The suspension is in effect from November 5, 2012, through February 4, 2013.

Riad Shanawany -Tamarac, Florida submitted a Letter of Acceptance, Waiver and Consent in which he was fined $7,500 and suspended from association with any FINRA member in any capacity for 45 days. Shanawany consented to the described sanctions and to the entry of findings that he engaged in an outside business activity by participating in a limited liability company involved in start-up efforts for reconstruction and modernization of the Port-au-Prince airport in Haiti, and received a membership interest in the company for his participation, without providing his member firm with adequate notice of the outside business activity and membership interest.

The suspension is in effect from November 5, 2012, through December 19, 2012. Shanawany currently works for J.W. Cole Financial. He previously was registered with Ameriprise Financial Services according to FINRA records.

William Mitchell Tillett
-Delray Beach, Florida
submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for six months. Tillett consented to the described sanctions and to the entry of findings that
he willfully failed to timely disclose material information to his member firm and FINRA. The findings stated that Tillett failed to disclose that he had been charged with the felony
offense of criminal trespassing and the misdemeanor offenses of theft by unlawful taking and theft of services. The findings also stated that Tillett failed to timely file amended Forms U4 to report that the felony trespassing charge was reduced to a non-reportable summary offense for trespassing.

The suspension is in effect from October 15, 2012, through April 14, 2013.

Clyde Marshall Thornburg
-Riverview, Florida submitted an Offer of Settlement in which he was barred from association with any FINRA member in any capacity. Thornburg
consented to the described sanction and to the entry of findings that he engaged in a pattern of unsuitable short-term trading and switching of unit investment trusts (UITs), corporate debt, and mutual funds in customer accounts without having reasonable grounds for believing that such recommendations were suitable in view of the size and
frequency of the recommended transactions, and in light of each customer’s investment objectives, circumstances, financial situations and needs. The findings stated that
Thornburg’s actions caused these customers to pay approximately $332,231 in unnecessary sales charges, and the accounts had cumulative losses of approximately $983,152.
Thornburg generated gross commissions of approximately $301,389 for his firm, of which he received a significant portion based on his member firm’s percentage payout structure.

The findings also stated that at the time some of the customers opened their accounts, Thornburg informed them that they would not pay costs for trading products such as UITs and other securities; these customers paid sales charges, commissions, front-end loads and other costs when they believed they were not paying such costs. Thornburg misled some customers by omitting information about the actual charges they were paying and by misrepresenting products as not having any costs when in fact they did have a charge. The
findings also included that Thornburg exercised discretion in each of the accounts without prior written authorization.
FINRA found that Thornburg forged, or caused to be forged, the names of some customers or their representatives on mutual fund disclosure forms, causing his firm to maintain
inaccurate books and records. FINRA also found that Thornburg provided false information about the customers’ income, liquid net worth, risk tolerance and investment objectives.

FINRA records indicate that Thornburg is no longer registered having last worked for International Financial Solutions.

Enrique Vila -Key Biscayne, Florida submitted
a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for 15 business days.  Vila consented to the described sanctions and to the entry of findings that he exercised discretion in a customer’s account and executed
numerous trades in the account. T
he findings stated that although the customer authorized the use of discretion with respect to his account, Vila did not obtain the customer’s written authorization and his member firm’s acceptance of the account as discretionary.

The suspension was in effect from November 5, 2012, through November 26, 2012.

FINRA reports that Vila currently works for Morgan Stanley and previously was registered with Merrill Lynch.

If you have questions about
losses or other activity in your brokerage account, please do not
hesitate to contact us. We have been helping investors recover stock
market losses for more than 20 years. 

Free consultation. Nationwide representation.

Rex Securities Law Investigates LPL Financial In Connection with the Sale of Non-Exchange Traded REITs

Update 2/7/2013: LPL Financial settled the case brought by Massachusetts securities regulators for improper sale of non traded REITs. More details here.

On
December 12, 2012, William Galvin, the head securities regulator for
Massachusetts charged LPL Financial, LLC of San Diego with a failure to
supervise brokers who sold non-exchange traded real estate investment
trusts (REITs) in violation of state limitations and company rules.
Massachusetts also charged LPL with dishonest and unethical business
practices.

The Massachusetts charges are the result of the sale of nontraded REITs
during 2006 to 2009. Of some 600 sales examined, the Securities Division
found that 569 had regulatory violations including violations of
concentration limits, sales made in violation of prospectus requirements
and sales in violation of LPL compliance rules. With more than 13,000
brokers nationwide, LPL is one of the largest sellers of non-traded
REITs.

Here is a link to the 34 page complaint on the Massachusetts Securities Division website.
They are focusing on seven non-traded REITs sold by LPL:

  • Inland American
  • Cole Credit Property Trust II
  • Cole Credit Property Trust III
  • Cole Credit Property 1031 Exchange
  • Wells REIT II
  • W.P. Carey Corporate Property Assoc. 17
  • Dividend Capital Total Realty


Other popular non traded REITs sold by broker dealers that have not fared well include:


  • KBS
  • Behringer Harvard
  • Hines
  • Retail Properties of America
  • CNL Lifestyle Properties


Non-exchange traded REITs are not traded on any conventional exchange making liquidation when cash is needed, very difficult. Many of the REITs are down 40-50% or more in value since when they were purchased.  FINRA has been concerned about these investments for some time as we previously have written.

In prior blog postings
we have addressed the fact that many retirees were sold these REITs
with the promise of steady, dependable distributions of income and with
the belief that the value would remain constant or increase. Most did
not understand that due to the fact they are not traded, there
essentially is little or no market if the investor wishes to liquidate.




If you purchased nontraded REITs based upon misrepresentations you may be able to recover some or all of your losses.



Robert H. Rex, Esq. been helping
investors recover investment losses for over twenty years. We represent
clients nationwide. Contact us for a no cost consultation.

Rex Securities Law Notice to Purchasers of Real Estate Investment Trusts (REITs) From LPL Financial


Rex Securities Law

561 391 1900

Rex Securities Law Investigates Former Transamerica Financial Broker Mario Porras

Rex Securities Law is investigating Mario Porras, a stockbroker from El Paso, Texas, on behalf of a former customer who was sold hundreds of thousands of dollars worth of KBS REIT I. Porras was working for Transamerica Financial Advisors at the time the investment was made. We are investigating the suitability of the recommendation and the representations made in connection with the sale.

As we commented in a recent post, KBS REIT I, which sold for $10 per share, has lost half or more of its value, distributions have ceased and investors wanting to liquidate can only look to secondary markets since this investment does not trade on a conventional exchange.

We have been told by some of our clients that KBS REIT I was sold with the promise of steady and dependable distributions of income and with the understanding that the value would remain constant or increase. Many did not understand the significance of the fact that this investment is not traded on any conventional exchange making it difficult to turn it into cash if the need arises. 

If you have information which you believe may be helpful in this investigation, we would appreciate hearing from you. If you have questions about your investment losses, please do not hesitate to call. Free consultation. Nationwide representation.

Rex Securities Law

561 391 1900