VSR Financial Fined $550,000 For Sale of Alternative Investments

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.

July 2013

Note: Alternative investments include non publicly traded real estate investment trusts (REITS) , hedge funds, real estate, commodities and derivatives contracts and, managed futures. It may also include art, wine, antiques, coins or stamps. These investments tend to be complex, illiquid, nontransparent, hard to value and expensive.

VSR Financial Services, Inc.  Overland Park, Kansas and Donald Joseph Beary, Registered Principal, Lenexa, Kansas) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $550,000. Beary was fined $10,000 and suspended from association with any FINRA member in any principal capacity for 45 days. Without admitting or denying the findings, the firm and Beary consented to the described sanctions and to the entry of findings that the firm failed to establish, maintain and enforce a reasonable supervisory system regarding the sale of non-conventional investments.

The findings stated that the firm’s WSPs provided that no more than 40 percent to 50 percent of a client’s exclusive net worth could be invested cumulatively in alternative investments unless there was a substantial reason to exceed the guidelines and that justification was well documented. Supplemental to these
procedures, the firm, through Beary, created additional procedures that applied a discount to certain non-conventional instruments, reducing the percentage of a customer’s liquid net worth invested. The findings also stated that as the direct participation principal, Beary had responsibility for the implementation and supervision of the discount program.

The Securities and Exchange Commission (SEC) identified as a deficiency, in a letter to the firm, that it did not have adequate written procedures relating to the discount program. The SEC made the same finding two years later regarding the lack of WSPs relating to the discount program. Despite these warnings from the SEC, Beary did not take reasonable steps to implement WSPs or to otherwise discontinue the use of the discount program.

The findings also included that in addition to the 40 percent to 50 percent concentration limit stated in the firm’s WSPs, the firm’s new account form asked each client to specify the percentage of liquid net worth that the client would be comfortable investing in various risk categories. Most alternative investment program sponsors identified their products involving, at a minimum, a high degree of risk. The firm also assigned a risk category to each alternative investment it sold. Rather than assign a risk category based upon the risk level identified by the sponsor in the alternative investment offering documents, the firm routinely assigned lower risk categories. In several instances, the firm lowered its internal risk rating subsequent to the firm’s acceptance of the product.

In spite of the firm’s efforts to increase sales of alternative investments through the use of discounts and risk rating reductions, customer investments still exceeded the 40 percent concentration guideline, but the firm did not document the existence of a substantial reason to exceed the concentration guidelines as required by its WSPs.

FINRA found that the firm failed to establish, maintain and enforce a reasonable supervisory system regarding the use of consolidated reports. The firm’s WSPs regarding consolidated statements were limited to a few memoranda issued to registered representatives prior to the issuance of FINRA Regulatory Notice 10-19. In practice, for six years, the firm’s registered representatives used a number of consolidated reporting systems. The firm did not require pre-approval of the consolidated reports to determine whether accurate pricing and disclosures were being used.

The firm did not have a system for prompt review of the consolidated reports after the reports were sent to customers. Given the fact that the firm allowed its registered representatives to enter valuations manually, the firm’s lack of supervision of the consolidated reports was unreasonable. FINRA also found that the firm, acting through a registered representative, recommended and effected the sale of high-risk private placements to customers. While these products may have been suitable for certain customers, they were not suitable for these customers given their financial circumstances and condition.

The firm earned approximately $35,950 in commissions on the transactions. The firm, through another registered representative, made recommendations to customers that were not suitable given their moderate risk tolerance and specifications, and the firm earned commissions on the transactions of approximately $483,077.38. In addition, FINRA determined that the firm failed to reasonably supervise its representatives with respect to the unsuitable transactions. One of several firm principals reviewed and approved the transactions of one of these representatives, and each of the principals failed to detect or investigate “red flags” regarding the transactions. This representative falsified the account documentation for customers, but the firm did not detect or investigate any of the representatives’ falsification of documents or other red flags. Detection and investigation of any of these red flags might have prevented the representative’s unsuitable recommendations and the resulting loss of the customers’ funds.

Moreover, FINRA found that the firm allowed its registered representatives to send consolidated statements to their customers but never reviewed the consolidated statements a representative sent to some customers to determine whether he was following the firm’s procedures regarding pricing. Because of the inaccurate pricing the representative used, and the firm’s lack of supervision, these customers received statements with erroneous pricing information.

The suspension is in effect from June 3, 2013, through July 17, 2013. (FINRA Case #2010022963602)

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

Eduardo G Diaz Sued by FINRA & Settles Customer Dispute for $250,000

November 2015 UPDATE-Eduardo Diaz Indicted on fraud charges. See this for more

September 2013-Gulfport, Mississippi

 

Eduardo Guillermo Diaz-Update 1/2014: A customer complaint filed in Jackson County Mississippi court against Diaz while he was employed by NEXT FInancial alleging damages of $677,000 was settled for $250,000. The customer alleged that Diaz misrepresented an investment, failed to disclose the risks and failed to provided the correct status of the investment. In addition the customer alleged that Diaz put fraudulent information on her application. Circuit Courty Jackson County, Mississippi, Docket Case # 2012-00 182 1 .

FINRA records indicate that Diaz has not been registered since 1/2013.

AUGUST 2013

Eduardo Guillermo Diaz (CRD #1621873, Registered Principal, Ocean Springs, Mississippi) was named a respondent in a FINRA complaint alleging that in connection with the sale of a security, during telephone conversations and email communications, he intentionally or recklessly made untrue statements of material fact to a customer in willful violation of Section 10(b) of the Exchange Act and Rule 10b-5 regarding properties of a limited liability company he controlled and intentionally or recklessly omitted to state other relevant and related material facts to the customer.

The complaint alleges that the customer’s investments in the company and the loan to it, which totaled at least $365,000, were not paid directly from her account at Diaz’s member firm. Rather, amounts withdrawn from her account were transferred to her checking account at a bank. At Diaz’s request, she then wired the funds, comprising the investments and loan to the company, to a bank account, which was a personal bank account Diaz controlled. In reliance upon representations Diaz made, the funds the customer provided to Diaz were intended for use by the company for its general business operations. Diaz’s bank account was comprised almost entirely of funds from the customer for her investments and the loan. Diaz improperly converted at least $126,000 of these funds in his bank account to his personal use for expenditures that did not benefit the company or the customer.

The complaint also alleges that Diaz executed transactions in the customer’s account, without her prior knowledge, authorization or consent. The unauthorized transactions in the customer’s brokerage account at Diaz’s firm resulted in more than $195,000 in cash that he sent to the customer, which she believed were distributions from the company. The complaint further alleges that Diaz, acting
outside of his employment with his firm, participated in private securities transactions for compensation with the customer without providing prior written or oral notice to the firm of his proposed role in, or the selling compensation that he might receive from the transactions. The firm did not approve Diaz’s private securities transactions with the customer. In addition, the complaint alleges that Diaz engaged in business activities with his company outside the scope of his relationship with the firm, without providing prior written notice to the firm or receiving its written approval. Diaz’s participation in the company was not passive.

Diaz was a member and manager of the company and received approximately $126,000 in compensation as a result of his business activity with it. Moreover, the complaint alleges that Diaz solicited loans from the customer in the total amount of $87,000. The loans were directed to Diaz and his company and deposited into his personal bank account. Diaz failed to notify his firm of the loans the customer made to him contrary to firm policy that prohibited Diaz from borrowing from customers in all circumstances.

(FINRA Case #2012034594402)

According to FINRA BrokerCheck Records Diaz is not currently registered. He was previously  registered at the following brokerage firms:

Kovack Securities, Inc.
12/2012-1/2013

Next Financial  Group, Inc.
12/2008-11/2012

AIG Financial Advisors, Inc.
10//2005-12/2008

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

Hugh Hunsinger -Former Lincoln Financial Advisors Broker Sued by FINRA-$1 Million Theft

 Pinebrook, New Jersey

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
Hugh Robert Hunsinger Jr. (CRD #2179745, Registered Representative, Pinebrook, New Jersey) was named a respondent in a FINRA complaint alleging that he misappropriated and converted a total of $1,452,503.57 from the accounts of his elderly and unsophisticated parents.

The complaint alleges that his parents never authorized the transfer of funds. To hide his misappropriation, Hunsinger told his parents that he was selling securities they owned to invest in new insurance or securities products. Instead, Hunsinger deposited the funds into bank accounts he controlled. The complaint also alleges that Hunsinger recommended that his parents invest in a deferred combination variable and fixed annuity to be issued by a company. Hunsinger provided his parents with documents that purported to be designed for one of them and that contained information, based on a historical illustration, concerning withdrawals, contract values, cash surrender, average annual returns and standard death benefit.

The complaint further alleges that Hunsinger’s parents agreed to his recommendation and believed that he was selling securities from their accounts to purchase the annuity. In addition, the complaint alleges that in subsequent meetings, Hunsinger reiterated to his parents, orally and in writing, that he had purchased the annuity, and later provided them with additional documents reflecting the purported initial premium for the annuity. Hunsinger caused securities to be sold in their accounts but never purchased the annuity.

Moreover, the complaint alleges that Hunsinger willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, FINRA Rules 2010 and 2020, and NASD Rules 2110 and 2120. Hunsinger acted with scienter in falsely representing that he had purchased the annuity on behalf of his parents.

Furthermore, the complaint alleges that Hunsinger failed to respond to FINRA requests for information and documents related to its investigation. (FINRA Case #2011030045101)

According to FINRA BrokerCheck Records Hunsinger is not currently registered. He was most recently  registered at the following brokerage firm:

Lincoln Financial Advisors Corporation
Paramus, NJ
2/2002-11/2011

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 Sues Christopher S. Vaughn-Theft From Elderly Client

Leesburg, Florida–The Villages FLA

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
Christopher Shawn Vaughn (CRD #4956822, Registered Representative, Leesburg, Florida) was named a respondent in a FINRA complaint alleging that he engaged in a scheme
to convert securities an elderly customer owned. Without the customer’s knowledge or consent, Vaughn made his wife the primary beneficiary of the customer’s brokerage account. When the account was opened, Vaughn did not inform his immediate supervisor, or any other supervisor at his member firm, that his wife was the beneficiary. As part of his efforts to hide his misconduct, Vaughn provided a false mailing address for the customer on her application, which was for a post office box belonging to his wife’s grandfather, preventing the firm from delivering monthly account statements and trading confirmations to the customer at her actual residential address. By doing so, Vaughn caused his firm’s books and records to be inaccurate. The complaint alleges that after opening her account, Vaughn recommended and sold the customer a fixed annuity contract for $10,000.

The customer informed Vaughn that she wanted her neighbor to be named as the annuity’s beneficiary. In direct contravention of the customer’s instructions, Vaughn falsely recorded in the firm’s electronic system that his wife was the annuity’s primary and sole beneficiary.

The complaint also alleges that in connection with the annuity, Vaughn provided the same incorrect mailing address for the customer in the firm’s system, thereby preventing the firm or the company that issued the annuity from delivering information concerning the customer’s annuity to her actual residential address. After receiving an email communication from the company that issued the annuity inquiring about the accuracy of the customer’s mailing address, Vaughn falsely represented to the company that the customer’s address was correct, and that the customer had informed him that she had experienced delivery issues with the post office.

In addition, the complaint alleges that the customer received a packet of documents concerning her annuity, from which she learned for the first time that Vaughn’s wife was named as the beneficiary of the annuity. The customer did not know who Vaughn’s wife was. After being contacted by the customer’s neighbor questioning the inaccurate address and why his wife was named as the beneficiary, and indicating that the customer wanted her $10,000 investment returned, Vaughn told the customer and her neighbor that he had mistakenly identified his wife as the beneficiary of the annuity because a member of his wife’s family purchased a $10,000 annuity at the same time and named his wife as the beneficiary. At her request, the customer’s annuity contract was cancelled and the $10,000 was refunded to her.

Moreover, the complaint alleges that after the customer’s neighbor informed Vaughn of the customer’s death, he informed the neighbor that the customer contacted him to remove the neighbor as the beneficiary. Vaughn promised to provide the neighbor with documentation to that effect, but he never did. Following the customer’s death, Vaughn opened a brokerage account in his wife’s name for the express purpose of receiving the assets from the customer’s account. Vaughn’s wife then presented to his firm a death certificate that Vaughn obtained from the neighbor, and successfully caused the assets held in the customer’s account to be transferred to his wife’s brokerage account.

The customer’s account held mutual funds worth a combined $22,417.58. Furthermore, the complaint alleges that after learning that the customer’s assets had been transferred to Vaughn’s wife’s account, the neighbor and the customer’s attorney asked the firm to conduct an investigation into Vaughn’s conduct with respect to the customer’s account.

The firm did not find any documentation evidencing the customer requested Vaughn’s wife to be named as a beneficiary on either the account or annuity. The firm terminated Vaughn’s employment in connection with this matter. Vaughn and his wife executed a Mutual Release and Settlement Agreement with the firm, agreeing to transfer the assets held in the wife’s account back to the customer’s account or an account maintained in the name of the customer’s estate. Vaughn’s conduct resulted in the conversion of $22,417.58 in assets from the customer. (FINRA Case #2011028581201).

According to FINRA BrokerCheck Records Vaughn is not currently registered. He was previously registered at the following brokerage firms:

SunTrust Investment Services, Inc
Deltona, FL
8/2009-7/2011

Wells Fargo Advisors, LLC
The Villages, FL
1/2008-8/2009

A.G. Edwards & Sons, Inc.
The Villages, FL
6/2007-1/2008

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

Grifphon and Sasquatch Hedge Fund Managers Accused of Fraud

On September 21, 2012, the Securities and Exchange Commission accused Yusaf Jawed, Grifphon Asset Management, Robert Custis, Jacques Nichols, Lyman Bruhn, Pearl Asset Management and Sasquatch Capital Management of securities fraud. See  SEC litigation release #22487.

Jawed pled guilty to running a Ponzi scheme in April 2013 and was sentenced to six and a half years in prison and ordered to forfeit $6.4 million raised in the scheme. Jawed’s poor financial condition makes it unlikely that he will be able to repay any of the funds.

In August of 2013, an arbitration panel awarded an investor damages against Raymond James on claims that the investment in the Grifphon Alpha 1 Fund violated state securities laws and was misrepresented. FINRA arbitration No. 12-1905 , Deters IRA, et al vs Raymond James Financial Services, Inc.

Grifphon Funds sold by brokerage firms include:

Grifphon Alpha I Fund
Alpha Qualified Fund
Grifphon Alpha Long Term
Grifphon Iota Fund
Grifphon High Quality Large Cap Fund
Alpha Institutional Fund – See more at: www.whitesecuritieslaw.com/securities-fraud/blog/page/2/#sthash.nxEMYGse.dpuf
Grifphon Alpha I Fund
Alpha Qualified Fund
Grifphon Alpha Long Term
Grifphon Iota Fund
Grifphon High Quality Large Cap Fund
Alpha Institutional Fund
Grifphon Alpha I Fund
Alpha Qualified Fund
Grifphon Alpha Long Term
Grifphon Iota Fund
Grifphon High Quality Large Cap Fund
Alpha Institutional Fund – See more at:
Alpha Qualified Fund

Alpha Institutional Fund
Grifphon Alpha I Fund
Grifphon Alpha Long Term
Grifphon High Quality Large  Cap Fund
Grifphon Iota Fund

If you invested in any of  the Grifphon funds you may have valuable legal rights entitling you to damages. For a no charge consultation with an experienced securities lawyer, please contact our office.

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

 

Top 10 Scams Targeting Seniors- National Council on Aging

According to a recent article from the NCOA (National Council on Aging) financial scams targeting seniors are so prevalent they are considered “the crime of the 21st century”.

The NCOA lists the following potential scams. See the full article here on the NCOA website:

1-Health Care/ Medicare/ Health Insurance Fraud
2-Counterfeit Prescription Drugs
3-Funeral & Cemetary Scams
4-Fraudulent Anti-Aging Products
5-Telemarketing
6-Internet Fraud
7-Investment Schemes
8-Homeowner/Reverse Mortgage Scams
9-Sweepstakes & Lottery Scams
10-The Grandparent Scam

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

 

SEC Sues Investment Adviser Larry J. Dearman for Securities Fraud

Bartlesville, Oklahoma

On August 27. 2013 the Securities and Exchange Commission (SEC) brought securities fraud charges against former investment adviser Larry J. Dearman, Sr. and his friend, Marya Gray, in connection with a fraudulent scheme that raised $4.7 million from his advisory clients , mostly of whom are located in Oklahoma. See this for a copy of the SEC complaint which was filed in the U.S. District Court in Tulsa.

The SEC alleges that Dearman invested the funds raised in businesses (including Bartnet Wireless Internet, The Property Shoppe, Quench Buds Holding Company) owned by Gray in Bartlesville, Oklahoma and misled investors about how the funds would be used and the risks involved. The pair squandered most of the investor funds on gambling, personal expenses and Ponzi payments, according to the SEC.

As is often the case is these cases, Dearman was able to obtain the trust of the unsuspecting investors because many of them had known him and his family since childhood, thought of him as an active member of their church and knew him as a popular wedding singer.

If you have questions about losses in your brokerage account or advice your stock broker has given you, please contact our office for a no charge consultation.

Rex Securities Law , located in Boca Raton, FL, provides representation to  investors  in Texas and Oklahoma and 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

 

Nationwide representation of victims of stockbroker fraud and the malpractice of investment professionals.

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