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Timothy Ward of Investment Professionals, Inc. Barred by FINRA–Misappropriating Client Funds

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

Timothy Ruben Ward (CRD #2600718, Registered Representative, Dexter, Missouri) 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, Ward consented to the described sanction and to the entry of findings that he solicited customers to buy a mutual fund.

 

The customers gave Ward $10,000 in cash to invest in the mutual fund. Instead of investing the funds, Ward converted the funds for his own personal use and then provided the customers with false quarterly account statements that showed that the money had been invested in the mutual fund. The findings stated that Ward borrowed at least $10,000 in total from firm customers in violation of the firm’s written policy prohibiting lending arrangements with customers. Ward did not give written notice to, nor obtain prior written approval from, the firm for any of the loans he received from the customers.

 

The findings also included that Ward settled a customer complaint without notifying the firm. FINRA found that a firm customer purchased a variable annuity contract in the amount of $52,000. Due to a misunderstanding between the customer and Ward regarding the product, the customer decided to terminate the contract. The customer was beyond the free look period and thus subject to surrender charges in the amount of $4,454.54. Ward settled the complaint by paying the customer the full amount of the surrender charges via cashier’s checks without notifying the firm. (FINRA Case #2013036640801)

According to FINRA records, Ward is not currently registered. He was previously registered with the following firms:

Investment Professionals, Inc.
7/2008-4/2013

U.S. Bancorp Investments, Inc.
12/2001-7/2008

Firstar Investment Services, Inc.

1/2000-12/2001

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

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

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