Securities Fraud
TIC CLAIMS ON THE RISE VERSUS BROKERAGE FIRMS
Tenant in Common (TIC) claims against the brokerage firms that sold them have recently resulted in multiple large FINRA arbitration awards, according to this this Investment News article.
The use of Tenant-in-Common (TIC) real estate investments in conjunction with IRS 1031 exchanges greatly increased after the 2002 issuance of IRS Rev. Proc. 2002-22 which clarified issues related to the uses of TICs in like-kind exchanges.
TICs since that time have been typically sold as securities by securities salespersons registered with FINRA which is a self-regulatory organization overseeing the securities industry. These salespersons (registered representatives) are required to be registered with a Broker-Dealer (brokerage firm) also regulated by FINRA.
The failure of securities salespersons and their firms to perform due diligence on the TIC deals they recommend, and on the sponsors of the TIC deals, can result in disastrous outcomes for their customers. In addition, salespersons must engage in a suitability analysis prior to recommending TIC deals to their customers to ensure that these illiquid investments are suitable for the customer’s financial situation. Federal and State Securities laws also prohibit the misrepresentation or omission of material facts in conjunction with the sale of a security. Many state Acts provide for the recovery of losses, attorneys fees, and interest.
FINRA issued guidance to its members back in 2005 regarding the sale of TICs (FINRA Notice to Members 05-18). The selling firm had duties with regard to obtaining a clear understanding of the customer’s investment goals and financial status for the purposes of making a suitability determination. The firms’ representative also had to take into account the illiquid nature of the TIC interest, the risks from over-concentration, and the “investment potential of the underlying real estate asset(s).” In regard to overconcentration, FINRA warned: “Concentration of an investor’s assets in a single asset class, however, is not suitable for many investors.”
TICs are typically leveraged with a bank loan, and such leverage can unfortunately result in customers’ investments being wiped out should the bank foreclose on the property. If you have lost monies in an illiquid or foreclosed upon TIC, and believe you may have a claim against the salesperson and firm, please contact one of the attorneys at Greco & Greco for a free consultation. Greco & Greco regularly represents investors on a contingency basis.
Posted by Greco & Greco on 02/21 at 04:49 PM
Arbitration •
Brokerage Firms •
Invest Financial •
LPL Financial •
FINRA •
Private Placements •
Securities Fraud •
Suitability •
TIC •
Permalink
Virginia Financial Fraud Task Force
As set out in this Washington Post article, federal prosecutors in Virginia have set up the Virginia Financial and Securities Fraud Task Force. This task force is comprised of members of the FBI, the Postal Inspection Service, the Securities and Exchange Commission, the Commodities Futures Trading Commission and the Virginia State Corporation Commission.
As set out in the story, the task force’s efforts have already resulted in multiple criminal convictions. A criminal conviction, however, does not always recoup losses for investors wronged by financial fraud. If you are the victim of a financial crime in which the salesperson or others involved in the scheme were registered to sell securities through a FINRA brokerage firm, you may be able to seek recovery of your losses through FINRA’s arbitration system. Please contact Greco & Greco for a free consultation with one of our lawyers.
Posted by Greco & Greco on 11/02 at 04:35 PM
Arbitration •
Brokerage Firms •
FINRA •
Ponzi Scheme •
SEC •
Securities Fraud •
State Regulators •
Virginia •
Permalink
Fredericksburg Virginia Registered Rep Indicted
As set out in this Fredericksburg.com article, John Robert Graves, a former FBI agent, was indicted on charges of defrauding Virginia investors out of $1,300,000. According to the indictment filed in U.S. District Court in Richmond (Case 3:11CR246), Mr. Graves used funds obtained from investors to buy personal real estate, to pay personal expenses and credit cards, to pay himself cash, and to pay back prior investors.
Mr. Graves operated Brooke Point Management in Spotsylvania County since 2003 which provided financial planning, insurance sales, estate planning, and investment advice to customers. According to FINRA’s Brokercheck report, Mr. Graves had been a registered securities salesperson since 1998 with various firms including, Harrison Douglas, Community Bankers Securities, Fintegra, Questar Capital Corporation, Pacific West Securities, and H. Beck. The Brokercheck report also discloses multiple pending arbitration claims alleging fraud, negligence, breach of fiduciary duty, and unsuitable investments regarding private placements, limited partnerships and REITs.
If you wish to discuss a potential securities fraud claim with one of our attorneys, please contact us here for a free consultation.
Posted by Greco & Greco on 10/13 at 02:35 PM
Arbitration •
Brokerage Firms •
Community Bankers Securities •
H. Beck •
Pacific West Securities •
Questar Capital Corporation •
Ponzi Scheme •
Private Placements •
Securities Fraud •
State Regulators •
Virginia •
Suitability •
Permalink
FINRA testifies regarding fiduciary standard and oversight of investment advisors
Rick Ketchum, the Chairman & CEO of FINRA testified before Congress recently regarding the Dodd-Frank Act, fiduciary standards for brokers and investment advisors, and oversight and regulation of investment advisors. His testimony can be found here.
In its testimony, FINRA agrees with many customer advocates that feel that Broker-Dealers (and their representatives) should be bound by the same fiduciary standard as registered investment advisors when giving personalized investment advice to the public. The testimony further restates the obvious: most customers cannot differentiate between services offered by Broker-Dealers versus Investment Advisors, and further are not aware of any differing standards of care or obligations.
The testimony further addresses the insufficient nature of current examinations of investment advisors by the SEC, and offers an allegedly better alternative: examinations by FINRA. FINRA maintains that investment advisor examinations and oversight by SRO’s (Self Regulatory Organizations) such as itself would help protect investors due to the fact that FINRA is currently overseen by the SEC, and currently examines many Broker-Dealers who also have investment advisory businesses.
Setting aside the adequacy of FINRA oversight, the fact remains that many customers who lose money due to the wrongful conduct of their broker or advisor cannot count on FINRA or the SEC to recover their funds. If you face such a situation, it is advisable to speak to an attorney to discuss your options. Our lawyers at Greco & Greco can be contacted here for a free consultation.
Posted by Greco & Greco on 09/16 at 03:34 PM
Arbitration •
FINRA •
SEC •
Securities Fraud •
Permalink
New SEC Office of the Whistleblower website
The SEC recently launched its webpage for the Office of the Whistleblower, an office created by the Dodd-Frank Wall Street Reform and Consumer Protection Act. (Click here for the site.) In the words of the SEC Whistleblower Chief Sean McKessy, the goal of the program is to “incentivize you to report possible violations of the US securities laws of which you become aware.” The site contains a FAQ section, links to the SEC Rules regarding whistleblowers, and Form TCR (Tip, Complaint, or Referral) to be used to submit a tip.
If you are a witness to information regarding a possible securities fraud, contact one of Greco & Greco’s attorneys here for a free consultation to discuss your options.
Posted by Greco & Greco on 08/19 at 01:33 PM
FINRA •
SEC •
Securities Fraud •
Whistleblower •
Permalink
SEC Adopts Securities Fraud Whistleblower Rules
The SEC recently approved final rules to govern its whistleblower program established pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act. The program has been established to encourage individuals to alert the SEC to evidence that helps the SEC in bringing securities fraud cases. The Rules were designed under the Act to increase the SEC’s authority to compensate whistleblowers regarding violations of the federal securities laws. The Rules may be found here.
There are several requirements for a whistleblower to be considered for an award of compensation. The whistleblower must voluntarily provide the SEC with original information regarding violations of the federal securities laws, rules, or regulations that leads to the enforcement by the SEC of a federal court or administrative action in which the SEC obtains monetary sanctions totaling more than one million dollars. The program also covers “related actions” which includes judicial or administrative actions by the U.S. Attorney General, regulatory authorities, self-regulatory organizations, or criminal prosecution by a state attorney general.
In regard to the “original information” requirement, the Rules contain complex requirements, limitations, and exceptions to information acquired through attorney-client privileged situations, and information obtained as an officer, director, trustee, partner, or compliance/audit employee. In certain circumstances, the Rules require disclosure of the information to the relevant entity within a specified time frame for the whistleblower to be entitled to payment under the Rules.
The amount of the award to the whistleblower will be decided by the SEC, however if the Rules’ requirements are met, the award will be between 10 and 30 percent of the monetary sanction that the SEC and other authorities are able to collect. The SEC will exercise its discretion in determining the exact percentage based on criteria set out in the Rules. Some of the positive and negative criteria to be applied by the SEC in the decision making process include significance of the information, assistance provided by the whistleblower, law enforcement interest, participation in internal compliance systems, culpability, unreasonable reporting delay, and interference with internal compliance systems.
This amount may also be divided by the SEC among multiple whistleblowers. Should the SEC deny payment, the Rules provide for an appeals process as well as an ultimate appeal to the U.S. Court of Appeals for the District of Columbia, or the circuit where the aggrieved person resides.
The SEC has provided specific forms for submission of information and a claim for an award. A whistleblower may remain anonymous when providing the information to the SEC, however to do so the whistleblower must be represented by an attorney with respect to the submission of information and claim for an award.
The Act and Rules also provide protections for the whistleblower from retaliation by the whistleblower’s employer, providing certain requirements are met.
If you wish to discuss a potential SEC whistleblower claim with a lawyer, please contact Greco & Greco here for a free consultation with one of our attorneys.
Posted by Greco & Greco on 07/08 at 03:23 PM
SEC •
Securities Fraud •
Whistleblower •
Permalink