THE FOLLOWING IS AN ARTICLE FROM THE SEC’S WEBSITE:

“The U.S. Securities and Exchange Commission announced today that the United States District Court for the District of Colorado entered an Order amending a February 11, 2011 Final Judgment wherein Greenberg, without admitting or denying the Commission’s allegations, consented to the entry of a Final Judgment that enjoined him from violations of Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rules 206(4)-2, 206(4)-7, and 206(4)-8 thereunder. Greenberg was the former Chief Executive Officer and majority owner of registered investment adviser Tactical Allocation Services LLC (TAS) and the founder and head portfolio manager for a registered investment adviser wholly-owned by TAS, Agile Group LLC (Agile Group). The Final Judgment also found that Greenberg was liable for disgorgement of $3,941,185, plus prejudgment interest, but based on his financial condition waived payment of all but $330,000 of that amount and, in addition, required Greenberg to surrender his interests in certain Agile Group hedge funds. The Final Judgment imposed no penalty based on Greenberg’s financial condition and prohibited Greenberg from seeking reimbursement for the money and fund interests he was disgorging. Greenberg paid the $330,000 and those funds were distributed to Agile investors under a Court approved equitable distribution plan.

On January 31, 2012, the Commission moved for an order requiring Greenberg to pay the unpaid portion of his disgorgement, pre- and post-judgment interest thereon, and a maximum civil penalty, alleging that Greenberg’s statement of financial condition on which the Final Judgment was based was incomplete. The Order, to which Greenberg stipulated, finds Greenberg liable for disgorgement of $3,998,145, representing the unpaid portion of the amount ordered to be disgorged in the Final Judgment (original $4,328,145 judgment comprised of $3,941,185 in disgorgement and $386,960 in prejudgment interest, offset by the $330,000 Greenberg paid on January 24, 2011). It further orders Greenberg to pay a civil penalty in the amount of $3,941,185, and post-judgment interest through February 29, 2012 of $130,480.03. The Order further imposes a freeze on Greenberg’s assets.

According to the SEC’s original complaint in this matter, extensive losses were suffered by affiliated hedge funds managed and recommended by Greenberg, including the Agile Safety Fund, the Agile Safety Fund International, and the Agile Safety Variable Fund (collectively Agile hedge funds). The Agile hedge funds were marketed and managed by affiliated investment advisers Agile Group and TAS. The Commission’s complaint alleged that Greenberg negligently misrepresented the safety, suitability, and diversification of the Agile hedge funds to TAS clients, in many cases conservative investors in or near retirement. Further, the complaint alleged that Greenberg made inadequate disclosure concerning advisory fees; failed to implement adequate compliance policies and procedures; failed to properly supervise his subordinate investment advisers; and failed to provide account statements and annual reports to his clients.”

END OF SEC’S ARTICLE

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In an InvestementNews.com article from January20,2012, Dan Jamieson writes that in a regulatory notice, Finra outlined characteristics of what it calls “complex products,” which could include structured notes, inverse or leveraged exchange-traded funds, hedge funds and securitized products such as asset-backed securities.

Finra stated that brokerage firms should have formal written procedures covering everything from the initial due diligence to post-sale performance. This notice specifically identifies duties that fall to individual brokers in understanding complicated products and explaining them to customers. The notice also said that registered representatives should consider whether less complex and cheaper products might achieve the same objectives.

“Finra is letting it be known that recommendations of complex products will be given even more scrutiny going forward,” said Mary Harris-King, co-founder of Comprehensive Securities Compliance Solutions Inc.

Jamieson writes that in its notice, Finra reviewed what a number of European regulators had done in characterizing various complex products. The notice also said that registered representatives should consider unbundling structured products.

“Registered representatives should compare a structured product with embedded options to the same strategy through multiple financial instruments on the open market, even with any possible advantages of purchasing a single product,” Finra said in the notice.

This was good news to Robert Gordon, chief executive at Twenty-First Securities Corp., which replicates structured notes by buying underlying instruments like zero-coupon Treasuries and options on ETFs.

“It looks like Finra is saying that brokers can’t say this [structured note] is simpler — that’s not a good excuse” to buy it, he said.

The InvestmentNews.com article goes on to say that buying the components of a note that guarantees principal is 2% to 3% cheaper than buying the package, offers tax advantages, and lessens counterparty risk, Mr. Gordon said.

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Recently, a FINRA arbitration panel made a monetary award  in the case of Stone & Youngberg v. Kay Family Revocable Trust, No. 3:11-cv-00198 (N.D. Cal., 6/22/11),  which was appealed by the defense and lost.  

 This case involved the challenge by a broker-dealer to a $750,000 award to a former customer, who was advised by Stone & Youngberg to invest funds in a hedge fund known as FutureSelect Prime Advisor II. According to the Court, “each of the Trust’s claims was based on the theory that Stone &Youngberg did not perform requisite due diligence before advising the Trust to invest in the Fund, which, according to the Trust, invested substantially all of its capital with Bernard Madoff….”

Attorney Lars Soreide would like you to know that if you or a family member have invested in the FutureSelect Prime Advisor II Fund with Stone & Youngberg, or another broker/dealer, call Soreide Law Group, PLLC and speak to a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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