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/

John Jumper (ALLUVION SECURITIES) Sentenced to 78 Months For $5.7 Million Embezzlement

John Jumper was a former broker with Alluvion Securities who stole $5.7 million from Snowshoe Refractories (a Pennsylvania-based firebrick manufacturer’s pension plan benefit plan). Jumper was also ordered by Snowshoe Refractories to pay $2.4 Million in restitution. This reflects financial recoveries made by Snowshoe Refractories. He will spend 78 months in prison, followed by three years of supervision.

According to United States Attorney John Gurganus, Jumper allegedly signed bogus documents allowing him to transfer funds from the pension plan three more times between March 2015 & April 2016.

The embezzled funds were used to purchase an Arkansas tubing facility and three other businesses. He also used them to repay $1.2million in personal debts and pay his legal bills.

He also had a personal interest in the firms he bought with the embezzled money. The sale of Arkansas’ tubing company netted Alluvion Securities, his Memphis broker, more than $1,000,000 in fees.

According to the indictment, there were approximately 129 employees who were active or retired from the Snow Shoe Refractories employee retirement plan. When the $5.7 million fraud began, assets in the pension plan were valued at $9.8million.

Both the Securities and Exchange Commission and Financial Industry Regulatory Authority issued regulatory and civil sanctions against Jumper.

In November 2018, a federal judge in the Western District of Tennessee granted his motion for default judgment by the SEC. He was banned from violating securities laws and ordered to pay $5.7 million in fraudulent gains, $726,800 prejudgment interest, and to repay the money.

FINRA permanently disqualified Jumper from the securities industry in February 2017. This was due to claims that he had misused monies from Snowshoe’s pension plan for personal use and capital injections into Alluvion Securities, his member company.

With the assistance of the US Department of Labor’s Employee Welfare Services Administration, Financial Industry Regulatory Authority (FINRA), and the US Securities and Exchange Commission (SEC), the Federal Bureau of Investigation investigated this matter. George Rocktashel, Assistant US Attorney, prosecuted the case.

source https://financialadvisorcomplaints.com/john-jumper-sentenced-to-78-months-for-5-7-million-embezzlement/

FINRA Panel Asks Morgan Stanley and Advisor Francisco Valenzuela to Pay $330K For Fraud and Elder Abuse Claim

Morgan Stanley, along with one of its financial advisors, now former, Francisco Valenzuela, have been asked to pay $330K over several violations, including allegations of fraud, by an arbitration panel of the Financial Industry Regulatory Authority (FINRA).

The claim was filed by Carlos Ramon Tapia Sanchez in October 2020. Allegations included supervisory failure, conversion, fraud, and elder abuse, among several others. The claim is related “to various unspecified securities,” as per the award document published by FINRA. In addition to Morgan Stanley and Valenzuela, Merrill Lynch was also named as a defendant.

A total sum of $357,622 was sought, which included lawyers’ fees, apart from compensatory damages.

Sanchez, in March 2020, filed a voluntary dismissal of claims notice against Merrill, with prejudice. As per the award document, the arbitrators made no determination against Merrill Lynch for relief requests against them.

Are you a victim of investment fraud by Francisco Valenzuela? Contact Haselkorn & Thibaut, P.A. at 1-888-614-9356 for a free private consultation.

Record of Francisco Javier Valenzuela

Starting in the financial services industry in 1996, Valenzuela moved through six different firms before he joined Merrill Lynch in 2010. From there he moved to Morgan Stanley with whom he stayed till 2018, as per his BrokerCheck record.

Though Valenzuela had been barred by FINRA in July 2018, with effect from October 2018, for his failure, in a timely manner, to request for the termination of suspension, the bar was vacated by FINRA in November 2018.

Valenzuela was suspended by FINRA for 8 months in December 2019, effective January 2020. This was for his failure to disclose a material fact on the U4 Form.

After leaving Morgan Stanley in 2018, Valenzuela has not registered with any other firm.

The verdict

Both Morgan Stanley and Merrill Lynch denied any wrongdoing and sought a dismissal of the claim, including that of arbitration costs and lawyers’ fees, as revealed by FINRA

Valenzuela, it appears, failed to file an answer statement as well as a properly executed agreement of submission.

He was asked to pay $160,000 towards compensatory damages for fraud, manipulation, and misrepresentation, as per the award document. Morgan Stanley was asked to pay a matching amount to the claimant on account of supervisory failure and negligence.

Additionally, Morgan Stanley and Valenzuela were also asked to pay lawyers’ fees of over $10,000.

source https://financialadvisorcomplaints.com/finra-panel-asks-morgan-stanley-and-advisor-francisco-valenzuela-to-pay-330k-for-fraud-and-elder-abuse-claim/

FINRA Suspends Nikolay Zotenko (Morgan Stanley) For “Exclusive Venture Capital Investment Opportunity” Investments

The Financial Industry Regulatory Authority (FINRA) has taken action against a former Morgan Stanley broker from Beverly Hills, California for misleadingly marketing a private placement on its platform. Nikolay Zotenko was a Morgan Stanley employee for five years before he was terminated in May 2021. He was also suspended and fined $10,000 because of the violations.

Between January 19, 2021 and February 3, 2021 Zotenko sent over 1,150 messages and emails to potential retail customers regarding a private placement that he called an “Exclusive Venture Capital Investment Opportunity.” The letter stated that the private placement was “typically closed for new investors.”

Zotenko also extolled the investment as a portfolio venture capital funds that invests in certain sectors. He claimed that it generated returns that “far exceeded industry average” and downplayed risks associated with what was a speculative type of investment.

The letter stated that “these communications violated content standards for member communications to the public because they contained misleading and unwarranted statements.” “[T]he communications were lacking balance and did not provide a solid basis for evaluating the private placement investment.”

Zotenko broke Finra rules regarding communications with retail clients. Zotenko also violated Finra’s catch-all Rule 2010, which requires “high standards commercial honor”. Zotenko circumvented Morgan Stanley’s internal controls by sending communications after the firm had denied approval.

Zotenko accepted the penalty but did not admit or deny Finra’s allegations. He said that he would not rejoin the industry, but declined to comment immediately. According to his LinkedIn profile, he has been working as the founder and CEO of UrDoc since February 2021. UrDoc is a startup that builds the “first financial history databank.”

Morgan Stanley spokesperson didn’t immediately respond to our request for comment.

According to Morgan Stanley’s U5 termination notice, he was fired because of “[c]oncerns about the representative sending email to many prospect clients with content about investment opportunities, after he had sought approval and not received it and took steps to prevent further review by the Firm.”

After sending over 600 emails via his firm account, Zotenko waited to get Morgan Stanley’s approval. However, the Finra letter stated that firm compliance officials denied Zotenko’s request. They claimed the message contained “several problems” and “impermissible promissory messages”.

Despite being denied, Zotenko evaded the firm’s supervision and sent approximately 550 more messages through Morgan Stanley’s internal systems over the next two days. Because he learned that the firm’s internal systems automatically rejected messages that were not approved and sent to more than 26 customers or prospects in a 30-day time period, he sent 25 messages at a stretch. Finra stated that he falsified each time that the messages were meant for 25 recipients.

source https://financialadvisorcomplaints.com/finra-suspends-n/

FINRA Rule 2111 – Avoiding Unsuitable Investments

When a broker makes a recommendation that is not suitable for a client, that investor is at risk of taking on unnecessary risk and losing money. Suitability rules have been established by the Financial Industry Regulatory Authority, and other regulatory bodies to protect consumers. Brokers must consider a number of factors when making recommendations, including a client’s financial situation and other securities holdings. Unsuitable investments can result in substantial losses, and an unsuitable investment claim attorney may be able to recover damages.

FINRA Rule 2111

According to FINRA Rule 2111, stockbrokers and investment advisors must recommend suitable investments to their clients. This includes the investor’s risk tolerance, age, investment objectives, financial needs, and tax status. Similarly, a broker cannot recommend 100% of an investor’s investable assets in one sector of the domestic equity market. In some cases, a broker may be in a suitable position but an unsuitable one.

Under FINRA Rule 2111, an associated person with control of the customer’s account must determine whether a series of transactions is appropriate for the customer’s investment objectives and risk profile. This is because “suitable” investment strategies must be appropriate for a customer’s risk profile and investment objectives. Furthermore, “reasonable” investment may vary based on several factors, including the complexity of a customer’s portfolio and the risks associated with a security.

Another aspect of the suitability rule involves holding recommendations. A hold recommendation may involve purchasing securities with a declining value. In such a case, a broker may recommend that a client purchase liquefied home equity in order to purchase a security. While such a recommendation may not be suitable, the customer’s indication of independent judgment does not make it unsuitable. Moreover, the firm may use a risk-based approach to document compliance.

Customer-specific suitability

In accordance with customer-specific suitability, brokers and financial advisors are required to analyze a customer’s investment profile. This profile includes factors such as the customer’s age, financial circumstances, investment objectives, risk tolerance, and liquidity needs. Moreover, the broker must determine the authority of anyone acting on the customer’s behalf. This requirement requires a broker to act in the customer’s best interests, and any investment recommendation made by the broker must be based on such factors.

Moreover, customer-specific suitability of unsuitable investments is a crucial requirement for financial advisors and broker-dealers. These professionals must make recommendations that are consistent with the customer’s best interests, which is defined by the Financial Industry Regulatory Authority (FINRA). In addition, broker-dealers and financial advisors must adhere to the same standards to ensure the suitability of their recommendations to their clients.

A broker must conduct suitability analysis based on the customer’s disclosures and the facts and circumstances of the case. While firms are not required to collect information from customers, they must make all reasonable efforts to obtain and maintain the relevant information. Customer-specific suitability of unsuitable investments may be the best way to ensure compliance with these requirements. And it’s the only way to avoid a complaint alleging the firm recommended an investment that is not suitable for its customer.

Reasonable-basis suitability

Suitability obligations are broken down into three categories: customer specific suitability, reasonable-basis-suitability, and quantitative. To make a recommendation to a customer, the stock broker must have a reasonable basis to believe the investment is suitable. In other words, he must conduct adequate due diligence. However, if the broker makes a recommendation based on a client’s specific profile, that recommendation may not meet the standards for reasonable-basis suitability.

The second category of investment is “reasonable-basis suitability of unsuitably recommended securities.” The CFTC recognizes that some investment products and strategies may not be suitable for all investors. For example, a broker may recommend a security with a decreasing value for a client, but the recommendation was unsuitable. In cases such as these, a broker must be able to educate its registered representative about the product or the market.

Suitability is the ethical standard for financial professionals in their dealings with clients. A broker must ensure that an investment is appropriate for the customer’s financial situation. In the U.S., the regulator has defined suitability requirements in FINRA Rule 2111. For example, a broker must have a reasonable basis to recommend a security to a customer if they are not knowledgeable about the risks and rewards.

source https://financialadvisorcomplaints.com/finra-rule-2111-avoiding-unsuitable-investments/

Can You Sue a Financial Advisor?

Are you wondering if you can sue a financial advisor? Perhaps your advisor shifted firms, or you experienced investment fraud. Here are some helpful tips for filing a lawsuit against your financial advisor if this has happened to you. You can also use this information to file a lawsuit if your financial advisor is not performing their professional duties. Here are some of the main reasons why you can sue a financial advisor. In addition to investment fraud, you can also sue your financial advisor for negligence or breach of fiduciary duty.

Sue a financial advisor

In order to successfully sue a financial advisor, you must prove that he or she failed to uphold their professional obligations and put the client’s best interests above his or her own. In many instances, the financial advisor may be liable for the monetary loss that you incur as a result of the negligent or fraudulent actions of the financial advisor. This can be difficult to prove, however, because many financial advisors make agreements over the phone or in person, which may not always be documented well. The financial advisor may deny your claims, especially if there isn’t proof to support them. Large financial firms may also use sneaky tactics to prevent a candid discussion about the case in court.

You may also want to contact FINRA to file a complaint. Although most financial advisors provide good advice, it’s important to seek legal counsel if you think you’ve been mistreated by a financial adviser. Without the help of an attorney, you may not be able to recover the full extent of your financial losses. FINRA is a federal agency that regulates financial advisors and can help you file a complaint if you feel that your advisor has breached their duties.

Can you sue a financial advisor for investment fraud?

When an investment fails to meet expectations, an investor may consider filing a lawsuit against their financial advisor. In these cases, the financial advisor is negligent in their duties as a licensed investment advisor. The investor may also allege fraud, outright theft, or forgery. Depending on the circumstances, an investor may also have the right to pursue arbitration or litigation against their financial advisor. If you believe that your financial advisor has violated these standards, you should contact an experienced lawyer to pursue legal action.

To file a lawsuit against your financial advisor, you will need to gather evidence of their negligent actions. Gather bank statements and investment statements that tie losses to the financial advisor. Keep these documents in a safe place and be sure to keep them handy so that you can present them in court. Your financial advisor can be sued for negligence or fraud if they caused you to lose money. Depending on the nature of your investment fraud case, you may be able to recover some of the money that you lost.

Another type of investment fraud involves failure to diversify the client’s portfolio. This failure to diversify is actionable if the financial advisor fails to properly explain investment risks and their impact on the client’s overall portfolio. It also means that the financial advisor is recommending an undiversified portfolio, which may cause the investor to lose money. Such investments are typically not suitable for your risk profile, which is why you should carefully consider your financial advisor’s recommendations.

Can you sue a financial advisor after a financial advisor moves firms?

If you feel that your advisor has taken advantage of your trust and confidence by moving to another firm, you have several options for pursuing legal action. While there are no clear rules regarding suing a financial advisor who moves firms, there are some important things that you should look for before filing a suit. If the advisor has a bad track record, you may be able to sue him or her for breach of contract or breach of fiduciary duty of loyalty.

First, you must be aware of the protocol for broker recruitment, which is administered by the SEC or FINRA. This agreement limits the number of times an adviser can tell clients they’re moving and can’t ask them to transfer their accounts with them. Second, your adviser can only take limited client information to a new firm, like account numbers and assets, but not your Social Security number. Third, your adviser must comply with privacy laws governing the transfer of client information.

Third, the agreement must clearly define the rights of each party in the relationship. For example, if your advisor left the firm, he or she could take your clients with him or her. But if the advisor left the firm without buying you out, you can still file a claim for breach of fiduciary duty. The restrictions on the transfer of client assets would prevent the advisor from contacting you to solicit your business.

source https://financialadvisorcomplaints.com/can-you-sue-a-financial-advisor/

Are You Investing in a Ponzi Scheme?

Investing in a Ponzi Scheme? There are signs to watch for to avoid falling prey to this financial scam. These warning signs are also the key to getting out of a Ponzi scheme. If you are unsure whether you’re getting involved in a Ponzi Scheme, read this article to learn more. Here, you’ll learn what to look for and how to protect yourself. Don’t fall victim to a Ponzi Scheme.

Investing in a Ponzi scheme

Avoiding the pitfalls of Ponzi schemes is crucial. These scams tend to target the elderly, who may have no knowledge of how the financial system works and are particularly vulnerable to financial fraud. Although they may be mentally sharp, they may not have the necessary mental capacity to assess the risks involved in investing. In such cases, children of elderly parents should discuss the investment options with them, and seek to appoint an investment authority. Then, set limits on withdrawals.

Ponzi schemes are based on the concept of high returns. Because the scheme promises such high returns, new investors are attracted. These new investors then use their funds to pay back the original investors. However, the original investors do not demand repayment of their investments. They continue to believe that the enterprise will eventually succeed and that they will be able to withdraw their funds. When a Ponzi scheme goes belly up, everyone in the pyramid scheme loses money.

Identifying a Ponzi scheme

A Ponzi scheme is an investment fraud that involves the payment of high returns for an initial investment. These investments are not based on a successful business venture, but rather on the principle of newly attracted investments. This is a highly unstable type of investment and will collapse when the new investors fail to fund the scheme or the existing ones decide to cash out. However, there are ways to recognize a Ponzi scheme. The Bernie Madoff Ponzi scheme, for example, operated for more than 30 years before investors finally realized they were being scammed.

A Ponzi scheme has two main characteristics. It depends on the ability of the operator to attract new investors to make money, which they then use to pay the earlier investors. When the operator can no longer pay the promised returns, they try to disappear. This type of investment is unregistered, which makes it difficult to file a complaint. However, the victim of a Ponzi scheme should be aware of these factors, as they can help avoid being scammed.

Signs of a Ponzi scheme

A Ponzi scheme is a fraudulent activity in which the promoter uses the money of new investors to pay the old ones. The new investors are seduced by promises of fast money and think they are buying into a legitimate business. This pyramid-style system is designed to keep the money flowing but the promoter soon runs out of money and the scheme crumbles. This is a common scenario, which is why the public is encouraged to report Ponzi schemes.

The most common sign of a Ponzi scheme is an investment program that guarantees high returns. Investors are lured to invest in such schemes mainly because of the high return rates, which do not reflect market fluctuations. A Ponzi scheme advertises returns as high as 15% without letting them know the risk involved. This type of investment is often unregistered and sold by an unregistered entity. The investment is offered with little or no transparency and may have numerous hidden costs or difficulties receiving payments.

Avoiding a Ponzi scheme

One of the first and most important steps in avoiding a Ponzi scheme is to research and investigate any company you are interested in investing in. Beware of sales tactics that seem too good to be true, such as promises of high returns. Ponzi schemes usually involve investments that are not registered with the SEC or any state regulator. Make sure you work with a reputable broker who explains investments in simple terms.

The first step in avoiding a Ponzi scheme is to read the company’s registration documents. Most Ponzi schemes are run by individuals without a registered business name and do not have state or federal licenses.

source https://financialadvisorcomplaints.com/are-you-investing-in-a-ponzi-scheme/