Category Archives: Failure to Supervise

Five Brokerage Firms Order to Pay Another $10 Million On Non-Traded REIT Sales

As we have previously noted, regulators have already hit broker-dealers for big fines and damages for the sale of non-traded REITs:

  • In May Massachusetts regulators order five firms to pay $6 million for improperly selling non-traded REITs
  • Earlier in 2013 LPL Financial was hit with a $4.8 million order from the Massachusetts securities regulators for failing to train and supervise brokers in connection with the sale of non-traded REITs.

In early September 2013, Massachusetts regulator William Galvin announced a second round of restitution orders, totaling $10.75 million,  against the same five firms: Securities America, Ameriprise Financial, Commonwealth Financial Network, Lincoln Financial and Royal Alliance.

In total, the six firms have agreed to pay up to $21.6 million in restitution and fines of $1.5 million.

According to Galvin, “These investments are popular, but risky. Our investigation showed widespread problems with adherence to the firms’ own policies, as well as the state rule that an investor’s purchase of REITs cannot be more than 10% of that person’s liquid net worth”.

What are non-traded REITs?

Non traded real estate investment trusts (REITS) do not trade on any conventional exchange and were sold with the promise of steady and dependable income, with little warning as to the illiquid nature of the investment and with the hopes of appreciation. Many purchasers believed them to be safe, secure investments similar to bonds. Now many of these investments have ceased making distributions and have plummeted in value. Since they are not traded on any conventional exchange, investors may look only to a secondary market if liquidity is required.

Popular Non-Traded REITs include:

Behringer Harvard (Multifamily, Opportunity I and II)

CNL Lifestyle Properties

Cole Credit Property Trust II and III

Corporate Property Associates 16, 17

Dividend Capital Diversified Property Fund

Healthcare Trust of America

Hines

Inland Diversified

KBS I and II

KBS Strategic

Landmark Apartment Trust

Lightstone Value 

Retail Property of America

TNP Strategic Retail

United Development Fune III and IV

Columbus Property (Wells REIT II)

Wells Timberland

If you believe you were sold a non traded REIT based upon misrepresentations, you may be able to recover damages through FINRA arbitration. Contact us for more information.

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

CFD Investments, Inc. Broker Craig Morrison Suspended for Cutting/Pasting Customer Signatures

Gainesville, Florida

The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for all securities firms doing business in the United States. FINRA’s chief role is to protect investors by maintaining the fairness of the U.S. capital markets.

All stockbrokers and broker dealers (brokerage firms) are required to be licensed by and subject to the rules and regulations of FINRA. Each month FINRA publishes disciplinary actions against brokers and broker dealers. Discipline can range from monetary fines and suspensions, or in extreme cases, revocation of licensing and a bar from the securities industry.

See the FINRA website for current and historical disciplinary actions.

AUGUST 2013

Craig Robert Morrison (CRD #4490109, Registered Representative, Gainesville, Florida-not currently registered, ( previously registered with CFD Investments, Inc. 11/2012-12/2012, ING Financial Partners, Inc. 12/2010, ING Financial Advisors 03/1006-12/2010) 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 three months. The fine must be paid either immediately upon Morrison’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier.

Without admitting or denying the findings, Morrison consented to the described sanctions and to the entry of findings that he falsified
customers’ documents by recycling the customers’ signatures from
previously signed documents and pasting their signatures onto new asset allocation change/ fund transfer forms, beneficiary designation forms and a Roth 403(b) salary reduction agreement. The findings stated that Morrison pasted the signatures without authorization, for transactions the customers otherwise had approved.

The suspension is in effect from July 1, 2013, through September 30, 2013. (FINRA Case #2012034371401)
If you have questions about investment losses or the way your brokerage account has been handled, please contact us to discuss your legal rights.

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

Resource Horizons Group Broker Robert Gist Barred by FINRA

Atlanta, Georgia

The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for all securities firms doing business in the United States. FINRA’s chief role is to protect investors by maintaining the fairness of the U.S. capital markets.

All stockbrokers and broker dealers (brokerage firms) are required to be licensed by and subject to the rules and regulations of FINRA. Each month FINRA publishes disciplinary actions against brokers and broker dealers. Discipline can range from monetary fines and suspensions, or in extreme cases, revocation of licensing and a bar from the securities industry.

See the FINRA website for current and historical disciplinary actions.

AUGUST 2013

Robert Gist (CRD#716088, Registered Representative, Atlanta, Georgia-not currently registered with FINRA, previously registered with Resource Horizons Group, LLC) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Gist consented to the described sanction and to the entry of findings that he misappropriated several million dollars from his customers.

The findings stated that in order to carry out the scheme, Gist misrepresented to these customers that he would invest their money in securities positions. Instead, Gist invested the customers’ funds in a company hecofounded. In furtherance of the scheme, Gist created and sent accountstatements with wholly fictitious securities positions to his customersevery six months. The findings also stated that Gist perpetuated the scheme by selling units of the company he owned, or used other investors’ funds, in order to make periodic payments to his customers.

By virtue of his conduct, Gist willfully violated Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 thereunder, FINRA Rules 2010, 2020 and 2150(a), and NASD Rules 2110, 2120 and 3110(a). (FINRA Case #2013036772901)

Rex Securities Law provides nationwide representation to investors 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

Darrell Frazier-Former MML Investor Services Broker-Discloses 38 Customer Disputes

UPDATE July 2016FINRA records disclose that Darrell G. Frazier has 17 customer disputes pending and 21 customer disputes that are final. Frazier was employed by MML Investors Services from 8/2010-5/2011. Prior to that he was employed by Park Avenue Securities.

August 2013-Dublin, Ohio

The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for all securities firms doing business in the United States. FINRA’s chief role is to protect investors by maintaining the fairness of the U.S. capital markets.

All stockbrokers and broker dealers (brokerage firms) are required to be licensed by and subject to the rules and regulations of FINRA. Each month FINRA publishes disciplinary actions against brokers and broker dealers. Discipline can range from monetary fines and suspensions, or in extreme cases, revocation of licensing and a bar from the securities industry.
Darrell Glynn Frazier (CRD #1663429, Registered Representative, Dublin, Ohio-not currently registered, formerly with MML Investors Services, LLC, prior to that Park Avenue Securities, LLC. ) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Frazier consented to the described sanction and to the entry of findings that he made false representations in connection with the sale of variable annuities. The findings stated that as a result of this conduct, Frazier willfully violated Section 10(b) of the Securities Exchange Act of 1934, FINRA Rules 2010 and 2020, and NASD Rules 2110 and 2120.

Frazier told customers that they would earn a return of 7 percent or
more by purchasing variable annuity products and that the principal
amount they invested through the variable annuity would be guaranteed against loss. Frazier assured one customer that he would not be charged annual fees on his variable annuities, and advised another customer that he, Frazier, would only make money from the annuity purchase if the customer made money. All of these representations and assurances were false.

The findings also stated that some of the customers separately contacted Frazier to question why a particular annuity was not performing as expected. The customers questioned why they were not seeing the guaranteed 7 percent return reflected in account documents, and why the values of their annuities appeared to be decreasing. Frazier assured them that they were receiving the 7 percent return and that their principal was safe.

The findings also included that Frazier separately told customers that the 7 percent return had not yet been added to their annuity but soon would be, that an annuity was making money but that the 7 percent return would only be reflected on annual, not quarterly, statements, that for various reasons, he had not been able to obtain documents reflecting the 7 percent return; and in response to why the value of his annuity seemed to be declining, Frazier promised to look into the matter, but never did.

FINRA found that Frazier made unsuitable allocation recommendations to his variable annuity customers. The customers had not completed college and had little investment experience. All were at or near retirement age, were of moderate means and expressed concerns about losing their principal. Nevertheless, at various times during the terms of their variable annuity contracts, Frazier recommended that the customers allocate most or all of their annuity assets to a single investment portfolio, and often the portfolio he recommended involved high-risk investments. Frazier’s recommendations to over concentrate assets in high-risk investments were unsuitable for customers who were at
or near retirement, had only moderate means, and were concerned about preservation of principal.

FINRA also found that Frazier recommended that customers take out home mortgages from their paid-off homes and invest the proceeds into variable annuities.

Some customers followed this advice. Frazier convinced customers to use profits from their annuities to purchase duplicative or excessive insurance policies, and arranged for systematic withdrawals from the variable annuities to pay the insurance premiums.

The withdrawals to pay the insurance premiums resulted in several customers incurring additional tax liability and surrender charges. Frazier also recommended that a customer, whose variable annuity was beyond the surrender period and was no longer subject to deferred sales charges, sell the annuity and invest the proceeds in a new variable annuity, exposing her to a new period of deferred sales charges. These strategies produced additional compensation for Frazier but were unsuitable for the customers.

In addition, FINRA determined that Frazier often completed or partially completed forms that the customers were required to fill out when applying for a variable annuity contract. Several of the forms Frazier completed were inaccurate. Frazier overstated the net worth and income of customers and inaccurately characterized their risk tolerances. Frazier regularly had customers sign undated, blank
brokerage forms. Such signed, but otherwise blank forms were located among his files, along with correspondence specifically instructing customers to sign but not date blank forms.(FINRA Case #2010023442901)

If you have losses in an account handled by Darrell G. Frazier you may be able to recover damages through FINRA arbitration.

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

Charles Crotts-Former Royal Alliance StockBroker-Barred by Regulator

Lexington, North Carolina

The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for all securities firms doing business in the United States. FINRA’s chief role is to protect investors by maintaining the fairness of the U.S. capital markets.

All stockbrokers and broker dealers (brokerage firms) are required to be licensed by and subject to the rules and regulations of FINRA. Each month FINRA publishes disciplinary actions against brokers and broker dealers. Discipline can range from monetary fines and suspensions, or in extreme cases, revocation of licensing and a bar from the securities industry.

See the FINRA website for current and historical disciplinary actions.

AUGUST 2013
Charles Eugene Crotts (CRD #5354524, Registered Representative, Lexington, North Carolina-not currently registered, previously with Royal Alliance Associates, Inc. and prior to that American Portfolios Financial Services, Inc.) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without
admitting or denying the findings, Crotts consented to the described
sanction and to the entry of findings that he failed to appear and
provide on-the-record testimony, as FINRA requested. The findings
stated that the request was regarding allegations that Crotts improperly borrowed money from a customer of his member firm, made unsuitable investment recommendations to a customer, and engaged in undisclosed outside business activities.

The findings also stated that Crotts borrowed $30,000 from a firm customer without providing notice to, or receiving permission from, his firm to borrow from the customer.
(FINRA Case #2012032962301)

If you have questions about investment losses or the way your brokerage account has been handled, please contact us to discuss your legal rights.

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

Ex-Interbolsa Securities Broker Giancarlo Ciocca Barred by FINRA

Coral Gables, Florida

The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for all securities firms doing business in the United States. FINRA’s chief role is to protect investors by maintaining the fairness of the U.S. capital markets.

All stockbrokers and broker dealers (brokerage firms) are required to be licensed by and subject to the rules and regulations of FINRA. Each month FINRA publishes disciplinary actions against brokers and broker dealers. Discipline can range from monetary fines and suspensions, or in extreme cases, revocation of licensing and a bar from the securities industry.

See the FINRA website for current and historical disciplinary actions.

AUGUST 2013
Giancarlo Ciocca (CRD #4252148, Registered Representative, Coral Gables, Florida-currently not registered, previously registered with Interbolsa Securities, LLC and prior to that Merrill Lynch) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Ciocca consented to the described sanction and to the entry of findings
that he impersonated one of his customers at his member firm during a telephone call with a firm call center employee.

 

The findings stated that Ciocca did so in order to obtain online access to the customer’s account. The customer was not on the call; instead Ciocca, impersonating the customer, was on the call with his sales assistant. After Ciocca obtained online access to the account, he used that access to change account preferences so his firm would no longer send hard-copy statements to the customer and to change the email address associated with the account to one Ciocca controlled. The findings also stated that the customer had sustained market losses in his account and Ciocca undertook these activities to prevent the customer from learning of those losses. Ciocca created and sent the customer inaccurate account performance reports, which listed transactions that had not occurred and
did not reflect the actual losses that had been incurred in the
account. Ciocca misrepresented to his firm that he was in compliance with firm policies prohibiting the creation of performance reports.

 

The customer complained to Ciocca, who then attempted to settle the customer’s complaint. This firm did not authorize the settlement offer, which was made without the firm’s knowledge. The findings also included that Ciocca failed to respond to a request for information and documents. FINRA also issued a request to Ciocca for an on-the-record interview. After being warned that a failure to appear would be a violation of FINRA Rule 8210, Ciocca’s counsel informed FINRA that Ciocca would not appear for the interview as requested or at any other time.
(FINRA Case #2011027886902)

If you have questions about investment losses or the way your brokerage account has been handled, please contact us to discuss your legal rights.

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