Advisor Adam Belardino, The Maddox Group, Sentenced to 3 and Half Years for Scams

Following his guilty plea, a former New York City advisor was sentenced to three and a half years in jail for theft and scamming multiple investors and employees at his firm. Adam Belardino was sentenced this week in federal court in White Plains after pleading guilty last year to two counts of wire fraud and one count of misrepresenting to a government agency.

According to his BrokerCheck biography, N.Y. Belardino is a former CEO of The Maddox Group who has also worked for MML Investors Services and MSI Financial Services. In May 2021, he was permanently banned from working in finance after an investigation by the Financial Industry Regulatory Authority.

According to the Department of Justice, shortly after establishing the Maddox Group in August 2019, Belardino persuaded a 64-year-old New Rochelle, New York client he had previously advised to sell portions of her investment portfolio and transfer it to Maddox accounts. Belardino paid the firm’s salaries and rent with the over $330,000 she moved to a Maddox account, as well as her own personal expenses and travel costs that she had incurred using credit cards.

The victim disclosed her desire to move her Maddox portfolio to a brokerage firm account in Belardino in September 2021. Until February of last year, the advisor communicated with the client and her family via email and text message, saying he was liquidating the portfolio to return the funds and providing documents detailing an upcoming wire transfer. He also deposited checks drawn on a Maddox account into the victim’s bank account.

Related: Ex-broker in Oregon facing five years in prison for $2.5 million in tax evasion

To make matters worse, the DOJ claims that Maddox’s bank account lacked the necessary cash to support the wire transactions and that the cheques on the account bounced. Belardino assured the victim’s family that his own family would repay the client if Maddox couldn’t pay, and he kept sending them proof that Mr. Maddox had the money to cover the funds.

In a second fraud, Belardino posed as an insurance company salesperson and helped a customer obtain a $1 million life insurance policy that was later increased to $18 million. The advisor registered for a $3 million policy with a different insurance provider on behalf of the client in April 2020, using false statements regarding the client’s income, net worth, and health. In August 2020, the business will increase the policy’s face value to $6 million.

Without the client’s knowledge or permission, Belardino also attempted to get her a third insurance coverage with a different business. Due to his exaggerations about the client’s income and health, the policy’s face value was increased from $5 million to $12.1 million by May 2021. Without informing either client, Belardino paid the coverage premiums and pocketed approximately $180,000 in commissions.

He allegedly plotted against Maddox Group personnel as well. Belardino established 401(k) plans for workers, but between November 2020 and August 2021, he illegally withheld over $8,000 from the salaries of four workers. Instead, he used the funds for personal expenses.

As of this writing, Belardino’s counsel had yet to respond to a request for comment.

Belardino was sentenced to 42 months in jail, 3 years of supervised release, and was ordered to pay over $501,500 in reparations.

source https://financialadvisorcomplaints.com/advisor-adam-belardino-the-maddox-group-sentenced-to-3-and-half-years-for-scams/

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source https://financialadvisorcomplaints.com/2022/11/27/hello-world/

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Welcome to WordPress. This is your first post. Edit or delete it, then start writing!

source https://financialadvisorcomplaints.com/2022/11/25/hello-world/

Morgan Stanley Fined $125 Million By SEC For Employee Communications

Disclosing their agreement to pay $125 million to the Securities and Exchange Commission (SEC) $125 million and $75 million to the Commodity Futures Trading Commission $75 million “to resolve record-keeping related investigations by those agencies relating to business communications on messaging platforms that had not been approved by the Firm,” in an SEC regulatory filing, Morgan Stanley has become the latest securities firm to face the ire of regulators over the use of unapproved channels of communication by employees, and reach a settlement.

This was in December. In its earnings report for the second quarter, it even disclosed the setting aside of $200 million for the settlement.

The fine is a part of broad investigations being conducted by regulators on how the monitoring of communications by employees is done by financial institutions. Many other institutions are impacted.

A similar amount has been set aside by Bank of America for “expense relates to an industry-wide issue and it concerns the use of unapproved personal devices” while sounding hopeful of settling the issue soon, even as it disclosed the provision.

Mark Mason, the chief financial officer of Citigroup, had disclosed in an earnings call with reporters in July the creation of a one-time reserve to cover the currently ongoing investigation in the matter by regulators.

In its latest quarterly report, UBS has claimed to be targeted by the CFTC and SEC in these investigations. It has advised that it was offering all support to the regulators.

How the SEC Protects Investors

The SEC is a federal agency established in the aftermath of the Wall Street Crash of 1929 that focuses on market manipulation and abuse. Its primary purpose is to enforce the law and prevent companies from manipulating the markets. The SEC has many roles, but its primary purpose is to ensure that the public does not lose money by risking their investments.

EDGAR

The EDGAR database is a single repository of public filings by companies and individuals. It gives users access to more than 20 years of corporate financial data. It also provides investors access to various investment products, such as mutual funds. However, it’s not free. You can pay for a subscription to use the service, but the cost can be prohibitive to many investors.

The EDGAR database allows people to research public companies, exchange-traded funds, variable annuities, and mutual funds. You can search by ticker symbol, company name, or industry to access detailed information. Once you’ve found the company you’re interested in, you can access its information.

The SEC started using EDGAR in 1984 as a pilot program to replace the outdated paper-based filing system. Over the years, the program expanded and companies began to submit all their documents electronically via EDGAR. Today, the EDGAR database contains tens of millions of public filing documents. It serves over 3,000 new companies and over 40,000 new filings per day. You can use EDGAR from any computer with a connection to the internet.

EDGAR is not the only place where you can access SEC filing information. There are also unofficial PDF versions of SEC filings. While PDF documents are technically equivalent to the official SEC filing, there are still some differences. For instance, a PDF document may be formatted differently and contain graphics. It is important to review the original filing for accuracy in these instances.

The SEC uses EDGAR to store and provide investors with public records of filings for publicly-traded securities. Companies that wish to raise money from large contributors or small investors may need to file an SEC form. In addition, companies outside the U.S. may need to file SEC forms if they plan to launch a mutual fund or ETF. ETFs have different filing requirements than money market funds.

Sarbanes-Oxley Act

The Sarbanes-Oxley Act, enacted in 2002, is important legislation requiring companies to report their financial data to investors. The act aims to protect investors from financial misdeeds and improve corporate transparency. It requires senior management of companies to certify their financial statements, imposes harsh penalties for financial misconduct, and ensures the independence of outside auditors.

The Act also requires public companies to publish studies and reports that analyze their financial health and operations. Public companies must also report changes in their financial condition and operations on a timely basis. In addition, they must provide additional information to investors, including trend information and qualitative information.

The Sarbanes-Oxley Act, also known as SOX, was passed in 2002 by the U.S. Congress as a response to the major accounting scandals that occurred in the early 2000s. Enron Corporation and WorldCom were two examples of companies that deceived investors. Because of these scandals, the Sarbanes-Oxley Act was enacted.

SOX compliance is largely records-related. Companies need to make sure that electronic and paper files are organized and secure. They also need to make certain that financial reports are carefully written and filed. Some companies complain about the costs associated with SOX compliance.

The Sarbanes-Oxley Act imposes various requirements on a company’s board of directors and executive officers. In addition, companies must hire an independent auditor to audit their accounting practices. The SEC enforces this requirement by means of civil and criminal penalties.

Regulation SCI

Regulatory experts worry that a rouge algorithm may destabilize the securities market, wiping billions of dollars worth of market value. The final rule aims to prevent such occurrences by requiring SCI entities to implement minimum standards and conduct testing to ensure that their systems are secure and compliant.

The rules are intended for entities that operate proprietary trading algorithms and platforms. They do not apply to broker-dealers. The rule applies to entities in the U.S. that operate at least 5% of their dollar volume on a weekly or daily basis. In addition, SCI ATSs would have to be supervised by a regulator to maintain their status.

The new regulations will take effect 60 days after the Federal Register is published. However, most compliance requirements will not be enacted until nine months from publication. The SEC adopted Regulation SCI under the Securities Exchange Act of 1934 in response to several high-profile disruptions in U.S. securities markets, including Facebook’s IPO and Nasdaq’s suspension of trading in August 2013.

Regulation SCI requires SCI entities to establish comprehensive policies and procedures to ensure compliance with federal securities laws and Commission rules. It also requires them to establish an Annual Compliance Review and a Business Continuity Plan. These policies and procedures also provide a safe harbor against liability.

Regulation SCI also requires the timely reporting of SCI events. This includes preserving records and keeping books. The rules also require the SCI entity to submit a quarterly report to the Commission. This is an important component of compliance, and entities should designate employees to provide these notifications. Furthermore, firms should ensure their agreements with vendors specify their notification requirements.

No-action letters

No-action letters to the SEC have been increasing in recent years. As the Trump administration took office, SEC chairman Jay Clayton adopted a more business-friendly approach. However, the new approach has also been criticized by some Republicans. Some companies feel that social issues have little to do with their financial performance and that dealing with these issues is an unnecessary burden.

The SEC and FinCEN have stated that no-action letters to the SEC should be treated with caution. The agency may change its stance based on the information provided in the letter. It may also change its stance and make no-action letters revocable.

However, a change in the Staff’s approach may have a negative impact on shareholder proposals. Ultimately, the lack of clarity on the new procedures may prevent companies from fully explaining their positions. As a result, shareholder proponents may continue to submit responses that refute those positions.

Another recent no-action letter to the SEC highlights the risks associated with using these services. In the no-action letter to SMC Capital, the SEC acknowledged that these firms can use this technique to avoid competition between orders. However, the letter’s scope is unclear. It appears that a no-action letter from the SEC will not be enough to change this practice.

The letter should include a copy of the request for interpretation and a reference to sections and rules. There should also be a separate copy for the staff.

Whistleblower rewards program

A whistleblower can receive up to 30 percent of the award amount when he or she reports a securities violation. The amounts awarded are determined by the SEC and CFTC based on the significance of the information and the degree of assistance that the whistleblower provides. In addition, they also consider other factors.

In order to qualify for a whistleblower award, the whistleblower’s report must lead to a successful action by the SEC. In most cases, the SEC will award a whistleblower between 10 percent and 30 percent of the amount of the sanction. If the SEC recovers more than $1 million, a whistleblower may receive up to 30 percent of the total amount.

In addition to reporting fraud or other violations of securities laws, whistleblowers can also report bribes to foreign officials. The information must be provided voluntarily and based on independent knowledge and analysis. Additionally, the information must lead to an order imposing monetary sanctions of more than $1 million. While an employee may directly apply for a reward, attorneys, corporate officers, and auditors may be eligible as well.

According to the Securities and Exchange Commission’s whistleblower program, over $1 billion has been awarded to whistleblowers in the financial sector. However, a new study found that the SEC outsources tip gathering to high-priced law firms, and this could discourage potential whistleblowers.

The Dodd-Frank Wall Street Reform and Consumer Protection Act included whistleblower rewards programs for whistleblowers who report violations of securities laws. This law also included a similar program for the CFTC. In addition to monetary rewards, whistleblowers may also be eligible for restitution or disgorgement.

source https://financialadvisorcomplaints.com/morgan-stanley-fined-125-million-by-sec-for-employee-communications/

UBS FA German Nino Gets 78 Months in Prison for Stealing Client Money

Broward County, Florida-based financial adviser German Nino, found guilty of stealing from three advisory clients of his then firm UBS, has been handed down a prison sentence of 78 months by U.S. Senior District Judge Donald Graham. Forfeiture of his interest in a home in Ave Marie, Florida, has also been agreed by Nino, as a part of the sentence.

According to his BrokerCheck record, Nino, a registered UBS representative between July 2012 and August 2020, joined the industry in 1995.

US Attorney’s office case

Nino is found to have stolen over $6 million from the accounts of his clients, between 2014 and 2020, through 62 transfers from their accounts, all of them unauthorized, as revealed by the U.S. Attorney’s Office for the Southern District of Florida, which also stated that a major part of the money was spent “on funding his own extramarital affairs.”

The US Attorney’s office also shared the various ruses used by Nino to facilitate the perpetration of this fraud:

• Misrepresentation of the balance, return and performance on their accounts
• Forgery of signatures of clients
• Removal of the email address of one of the clients, in order to prevent alerts about unauthorized transfers from reaching
• Preparation of bogus account statements

Securities and Exchange Commission case

The Securities and Exchange Commission (SEC) has alleged that Nino diverted $1.2 million out of the stolen funds to pay another client from whom he had stolen earlier.

The SEC has filed a civil complaint against Nino that accuses him of theft of an amount of approximately $5.8 million from a couple who were clients of UBS who he was advising, and that it was mostly spent on “gifts and travel and living expenses for women with whom he had a romantic relationship.”

How to Spot Stock Broker Fraud

To avoid becoming a victim of stock broker fraud, you should get reports from your brokers. Compare these reports with the information provided by BrokerCheck and other sources. Make note of differences in reports, especially typos. Recent scams involved doctored information in different fonts and states. You can also check whether the broker is a member of any professional associations. If you think that your broker is a scammer, you should contact the relevant state authorities and an investment fraud lawyer.

Unauthorized trading

Unauthorized trading is the practice of a stockbroker making rogue trades in the account of a client or customer without the investor’s knowledge. Generally, brokers can’t make a trade unless the client has given their express permission to do so. A broker must seek permission from the investor before making any trades, but if they fail to do so, they are committing broker misconduct and fraud.

To determine whether you’ve been the victim of stock broker fraud, check your confirmations and monthly statements. Excessive confirmations may be an indication of unauthorized trading. Make sure confirmations arrive within three days of trade and include details of the transaction. If you do receive unauthorized trades, contact your broker and demand to know why.

Churning

As investors, it is important to know how to spot a churning stock broker fraud case. The first element of churning is the client’s written authority. Most churning cases involve retail accounts that are non-discretionary. Additionally, there must be evidence that the broker has actual control over the account. This could include a client who follows the recommendations of a broker or frequently trades in a way that is counter-productive to the client’s objectives.

When a stockbroker is churning, he may not be aware of his activity until after the client has lost money. Fortunately, there are many warning signs of churning. For example, a high turnover rate and excessive buying and selling fees can indicate a problem. Your stockbroker may also recommend transactions that are unnecessary and increase your tax liability. Churning stock broker fraud should be investigated immediately.

Lack of supervision in stock broker operations

When a broker fails to properly supervise its staff, he or she may be directly liable for the actions of an employee. This is known as vicarious liability, and if the brokerage firm failed to supervise the employee, the employee’s actions may be considered negligence. If an employee fails to report suspicious activity to the brokerage firm, it may be held directly responsible. A stock broker’s failure to properly supervise its employees may be considered a form of negligent hiring.

In order to avoid liability issues, brokers should consider making team members licensed employees instead of commission-paying team members. The broker needs to educate team leaders on the issue of worker classification to avoid potential liability. Typically, teams focus on a top-producing team member, who may be the sole customer contact, and may dictate salespeople’s interactions with clients.

Compensation for investment losses caused by stock broker fraud

Many investors may not realize it, but stock broker fraud is more common than they think. While many investors understand that there are certain risks involved in investing in stocks and other securities, investment losses are rarely simply the result of bad luck. Stockbrokers and brokerage firms can be negligent or intentionally misrepresent the risks and rewards of investing, and this can lead to serious investment losses. If you or someone you know has lost money through stock broker fraud, you may be able to recover your investment losses through a securities fraud arbitration case.

Haselkorn & Thibaut represents clients nationwide in claims involving stockbroker fraud. Our attorneys have more than 50 years of combined experience representing investors in such cases. Contact us today to discuss your potential claim. We are free to review your case and do not charge unless we recover compensation for you. If you have lost money due to the actions of a stockbroker, we will fight for you and help you get the compensation you deserve.

source https://financialadvisorcomplaints.com/ubs-fa-german-nino-gets-78-months-in-prison-for-stealing-client-money/

National Securities Corporation (NSC) Fined $9 Million From FINRA For Rule 101 Violations

National Securities Corporation (NSC) has been fined $9 million by FINRA, including $4.77 million in net profits the company made for underwriting 10 public offerings in which NSC sought to manipulate the market for the securities it was selling.

For failing to provide consumers who bought private placements from GPB Capital Holdings, LLC with significant information, FINRA also ordered NSC to pay more than $625,000 in damages. For this wrongdoing in addition to many other supervisory and operational infractions, FINRA also assessed a $3.6 million punishment.

Jessica Hopper, Executive Vice President and Head of FINRA’s Department of Enforcement, stated that investors have a right to rely on a market free from false price movement caused by underwriters. “We will keep up our vigilance in enforcing the rules designed to prevent underwriters from influencing the market for a security offered, including boosting the offering price by insinuating aftermarket demand,” the company stated.

FINRA determined that NSC violated Rule 101 of Regulation M under the Securities Exchange Act of 1934 by illegally inducing or attempting to induce certain customers to purchase stock in the aftermarket of the offerings before they were completed between June 2016 and December 2018 while acting as an underwriter for three initial public offerings and seven follow-on offerings.

Underwriters are not allowed to try to persuade someone to make an aftermarket bid or purchase security during a limited period, according to Rule 101.

FINRA discovered that NSC broke Regulation M in connection with 10 offerings by doing one or more of the following during the restricted period for each offering:

• Putting a clear restriction on allocations, known as “tie-in agreements,” requiring branch managers or representatives to purchase a predetermined number of shares for their clients on the secondary market;
• Decided to approach clients who received allocations to ask them to buy more shares in the immediate aftermarket; and
• Threatened to cut representatives’ allocations if they didn’t agree to persuade their clients to join in the aftermarket.

NSC’s actions were intended to artificially boost aftermarket demand and support the price of the supplied securities, which tended to be lightly traded. The standing of the company and its capacity to generate future investment banking fees depended on how well the underwritten offers of NSC performed in the aftermarket.

The agreement settles numerous additional complaints against NSC, including that the company:

• Negligently failed to notify investors in two offerings connected to GPB Capital between April 2018 and July 2018 about delays in the issuer’s required public filings, including audited financial statements—for which FINRA has ordered the firm to pay those customers more than $625,000 in restitution;
• Failed to acquire locates for more than 33,000 short sale transactions between January 2005 and April 2020 as required by Rule 203(b)(1) of Regulation SHO under the Exchange Act;
• Between September 2013 and May 2017, failed to properly supervise one of its representatives by ignoring numerous warning signs that he was fabricating data on customers’ assets and suitability in order to get around NSC’s concentration level restrictions that applied to his recommendations for non-traded real estate investment trusts;
• Made false claims to FINRA regarding the sales of stock warrants it acquired in conjunction with a public offering in October 2019.

Without admitting or disputing the allegations, NSC agreed to the entry of FINRA’s conclusions in the settlement of this case.

source https://financialadvisorcomplaints.com/national-securities-corporation-nsc-fined-9-million-from-finra-for-rule-101-violations/

Merrill Lynch Fined $15.2 Million By FINRA

Merrill Lynch was fined $15.2 Million ($13.4 Million plus interest) by Financial Industry Regulatory Authority (FINRA). It allegedly charged consumers exorbitant fees for mutual fund transactions. Merrill was not penalized for the infraction due to its “exceptional cooperation”.

Mutual fund issuers offer several classes of mutual fund shares, including Class A and C. Class A shares are subject to a front-end sale fee. Class C shares don’t. On the other hand, Class C shares have higher yearly expenses and are often subject to a deferred sale charge.

Many mutual fund issuers offer discounts for customers who purchase enough Class A shares. They also offer no sales tax if they meet certain volume limits.

Merrill Lynch’s automated system was created to prevent Class C share transactions when Class A shares were made available at NAV or at a discounted price. Although the automated system accurately calculated customer purchases and fund holdings. However, FINRA stated that the system applied a Class C share purchase limit that was incompatible with a fund’s Class C limit purchase limit or a threshold for when Class A stocks were available at net assets value. This resulted in thousands of clients buying Class C shares and paying fees and charges when Class A shares were more affordable.

According to FINRA, Merrill Lynch customers paid $13.4 million in additional fees and costs between January 15 and January 2021.

FINRA praised Merrill’s “extensive inquiry” into the firm’s systems related to Class C mutual funds sales following the discovery. It was hailed by FINRA for its “exceptional cooperation and significant help.” A substantial fee was also paid to an independent expert by the company to identify affected customers and to “promptly create” a remedy plan for them.

Merrill Lynch, a full-service brokerage company, offers sales, trading, research, and underwriting services through approximately 31,000 agents. In January 2009, Merrill Lynch was an indirect, wholly-owned subsidiary of Bank of America Corporation.

How to File a Financial Advisor Complaint

Filing a financial advisor complaint is a good way to get redress for problems you have with your financial advisor. However, you need to be careful when filing a complaint. If you file it without proper research, it is likely to be dismissed without a proper hearing. Here are some tips to file a complaint:

The first step in filing a complaint is to contact FINRA. FINRA is a separate regulatory body from the U.S. government. They regulate the financial industry and enforce federal securities and foreign exchange laws. If you feel your complaint has merit, you should contact the FINRA or your state securities regulator. An attorney will help you file the complaint, review it and protect you during the arbitration. Here are the steps involved.

If the complaints are resolved, you can also file them with the Securities and Exchange Commission, the government agency that regulates securities professionals. The SEC can investigate complaints against financial advisors and take action, or dismiss them without any action. However, you should first seek the advice of an SEC-approved financial advisor before filing a complaint. A financial adviser’s qualifications should also be investigated by the SEC. It should be able to prove that he or she is qualified to provide investment guidance.

A financial advisor’s record can tell you a lot about the quality of their services. Moreover, if you’ve had to deal with more than one financial advisor in the past, you may want to think twice about hiring them. In addition, you should know how they compensate themselves. Some charge hourly fees while others work on commission. Regardless of the way they make their money, a financial advisor’s past will remain on their record.

Contact us today if you believe your financial advisor did something wrong and we will give you a free consultation with one of our experienced investment lawyers.

source https://financialadvisorcomplaints.com/merrill-lynch-fined-15-2-million-by-finra/