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/

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/