Of particular note is The Huntington Investment Company’s case, which stands out due to its self-reporting and cooperation with the SEC. As a result, Huntington was ordered to pay a lower civil penalty compared to other firms, totaling $1.25 million. This demonstrates the importance of voluntary disclosure and cooperation in regulatory investigations.

The investigations uncovered widespread use of unapproved communication methods, such as personal text messages, across all sixteen firms. Employees at various levels, including supervisors and senior managers, were involved in these violations. The failure to maintain and preserve required records potentially deprived the SEC of crucial information in various investigations.

Each of the firms involved was charged with violating recordkeeping provisions of relevant securities laws and failing to reasonably supervise to prevent and detect such violations. In addition to the financial penalties, the firms were ordered to cease future violations, receive censures, and engage independent compliance consultants to review and enhance their policies and procedures.

Most securities brokerage firms and investment advisory firms prohibit texting between financial advisors and brokers and their customers because of the difficulty of supervising those communications. The reality is, however, that many brokers and advisors don’t follow these rules and often will send texts that can be used against them and their firms in related securities fraud actions. For this reason, customers who have been damaged by the wrongdoing of their advisors should take care to preserve all communications with their advisors including texts. If you believe you may have a claim against your financial advisor, broker, or their firm, please contact securities fraud attorney Scott Greco for a free attorney consultation.

The alleged wrongdoing centered on the language included by J.P. Morgan in its settlement agreements with its advisory and brokerage firm customers to which it paid over $1,000.00. Virtually all FINRA securities firms and Registered Investment Advisors require a confidentiality clause to be included in any settlement agreement with a customer. These settlement agreements are often the result of various misconduct by the firms or their advisors, such as securities fraud, breach of fiduciary duty, unauthorized trading, broker theft, recommended unsuitable investments, and churning. The reason why securities firms always require their settlements to be confidential is clear – they wish to hide their misconduct and the misconduct of their advisors from the public. FINRA’s Brokercheck report does require firms to disclose settlements with advisors/firms, but the details are often extremely general, and one has to look up the broker directly to find the disclosures.

According to the SEC Order, from 2020 to 2023 J.P. Morgan included language in 362 release agreements that prohibited customers not only from disclosing the amount of the settlement to the SEC, but also prohibited disclosing the facts related to the account (i.e. the misconduct). Although the releases did allow disclosure to the SEC in response to an inquiry, it did not allow the customers to initiate contact with the SEC.

These actions allegedly violated the SEC protections for securities whistleblowers, and as stated by the SEC in the Order: “JPMS willfully violated Exchange Act Rule 21F-17(a), which prohibits any person from taking any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation.”

In addition to the fine, J.P.Morgan was required to advise its customers that they were allowed to contact the SEC directly.

If you were the victim of misconduct of a securities brokerage firm or financial advisor/broker resulting in the loss of your monies, please contact investment fraud attorney Scott Greco for a free attorney consultation about your potential case.

According to the SEC Order, between February 2017 and August 2021, BAM, under Bruderman’s direction, persuaded at least thirteen investment advisory clients to invest substantial amounts totaling $6.1 million in entities where Bruderman had significant ownership and decision-making authority. Shockingly, these clients were not informed that their investments would temporarily be diverted to cover expenses unrelated to their intended investments or to repay loans made by Bruderman himself.

One particularly concerning example involved a $500,000 equity investment, where $400,000 was transferred to Bruderman’s personal bank account to repay a loan owed by one of the entities. The clients invested based on BAM’s advice, unaware of the temporary diversion of their funds. Despite BAM’s written policies requiring disclosure of material conflicts of interest, these conflicts remained undisclosed, leaving clients in the dark about the use of their investments.

The SEC found BAM and Bruderman in violation of the Advisers Act, specifically Sections 206(2) and 206(4), and Rule 206(4)-7. As part of the settlement, BAM and Bruderman have voluntarily repaid certain debts to investment advisory clients, totaling $1,650,000, and further were required to pay a $250,000 civil penalty.

This SEC order serves as a stern reminder of the regulatory responsibilities that investment advisers bear towards their clients. Misuse of customer funds and failure to disclose conflicts of interest are serious violations that can result in substantial penalties. Greco & Greco’s securities fraud lawyers have decades of experience seeking recovery of customer losses resulting from misconduct and fraud by investment advisory firms. If you believe you may be a victim of similar conduct, please contact Scott Greco for a free attorney consultation about your case.

The AWC discussed the fact that Janney’s supervisory system red flagged these concentrations, but Janney “failed to take reasonable steps to understand the potential risks and rewards.”

In addition to being censured by FINRA, Janney was fined $100,000 and ordered to pay restitution to the customers that had not yet received restitution in the total amount of $145,019.

Concentration of customer accounts in one sector such as energy, or in multiple master limited partnerships (MLPs), can result in an unsuitable risk in customer accounts, and also may violate Regulation Best Interest (Reg BI). Firms such as Janney are required to have in place reasonable systems to supervise their advisors and accounts to attempt to prevent such violations.

If you have lost monies resulting from unsuitable overconcentration in a single sector, in oil and gas, or in unsuitable MLPs, we may be able to help. Please contact our securities fraud lawyers at Greco & Greco for a free attorney consultation.

Reg BI, 17 CFR 240-15l-1, specifically describes the “best interest” obligation as follows in section (a)(1):

“A broker, dealer, or a natural person who is an associated person of a broker or dealer, when making a recommendation of any securities transaction or investment strategy involving securities (including account recommendations) to a retail customer, shall act in the best interest of the retail customer at the time the recommendation is made, without placing the financial or other interest of the broker, dealer, or natural person who is an associated person of a broker or dealer making the recommendation ahead of the interest of the retail customer.”

Reg BI includes four best interest obligations – the disclosure obligation, the care obligation, the conflict-of-interest obligation, and the compliance obligation.

Although firms may address some conflicts of interest by disclosure to customers, the SEC discussed that certain conflicts cannot simply be disclosed, and must be eliminated. Specifically, the following activities by the Broker-Dealer would violate Reg BI – “sales contests, sales quotas, bonuses, and non-cash compensation that are based on the sales of specific securities or specific types of securities within a limited period of time.”

Many cases of investor harm that end up in FINRA Arbitration are a result of financial incentives to the broker which encouraged the wrongful conduct or unsuitable recommendation. This can include churning, but also can involve high risk securities / investments that pay higher fees or compensation to the broker to generate more sales of the product. Issuers of high risk but low reward investments pay high commissions (sometimes at 8% or higher) because otherwise no reasonable broker would sell the investment. This can and does then lead to losses by public customers who were not explained the risk, and trusted their financial advisor. As the SEC makes clear, a Broker-Dealer cannot encourage the sale of certain kinds of high commission products through sales contests or quotas, and must have a compliance system in place to detect and prevent such violations of Reg BI.

If you believe you may have a potential claim against your financial advisor, please contact Scott Greco for a free attorney consultation about your case.

• From 2012 until 2022 Mr. Good solicited customers to transfer funds to his personal bank account, allegedly for investments in real estate and government bonds.
• In ponzi scheme fashion, the transferred monies were used to repay earlier customers who had also invested, in addition to payment of Mr. Good’s personal expenses.
• The alleged fraud included at least $4,800,000.00 paid from customers, and approximately $2,000,000.00 in losses for investors.

Mr. Good was also indefinitely barred from the securities industry by FINRA pursuant to an Acceptance, Waiver and Consent agreement. Mr. Good’s FINRA Brokercheck report also discloses two customer complaints of alleged misappropriation of funds.

The Brokercheck report does not report any settlement of the claims by Mr. Good or Morgan Stanley. Securities firms such as Morgan Stanley may be found liable for the wrongful and fraudulent actions of their brokers under a number of legal theories. First, employers can be liable for the fraudulent acts of their employees and agents under basic agency law. Second, most state securities laws including North Carolina’s hold control persons (firms and management of firms) legally responsible for the securities fraud of their brokers, and provide for returns of losses, interest, and reasonable attorneys fees.

If you were a victim of Mr. Good or another financial advisor who stole funds or conducted a ponzi scheme, and wish to discuss your potential case with an attorney, please contact the securities fraud lawyers at Greco & Greco. You can contact Scott Greco here for a free attorney consultation.

The Complaint alleges that Western and its brokers sold high risk and potentially illiquid L bonds issued by GWG Holdings, Inc., with many of the sales to customers on fixed incomes and with moderate risk tolerances. The SEC’s press release alleged that the Defendants “failed to comply with Reg BI’s “Care Obligation” both because they did not exercise reasonable diligence, care, and skill to understand the risks, rewards, and costs associated with L Bonds, and also because they recommended L Bonds to at least seven particular customers without a reasonable basis to believe the bonds were in their customers’ best interests.”

The SEC also claimed that the activities and sales violated the compliance component of Reg BI which requires firms to establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance with Reg BI.

Western’s advisors allegedly sold $13.3 million of the L bonds in 2020 and 2021.

Greco & Greco’ securities fraud lawyers regularly represent harmed individuals who were sold unsuitable investments that were not in their best interest, and has brought multiple FINRA arbitrations against Western International in the past. If you lost money in GWG L bonds sold by Western brokers or brokers from another firm, and wish to discuss your claims, please contact Scott Greco for a free attorney consultation.

According to the SEC Press Release, the firms recommended the purchase and holding of these products, despite the fact that the products were only supposed to track the short term volatility in the market, and would likely decline if held long term.

The exchange traded funds (ETFs), attempted to track the short term volatility expectations of the market. Examples referenced in the SEC Orders were iPath S&P 500 VIX Short–Term Futures ETN (“VXX”), Velocity Shares Daily Inverse VIX Short Term ETNs linked to the S&P 500, VIX Short-Term Futures Index (“XIV”), and another volatility-linked security called the ProShares VIX Short-Term Futures ETF (“VIXY”).

The firms that reached a settlement of the SEC charges were American Portfolios Financial Services/American Portfolios Advisors Inc., Benjamin F. Edwards & Company Inc., Royal Alliance Associates Inc., Securities America Advisors Inc., and Summit Financial Group Inc.

The SEC also alleged that the firms failed to implement written policies and procedures to prevent violation of the Investment Advisers Act and its Rules, and several firms failed to supervise their representatives.

FINRA securities firms and Investment Advisory firms have duties to supervise their financial advisors, and implement reasonable supervisory systems to detect and prevent unsuitable sales and recommendations. Such firms can be held liable in FINRA arbitrations and other forums for the wrongful acts of their agents, and for their failures to supervise. If you were sold unsuitable ETFs, or were the victim of other wrongful activity relating to investments, and you would like to discuss your potential claims for free with an attorney, please contact W. Scott Greco at Greco & Greco, P.C. W. Scott Greco has decades of experience recovering monies lost through the wrongful acts of financial advisors.

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