In a November 28, 2011 article for InvestmentNews.com, Bruce Kelly writes that Next Financial Group, Inc. has agreed to pay $2 million in restitution to clients who bought oil and natural gas private placements of Provident Royalties LLC, which the Securities and Exchange Commission in 2009 accused of fraud.

In a Financial Industry Regulatory Authority Inc. letter of acceptance, waiver and consent, Next Financial sold $20 million of three separate Provident private placements from July 2008 to January 2009. Over that time, the firm’s due diligence was lacking, according to the Finra.

“Despite the fact that Next received a specific fee related to the due diligence that was purportedly performed in connection with each offering, beyond reviewing the private-placement memorandum for the offerings, [Steven Nelson, vice president of investment products and services] did not perform adequate due diligence on the [Provident] offerings,” according to the AWC, which was finalized last month.

Next Financial reported $136.1 million in gross revenue last year and has 866 affiliated reps and advisers, writes Kelly.

Next Financial and Mr. Nelson’s due diligence on Provident fell short in several areas, according to Finra. Mr. Nelson “did not travel to Provident’s headquarters in Texas to conduct due diligence on three separate offerings,” according to the AWC. He also “did not see any financial information regarding Provident Royalties, other than the information contained in the private-placement memorandum. Further, once [Mr.] Nelson had concluded that Next could sell [the three offerings], he did not conduct adequate continuing due diligence.”

The InvestmentNews.com article adds that outside due-diligence reports highlighted a number of red flags of the Provident offerings, and Mr. Nelson “should have scrutinized each of the [Provident] offerings, given the purported high rate of returns,” according to the AWC.

Next Fincancial’s $2 million in restitution to investors is part of a larger case brought by the receiver for Provident in federal court in Dallas. While at least 20 broker-dealers that sold Provident private placements have shut down or declared bankruptcy, others, now including Next Financial, have had the funds to pay the claims and remain open for business. About 50 broker-dealers in total sold Provident, which raised $485 million from 7,700 investors from 2006 to 2009.

Finra censured and fined Next $50,000, and fined Mr. Nelson $10,000 and suspended him as a principal for six months. Next Financial also failed to supervise adequately a registered rep’s sale of fraudulent life settlement products from 2007 to 2009, according to the AWC. The rep, who was not identified, sold $3.5 million in life settlement contracts to 35 clients.

Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member have experienced losses with Next Financial Group, Inc., call 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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WASHINGTON —It was announced July 20, 2011, on FINRA’s website that The Financial Industry Regulatory Authority (FINRA) has suspended William Bailey, a former NEXT Financial Group, Inc. broker of Mesa, Arizona, from the securities industry for two years for unsuitable and excessive trading of mutual funds and variable annuities. Bailey also engaged in discretionary trading without receiving prior written approval from his customers.

It was reported that FINRA found between January 2006 and December 2007, Bailey recommended 484 short-term mutual fund switch transactions in seven customer accounts. In each of the accounts, Bailey, on his customers’ behalf, repeatedly sold mutual funds less than one year after purchasing them, and purchased new mutual funds with the proceeds. With Bailey’s frequent switches, on average, his customers held their mutual funds for only 60 days. The seven customers, who ranged in age from 66 to 93 and were all unsophisticated investors, incurred over $147,000 in sales charges and trading fees. Bailey received over $120,000 in commissions from these sales. To facilitate his mutual fund trading scheme, Bailey frequently traded in his customers’ accounts without first obtaining their permission and improperly completed customer account forms to make it appear the customers approved of the trading.

 In the FINRA article it was reported that FINRA also found Bailey convinced three customers to switch their variable annuities for new ones after holding them for a short period of time. These exchanges were unsuitable based on the customers financial objectives and needs, and did not improve the customers’ financial situations.

 Mr. Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, “Brokers who engage in excessive trading will be held accountable. In this case, Mr. Bailey rapidly switched his elderly and unsophisticated customers in and out of mutual funds with high costs, providing a benefit to Bailey instead of to his customers.”

In settling this matter, Bailey neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

This information was obtained on FINRA’s website.

Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member feel you have become a victim of William Bailey or Next Financial Group, Inc., or a similar situtation, call 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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