Category Archives: Churning

SEC Announces Action Vs.Richard P. Sandru

On April 8, 2013, the Securities and Exchange Commission (SEC) announced the issuance of an Order Instituting Administrative and Cease And Desist Proceedings Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 and other statutory violations against Richard P. Sandru. View the Order.

The SEC Order alleges that from at least December 2009 through March 2011, while associated with Cambridge Investment Research Advisors, Inc. (Cambridge), Sandru misappropriated at least $308,850 in purported financial planning fees from at least 47 clients.  During this same period Sandru misrepresented the actual values of customer accounts to certain clients to conceal the diminishing value of the accounts in order to allow him to continue to purchase and sell securities in the accounts and to collect advisory fees.

Sandru, who conducted business under the name Sandru Financial Group and Reizen Wealth Management, was associated with Cambridge from July 1, 2009 until April 29, 2011 and worked the Perrysburg, Ohio branch office.

The SEC order also alleges that Sandru:

  • forged signatures or added costs to Financial Planning Engagement agreements after the clients signed them and without his client’s knowledge or permission
  • failed to provide financial planning services as described in the agreements
  • submitted the forged documents to Cambridge’s accounting office who paid Sandru 91% of the financial planning fees
  • collected financial planning fees ranging from $500 to $5,000 per agreement
  • charged some clients four or five times over several months for unauthorized and unperformed financial planning services
  • Beginning in 2008 while Sandru was associated with another broker dealer ( Sandru was LPL Financial from 9/2002-6/2009 according to FINRA records) Sandru lost money through his trading in several client accounts and told some of these elderly and/or retired clients that they would be able to make substantial withdrawals from their accounts for the rest of their lives or at least for many years
  • went as far as to pay monthly distributions to clients after their funds were exhausted to conceal his scheme

A hearing has been scheduled before an Administrative Law Judge to provide Sandru the opportunity to respond, to determine if the allegations are true and whether remedial actions or other relief is appropriate.

REX Securities Law On Going Investigation of Sandru & LPL Financial

Rex Securities Law began an investigation of Sandru during the summer of 2012 on behalf of a group of former customers of Sandru who have made allegations against Sandru’s prior employer LPL Financial that are substantially identical to those in the cited SEC Order. Sandru was permitted to resign from LPL Financial for attempting to resolve a customer issue without firm approval per FINRA records.

If you have information related to the investigation of Sandru’s actions at LPL Financial and/or Cambridge Investment Research we would appreciate hearing from you.

For more details on that investigation see this page.

If you have a question about your investment account call to speak with an experienced securities fraud attorney.

Rex Securities Law , located in Boca Raton, FL, provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Rex Securities Law

561 391 1900

Thomas Redmond-Former Capital Financial Services/Next Financial Broker Charged with Fraud

FINRA records indicate that Thomas Heflin Redmond, Jr. was registered with these firms during the time frames indicated:

  • Next Financial Group, Inc.                                         12/2007-10/2009
  • Capital Financial Services, Inc.                                   8/2005-11/2007
  • Empire Financial Group, Inc.                                      11/2003-8/2005
  • Freedom Financial, inc.                                                2/2002-11/2003
  • SII Investments, Inc.                                                     3/2001-3/2002

In 2011, FINRA revoked Redmond’s registration for making an unsuitable investment to a 60 year old widow, for whom he invested 47.5% of her liquid net worth in high risk investments including $100,000 in an oil and gas limited partnership. Redmond forged signatures and otherwise failed to follow the instructions of the customer. To top it off, Redmond falsely told the customer that he had invested a third of his personal assets in one of the same investments, a common sales pitch utilized by unscrupulous
investors to gain investor confidence.

On March 1 2013, Redmond was charged with fraud in Indiana for
defrauding 10 elderly investors out of more than $580,000. According to Marion County Prosecutor Terry Curry:

“This case is particularly devastating as it involves the most trusting
of victims: elderly widows who knew Redmond through church and a pair of missionaries who spent their life’s work overseas counseling survivors of Auschwitz,” said Secretary Lawson. “These Hoosiers, who thought they were making sound investments, have lost their life savings.”

Redmond admitted that he began stealing from clients in 2004 by feigning a shared Christian belief to secure the trust and confidence of his victims. To perpetuate this ponzi scheme, Redmond prepared and sent fake statements to the victims. To read the press release from Indiana authorities see this.

More information regarding the regulatory and disciplinary history of Redmond, Next Financial and Capital Financial Services can be found by visiting FINRA’s BrokerCheck website.

Brokerage firms have a duty to supervise the brokers that work for them to assure that they make suitable and legitimate investment recommendations. Investors who have suffered losses due to the negligence or fraud of their broker may be able to recover all or a part of their losses through FINRA arbitration.

If you have questions  about the way your brokerage account has been handled, call for a no charge consultation with an experienced
securities fraud attorney.

Rex Securities Law , with offices in Boca Raton, FL,  and  Austin, TX,   provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney.

Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Nationwide Representation

Rex Securities Law

TollFree: 877-224-3199

Florida-561 391 1900 

Texas-512-329-2870

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.

Churning by J.P. Turner Brokers Costs Conservative Investors $2.7M

In a news release that can be accessed here, the Securities and Exchange Commission (SEC) charged three former brokers from J.P. Turner & Company (Ralph Calabro, Dimitrios Koutsoubos & Jason Konner) with churning the accounts of customers with conservative investment objectives resulting in losses of $2.7 million. According to the SEC release, the brokers churned the accounts of seven customers generating  commissions, fees and margin interest of about $845,000.

In addition the company, J.P. Turner’s president William Mello and Michael Bresner, head of firm compliance, were also charged with compliance failures.

JP Turner and Mello agreed to settle by paying penalties of about $500,000 and agreeing to hire an independent consultant to review the firm’s supervisory procedures. Mello is suspended from association in a supervisory capacity for five months. The SEC proceeding will continue against the three brokers and the compliance supervisor.

In 2008, J.P. Turner was fined $250,000 by FINRA for failing to to have an adequate supervisory system designed to ensure that commissions charged to customers were fair and reasonable. As a part of that settlement, J.P. Turner was required to hire an independent consultant to review firm policies and procedures relating to FINRA’s Fair Pricing Rule.

An SEC website  which provides answers to common questions from investors defines “churning” as:

“Churning occurs when a broker engages in excessive buying and selling of securities in a customer’s account chiefly to generate commissions that benefit the broker.  For churning to occur, the broker must exercise control over the investment decisions in the customer’s account, such as through a formal written discretionary agreement.  Frequent in-and-out purchases and sales of securities that don’t appear necessary to fulfill the customer’s investment goals may be evidence of churning. Churning is illegal and unethical. “

It can violate SEC Rule 15c1-7 and other securities laws.

It is not necessary that there be a formal written discretionary agreement between the customer and the brokerage firm for churning to occur. We have seen many instances where the broker buys and sells in customer accounts without first obtaining permission from the customer and where there is no written agreement.

If you have conservative investment objectives and your risk tolerance is low to moderate, which is the case for most retirees, then there should not be a significant amount of trading (buying and selling) in your account. If you believe your account has been traded excessively resulting in losses, you may be a victim of churning.

If you have a question about your brokerage account, do not hesitate to contact us.

Rex Securities Law , located in Boca Raton, FL, provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Rex Securities Law

561 391 1900