FINRA continues to crack down on sales of alternative investments. Earlier this week, FINRA, the Financial Industry Regulatory Authority Inc. fined VSR Financial Services Inc., a midsize broker-dealer known for selling alternative investments, $550,000, and imposed a $10,000 fine and 45-day suspension of VSR’s chairman, Don Beary.

FINRA alleged that from 2005 to 2010, VSR and Mr. Beary “failed to adequately implement the firm’s supervisory system pertaining to its supervision of concentrated positions in alternative investments through the use of a ‘discount program.’” That program “artificially reduced the amount a customer had invested in a particular investment for purposes of calculating concentration,” according to the FINRA letter.

“In addition, when calculating concentration at certain risk levels, VSR reduced the risk ratings on many investments, making the ratings inconsistent with the risks stated in the offering documents related to the investments,” according to FINRA.

According to FINRA, VSR Financial has 460 registered reps, and between January, 2006 and September, 2010, 20% to 45% of the firm’s revenue was generated by the sale of nonconventional investments. That level of sales contributed to “increasing the seriousness of the violations.”

VSR generated $98.1 million in total revenue in 2012, according to InvestmentNews’ most recent survey of independent broker-dealers.

Mr. Beary told InvestmentNews about changes VSR made this month to policies regarding the sale of alternative investments. The firm scaled back the amount of illiquid alternative investments that can be held in client accounts and lessened the amount that investors over 70 could own. It has been reduced to 35%, with new limits for older clients.

Soreide Law Group, PLLC, represents clients nationwide before FINRA. Call for a free consultation with on how to potentially recover your losses. To speak with an attorney call 888-760-6552

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Florida’s statute of limitations can apply not only to court proceedings, but to securities arbitration cases between investors and their brokers, the Florida Supreme Court ruled recently.

The ruling, in favor of Raymond James Financial Services Inc , could in Florida, empower securities arbitrators to cut the time investors have to file a complaint with FINRA, the Financial Industry Regulatory Authority from six years to four years or even two years.

A group of investors, who filed an arbitration against Raymond James in 2005, argued the law applies only to court cases, according to an opinion by Florida Supreme Court Justice Barbara Pariente. The Florida case stems from a Raymond James broker’s alleged investments in high-risk equities on behalf of the investors between 1999 and 2005, according to the opinion. The broker allegedly did not diversify the risky investments, causing significant losses. The investors also alleged that Raymond James failed to adequately supervise the broker. Raymond James tried to dismiss the investors’ case, arguing that they filed too late.

Brokerage customers typically agree to resolve their disputes in FINRA’s arbitration forum when they sign agreements to open their accounts. Investor cases are typically eligible for FINRA arbitration if they are filed within six years from the event giving rise to the case, such as the sale of a stock.

Florida law has a four-year deadline to file a negligence case, and a two-year deadline to bring a claim under Florida’s securities fraud law, according to the opinion.

Call Soreide Law Group, PLLC, a Securities Arbitration Law Firm, at (888) 760-6552 to speak to an attorney at no charge.

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The SEC and FINRA issued a joint alert on May 9, 2012, warning investors about the risks involved in selling or buying rights to pension or settlement income streams via products like pension loans, structured settlements or secondary-market annuities.

The alert is titled, “Pension or Settlement Income Streams—What You Need to Know Before Buying or Selling Them.” The SEC and FINRA urge investors to proceed with caution if engaging in such transactions.

The alert explains that after acquiring the rights to a future income stream (such as a retiree’s pension payments), factoring companies may turn around and sell these income streams to retail investors, often through a financial advisor, broker or insurance agent.

The products — pension loans, pension income programs, mirrored pensions, factored structured settlements or secondary-market annuities — may be pitched to investors with words like “guaranteed” and “safe,” the alert explains. The sales pitch may also promise huge returns that outpace more traditionally conservative investments such as CDs or money-market accounts.

“The advertised returns may sound enticing, but investors should be aware that these investments can be risky and complex,” the alert says.

The investor alert contains a checklist of questions investors should ask themselves before selling away an income stream:

•Is the transaction legal? Federal law may restrict or prohibit retirees from “assigning” their pension to someone else.

•Is the transaction worth the cost? Find the discount rate that the factoring company has applied to your income stream and compare this rate to alternatives such as a bank loan.

•What is the reputation of the company offering the lump sum? Check the factoring company’s record with the Better Business Bureau, and research the firm on the Internet and with a financial professional.

•Will the factoring company require life insurance? The factoring company may require you to purchase a life insurance policy, which will add to your transaction expenses and reduce your payout.

•What are the tax consequences? The lump-sum payment you collect may be taxable.

The investor alert also warns investors who might be attracted to the yield offered by buying the rights to someone else’s pension or structured settlement to be aware that:

•Investors may encounter commissions of 7 percent or higher.

•Pension and structured settlement income-stream products may or may not be securities and likely are not registered with the SEC.

•These products could be difficult to sell if you need money and want to sell the product.

•Your “rights” to the income stream you purchased could face legal challenges.

The Soreide Law Group represents clients nationwide before FINRA. Call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552.

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With mounting pressure from regulators, broker/dealers are making changes to how they sell alternative investments.

VSR Financial Services Inc., Berthel Fisher & Co. Financial Services Inc. and the Cetera Financial Group Inc., which has four independent-contractor broker-dealers under its umbrella, this year have revised policies or added new guidelines and procedures for the sale of certain alternatives, such as nontraded real estate investment trusts (REITs), according to Bruce Kelly in a recent article from InvestmentNews.com.

These changes particularly affect alternative investments that are illiquid. Illiquid securities are not traded on an exchange, leaving investors with little or no ability to sell them immediately. Illiquid products remain enormously popular with clients.

In making these changes, the broker-dealers are following the lead of both state regulators and FINRA, the Financial Industry Regulatory Authority Inc.

In February LPL Financial LLC agreed to pay Massachusetts $500,000 to settle complaints tied to the firm’s sale of nontraded REITs, which are illiquid real estate investment trusts. Massachusetts Commonwealth Secretary William Galvin in December had charged LPL with failure to supervise registered representatives who sold the nontraded REITs in an alleged violation of both state limitations and the company’s rules.

For clients who are 70 to 75, the maximum percentage of illiquid investments a client can own is 25% of a portfolio; for clients between 75 and 84, the new maximum is 15%. The firm is not accepting orders for illiquid investments — commonly referred to as direct participation programs — for clients who are 85 and above.

If you or a family member have sustained investment losses due to your stock broker or financial advisor’s recommendations, call Soreide Law Group for a free consultation on how to potentially recover your losses at 888-760-6552.

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A Financial Industry Regulatory Authority (FINRA) arbitration panel has ordered Goldman Sachs & Co. to pay approximately $2.5 million to Tracy Landow, a client who said she was sold an inappropriate investment in a private-equity fund.

Ms. Landow accused Goldman Sachs and her broker of making an unsuitable recommendation in the Goldman Sachs Special Opportunities Fund 2006, according to the FINRA ruling.

The FINRA arbitration panel found that the “very complex instrument is unsuitable” for Ms. Landow, an unsophisticated investor who had no prior investment experience and only a high school education. But that’s not why they ruled against the broker-dealer unit of Goldman Sachs Group Inc. The FINRA panel determined that there were problems with the fund’s subscription agreement, making it invalid. The firm was ordered to take back her investment in the fund and return approximately $2.5 million in principal, interest, and expert witness fees.

The panel further ruled that because Ms. Landow’s broker didn’t oversee the defective subscription agreement, he is not responsible for the fund or the investments that followed.

Not all three panelists felt the same. In a rare dissent, one FINRA arbitrator said that while the subscription agreement may be of concern, it’s only a small factor in the case. She found the fund to be an appropriate investment for Ms. Landow and didn’t think the firm should be required to take it back, according to the decision.

Soreide Law Group, PLLC, represents clients nationwide before FINRA. Call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552.

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FINRA, the Financial Industry Regulatory Authority Inc. has filed a complaint against Kimberly Springsteen-Abbott, the owner, chief executive and head of compliance for Commonwealth Capital Securities Corp. This firm, which is the broker-dealer arm of Commonwealth Capital Corp., employs about 22 registered reps and conducts business in private placements and direct investments.

According to the complaint, Kimberly Springsteen-Abbott allegedly misused $345,000 in investors’ money between December 2008 and February 2012. She also was allegedly involved in falsifying and backdating a memo accounting for “Disney Tickets” that was given to FINRA staff members while they were conducting an exam in 2011.

The FINRA complaint states that the broker-dealer distributed 13 different equipment leasing funds from 1993 to the present, which raised more than $240 million. Each fund acquires equipment involving information technology, medical technology, telecommunications and other categories. The proceeds from the offerings are invested primarily in equipment that is subject to operating leases with durations of 12 to 36 months.

According to FINRA, Kimberly Springsteen-Abbott “directed the misuse of investor funds to pay for various American Express credit card charges that were not related to legitimate business purposes of the funds.”

FINRA’s complaint includes an exhibit of 27 pages of purchases from Ms. Springsteen-Abbott and other company executives. Also, a sexual discrimination suit was filed last year by a former Commonwealth Capital employee, which was since settled, alleged that Springsteen-Abbott and other company executives “were misrepresenting investor return rates and misappropriating investor funds for lavish personal expenses.”

If you or a loved one experienced a financial loss due to your stockbroker or financial advisor’s recommendations, call Soreide Law Group for a free consultation with an attorney at: 888-760-6552.

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The following information appeared on FINRA’s website under “Disciplinary and Other FINRA Actions, May, 2013.”

Ronald Wayne Lankford (CRD #1751588, Registered Principal, Tampa, Florida)

was suspended from association with any FINRA member firm in any principal capacity other than as a FINOP (Series 27) and Introducing Broker-Dealer/FINOP (Series 28) for 18 months; suspended from association with any FINRA member firm in a principal capacity as a FINOP (Series 27) and Introducing Broker-Dealer/FINOP (Series 28) for one month; and ordered to re-qualify as a principal by passing the required examination(s) before re-associating with any member firm in that capacity. In light of Lankford’s financial status, no monetary sanction has been imposed.

Without admitting or denying the allegations, Lankford consented to the described sanctions and to the entry of findings that he was aware of and permitted the sales of unregistered promissory notes by his member firm’s representatives, failed to ensure that the notes were either registered or exempt from registration, and failed to ensure that all material facts were disclosed to investors who were offered and sold the promissory notes.

FINRA’s findings stated that when a preferred stock private placement offering began, Lankford, as his firm’s president and CCO, was responsible for approving the private placements and for conducting due diligence, but failed to conduct adequate due diligence regarding the preferred stock offering to ensure that the PPM disclosed all material facts to investors.

When subsequent material events occurred, Lankford did not suspend sales of the preferred stock pending the creation and receipt of an amended PPM (Private Placement Memorandum is document explaining a new offering of securities for private placement), and instead allowed the continued sale of the preferred stock by representatives using the original PPM without any amendment.

FINRA’s findings also stated that Lankford had the overall supervisory responsibility for the sales representatives and the firm’s sales activities, and allowed firm representatives to sell the preferred stock with a PPM that had material misrepresentations and omitted material facts. Lankford admitted to FINRA that although he was responsible for supervision of the firm’s OSJ principal, he did not discharge this responsibility. Lankford failed to supervise representatives selling the preferred stock to ensure all material facts were adequately and accurately disclosed to investors.

FINRA’s findings also included that Lankford, as the firm’s president, CCO and FINOP, allowed it to engage in a securities business while failing to maintain its minimum net capital. FINRA found that Lankford failed to make and keep a current and accurate general ledger that showed all of the firm’s liabilities, and prepared inaccurate net capital computations for the firm.

The suspension in a principal capacity as a FINOP (Series 27) and Introducing Broker-Dealer/FINOP (Series 28) was in effect from April 1, 2013, through April 30, 2013. The suspension in any principal capacity (other than as a FINOP (Series 27) and Introducing Broker-Dealer/FINOP (Series 28) is in effect from April 1, 2013, through September 30, 2014. (FINRA Case #2010020829803)

According to FINRA’s BrokerCheck, Ronald Wayne Lankford is currently employed by and registered with the following FINRA Firm:

SPARTAN SECURITIES GROUP, LTD.
15500 ROOSEVELT BOULEVARD, SUITE 303
CLEARWATER, FL 33760
CRD# 104478
Registered with this firm since: 2/14/2012

This broker was previously registered with FINRA at the following brokerage firms:

SAGE SOUTHEASTERN SECURITIES, INC.
CRD# 144051
ATLANTA, GA
02/2010 – 09/2011

FIRST LEGACY SECURITIES, LLC
CRD# 47079
VESTAVIA HILLS, AL
09/2007 – 03/2010

JONES, BYRD, & ATTKISSON, INC.
CRD# 36268
ATLANTA, GA
04/2006 – 02/2008

This ends the information obtained on FINRA’s website.

Soreide Law Group, PLLC, represents clients nationwide before FINRA. Call for a free consultation with on how to potentially recover your losses. To speak with an attorney call 888-760-6552

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Soreide Law Group, a Securities Arbitration Law Firm, (888) 760-6552, obtained the following information on FINRA’s website under “Disciplinary and Other FINRA Actions, May, 2013.”

Michael Peter Borci (CRD #5436457, Registered Representative, Apollo Beach, Florida)

was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Michael Borci consented to the described sanction and to the entry of findings that in the course of an investigation, FINRA sought on-the-record testimony from him concerning whether he provided his member firm client with documents overstating
that client’s account value.

FINRA’s findings stated that they sent Borci a written request for an on-the-record interview, but he failed to comply with the FINRA request.
(FINRA Case #2012032412801)

The following information is from FINRA’s BrokerCheck:

Michael Peter Borci was previously registered with FINRA at the following brokerage firms:

UBS FINANCIAL SERVICES INC.
CRD# 8174
TAMPA, FL
01/2012 – 05/2012

FIFTH THIRD SECURITIES, INC.
CRD# 628
TAMPA, FL
01/2009 – 06/2011

WACHOVIA SECURITIES, LLC
CRD# 19616
TAMPA, FL
03/2008 – 10/2008

This ends the information obtained from FINRA’s website.

If you have experienced a financial loss due to your stockbroker or financial advisor’s recommendations, call Soreide Law Group for a free consultation with an attorney at: 888-760-6552.

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The following information appeared on FINRA’s website under “Disciplinary and Other FINRA Actions, May, 2013.”

vFinance Investments, Inc. (CRD #44962, Boca Raton, Florida)

consented to the described sanctions and to the entry of findings that it acted as the private placement agent for a placement of up to $5 million in convertible notes a company issued. Investors, some of whom were the firm’s customers, invested a total of $5,950,000 in the private placement while the issuer was on the firm’s restricted list for the duration of its participation in the offering.

FINRA’s findings stated that the firm did not adequately supervise the purchases of stocks on the restricted list even though the firm’s procedures required it to monitor purchases of securities of issuers on its restricted list, including those for which it was conducting offerings.

The firm failed to adequately enforce the procedures and instead authorized customer purchases of the stock without
conducting an adequate inquiry into the facts and circumstances surrounding those purchases, thereby failing to reasonably supervise activity in the issuer’s stock in a manner reasonably designed to achieve compliance with Regulation M. The findings also stated that the firm failed to disclose involvement of a statutorily disqualified person who worked closely with firm employees in connection with the private placement, communicating directly with the firm’s investment banking department and others.

FINRA’s findings also included that a registered representative involved in the solicitation of purchases of the stock used his personal email account to solicit purchases of stock and for other business purposes, and forwarded and addressed some of the emails to firm email addresses of other firm employees, including managerial-level employees. The firm should have been on heightened awareness of its obligations to supervise the use of external email accounts.

FINRA found that the firm did not create and implement procedures reasonably designed to review incoming and outgoing
securities-related and investment banking-related correspondence, including electronic correspondence, so it did not adequately supervise employees’ outside email accounts.
(FINRA Case #200901616000)

The following information was obtained on FINRA’s BrokerCheck:

Main Office Location:
1200 N. FEDERAL HIGHWAY
SUITE 400
BOCA RATON, FL 33432
Regulated by FINRA Florida Office

Mailing Address:
1001 FOURTH AVENUE
SUITE 3750
SEATTLE, WA 98154

This ends the information from FINRA’s website.

Soreide Law Group, PLLC, represents clients nationwide before FINRA. Call for a free consultation with on how to potentially recover your losses. To speak with an attorney call 888-760-6552

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The Soreide Law Group, PLLC, is a Securities Arbitration Law Firm, (888) 760-6552, and obtained the following information on FINRA’s website under “Disciplinary and Other FINRA Actions, May, 2013.”

Raphael Huaman (CRD #5868404, Registered Representative, Miami, Florida)

was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Huaman
consented to the described sanction and to the entry of findings that he misappropriated a total of $134,047.65 from different bank trust accounts at his member firm’s affiliate.

FINRA’s findings stated that Raphael Huaman misappropriated the funds by having a colleague transfer money from the bank trust accounts to a separate affiliate account. Huaman then requested and obtained checks drawn on these accounts made out to third-party payees and deposited the checks into his personal bank account.

After the firm’s affiliate confronted Huaman regarding the transactions, he admitted his misconduct and the firm terminated his employment. The findings also stated that Huaman failed to respond to FINRA requests for information. (FINRA Case #2012034283301)

According to FINRA’s BrokerCheck, this broker was previously registered with FINRA at the following brokerage firm:

SUNTRUST INVESTMENT SERVICES, INC.
CRD# 17499
MIAMI, FL
01/2011 – 10/2012

This ends the information from FINRA’s website.

If you have experienced a financial loss due to your stockbroker or financial advisor’s recommendations, call Soreide Law Group for a free consultation with an attorney at: 888-760-6552.

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