Former PNC Investments Advisor Obtains $1.8 Million Award Against the Firm

As reported in Investment News, a FINRA arbitration panel recently ruled against PNC Investments LLC, the broker-dealer subsidiary of PNC Bank, and in favor of a former financial advisor, awarding her $1.8 million.  The Award is notable because the panel elected to award the former representative $1.5 million in punitive damages, in addition to $300,000 in compensatory damages.

According to the Investment News article (and the text of the arbitration Award), the arbitrators also directed FINRA to modify the “termination explanation” language that PNC Investments had placed on the advisor’s Form U5, changing the U5 language to reflect that the representative’s discharge was “pre-textual, arbitrary and unreasonable.”  As well, the panel directed expungement of the “yes” answer to the Termination Disclosure question on the representative’s Form U5 (Item 7F(1)), and assessed hearing fees of $14,750 solely against Respondent PNC.  PNC Investments’ Form U5 language had previously reflected that the representative was terminated for “dishonesty and a violation of PNC Bank policy.”

The foregoing information is provided by Amato Law Firm, LLC and securities lawyer Ronald M. Amato.  Mr. Amato, a former licensed securities professional (Series 7 and Series 63), has substantial experience representing financial advisors and other securities professionals in securities arbitration and securities-related employment and regulatory matters, and successfully has handled claims for Form U5 defamation against major brokerage firms.  Mr. Amato has represented several former PNC Investments representatives in Form U5 disutes with the firm.  He can be reached at (630) 352-2226 or by email at ramato@ramatolaw.com.

FINRA Bars Former Wells Fargo Advisors Broker Matthew Maczko

The securities law firm of Amato Law Firm, LLC is investigating potential securities law claims involving former Wells Fargo Advisors, LLC representative Matthew Maczko.  Mr. Maczko, who worked in Wells Fargo Advisors’ Oak Brook, Illinois branch office from February 2008 until he was terminated in September 2016, recently consented to a settlement agreement with the Financial Industry Regulatory Authority (FINRA) (known as a letter of acceptance, waiver and consent) in which he agreed to a permanent bar from associating with any FINRA member firm in any capacity.

While Mr. Maczko neither admitted nor denied FINRA’s allegations, the regulator found that – between January 2009 and April 2016 – Maczko engaged in excessive trading (sometimes called “churning”) in four accounts of a senior customer.  Specifically, FINRA found that Mr. Maczko engaged in excessive trading in the accounts of a customer, who is now 93 years of age, that was unsuitable for the customer given her age, risk tolerance and income needs.  According to FINRA’s findings, Mr. Maczko’s pattern of churning generated commissions in excess of $580,000, $84,270 in other fees, and trading losses of $397,000.

Investors who have suffered losses due to reckless trading strategies such as those allegedly employed by financial advisor Matthew Maczko may be able to recover some or all of their losses through FINRA arbitration in FINRA’s Dispute Resolution forum.

If you or a family member suffered investment losses through Wells Fargo Advisors and Mr. Maczko, please contact Amato Law Firm, LLC at (630) 352-2226 or via e-mail at ramato@ramatolaw.com to discuss your legal options.  We have more than 16 years of experience representing investors in securities arbitration before FINRA (and its predecessor, NASD).  We offer a free, no obligation initial consultation and handle most cases on a contingency fee basis (meaning that the firm is only compensated if you recover).

Large Raiding Award Against Robert W. Baird & Co. Underscores Issues with Team Transitions

A notable (due to its size) $23.5 million FINRA arbitration award against broker-dealer Robert W. Baird & Co. (Baird) and some of its representatives, issued by a three-member FINRA panel in Kansas last week, underscores the issues that can arise when a team or significant group of advisors transitions en masse to a rival firm and things go sour.  The arbitrators in that case, captioned Wells Fargo Advisors, LLC (WFA) v. Robert W. Baird & Co., et al. (FINRA No. 15-02708), awarded WFA punitive damages of more than $10 million, along with $10.8 million in compensatory damages and attorneys’ fees of $1.75 million.  Four of Baird’s six representatives named as individual respondents in the claim, who had transitioned from a WFA branch office to Baird in 2015, were found individually liable to WFA for lesser sums.  Baird and its representatives’ counterclaims against WFA were denied.

While the arbitrators’ award does not go into detail regarding the underlying facts, it appears that the arbitration was hard fought, with 18 hearing sessions over ten days during late 2016 and early 2017.  As reported in Investment News, in a June 2015 announcement, Baird had publicized the fact that it had established a Wichita, KS office comprised of 10 advisors, six of whom had most recently been with WFA and brought in assets of more than $1 billion.  It is not clear what the advisors (and Baird) did to violate the terms of the Protocol for Broker Recruiting or other industry standards, but the large punitive damages award suggests that the arbitrators concluded that Baird and the representatives engaged in egregious conduct in connection with their move.

The foregoing information is provided by Amato Law Firm, LLC and securities lawyer Ronald M. Amato.  Mr. Amato, a former licensed securities professional (Series 7 and Series 63), has substantial experience representing financial advisors and other securities professionals in securities arbitration and securities-related employment and regulatory matters.  He can be reached at (630) 352-2226 or be email at ramato@ramatolaw.com

JPMorgan Found to Have Retaliated Against Adviser, Filed Defamatory U5

A recent investigation by the U.S. Occupational Safety and Health Administration (OSHA) has resulted in an award of more than $160,000 for back pay and “reputational damage” to a former JPMorgan Chase & Co. financial adviser.  In addition, under the OSHA findings, JP Morgan Securities LLC would be required to expunge the adviser’s Form U5.

According to OSHA’s decision, JPMorgan Chase & Co. decided to fire the adviser after he publicly complained that managers had pressured him to sell the bank’s proprietary investment products.  In an unusual twist, OSHA also found that several customer complaints initiated against the adviser in fact had been written by a JPMorgan manager, who had turned oral complaints into written ones and put them on the adviser’s U5 record.

JPMorgan has indicated that it intends to appeal OSHA’s decision, an appeal that would be considered by an administrative law judge.  The adviser in question previously had lost a FINRA arbitration case against the firm involving the same underlying facts.  Such employment disputes typically are heard in FINRA arbitration; however, this particular adviser’s claims involved anti-whistleblower retaliation provisions of the Sarbanes-Oxley Act.

The foregoing information is provided by Amato Law Firm, LLC and securities lawyer Ronald M. Amato.  Mr. Amato, a former licensed securities professional (Series 7 and Series 63), has substantial experience representing financial advisors and other securities professionals in securities arbitration and securities-related employment and regulatory matters, and successfully has handled claims for Form U5 defamation against major brokerage firms.  He can be reached at (630) 352-2226 or be email at ramato@ramatolaw.com

FINRA Recently Reminds Firms of Clients’, Associated Persons’ Right to Arbitrate

In a recently published Regulatory Notice (FINRA Regulatory Notice 16-25), FINRA sought to remind customers, as well as associated persons, of their right to arbitrate within the FINRA forum “at any time.”  In short, FINRA made it clear that member firms may not use predispute arbitration agreements to attempt to limit the right of customers or associated persons to arbitrate through the FINRA arbitration forum.  Further, FINRA expressly stated that any such attempt by a member firm would constitute a violation of FINRA rules (including FINRA Rule 2010) and could lead to an enforcement action.

FINRA’s guidance is timely given the recent conflict between Credit Suisse and its former registered representatives seeking to recoup deferred compensation after leaving the bank last year.  By expressly stating that FINRA members may not require workers to waive their right to resolve disputes in FINRA’s forum, FINRA gave a big boost to the dozens of former Credit Suisse advisors who are pursuing claims.  According to a recent New York Times article, it has been estimated that hundreds of millions of dollars in deferred compensation awards were left on the table when Credit Suisse closed its private bank last year.  Credit Suisse has taken the position that advisors forfeited those awards because they left the firm voluntarily, and has sought to force its former advisors to use private arbitration forums that they do not want.

The foregoing information is provided by Amato Law Firm, LLC and securities lawyer Ronald M. Amato.  Mr. Amato, a former licensed securities professional (Series 7 and Series 63), has substantial experience representing financial advisors and other securities professionals in securities arbitration and securities-related employment and regulatory matters, and successfully has handled claims for deferred compensation against major brokerage firms.  He can be reached at (630) 352-2226 or be email at ramato@ramatolaw.com

Credit Suisse Deferred Compensation Claims

Amato Law Firm, LLC is investigating claims against Credit Suisse (CS) on behalf of its former U.S.-based advisers who have transitioned to firms other than Wells Fargo Advisors.  As recently reported in On Wall Street, more than one-half of CS’s U.S.-based advisers have moved to firms other than Wells Fargo (with whom CS signed an exclusive recruiting arrangement) in the wake of CS’s departure from the the U.S. wealth management business earlier this year.   CS unfairly has taken the position that those advisers – who have joined firms such as UBS – quit voluntarily and are not entitled to their significant deferred compensation awards.

As a result of CS’s actions, its former advisers have been deprived of their substantial awards in plans such as the ISWAP Share Award, the PB USA Equity Share Award, the Growth Phantom Share Award, and the PB RM Contingent Capital Award.  Upon information and belief, the plan documents for those plans are substantially similar, and all provide that advisers shall forfeit their plan balances upon voluntarily resigning from the firm.  Of course, in this instance, none (or very few) of the former CS advisers voluntarily resigned from their positions with the firm’s U.S. private bank division.

The foregoing information is provided by Amato Law Firm, LLC and securities lawyer Ronald M. Amato.  Mr. Amato, a former licensed securities professional (Series 7 and Series 63), has substantial experience representing financial advisors and other securities professionals in securities arbitration and securities-related employment and regulatory matters, and successfully has handled claims for deferred compensation against major brokerage firms.  He can be reached at (630) 352-2226 or be email at ramato@ramatolaw.com

 

United Development Funding Investment Losses

The securities law firm of Amato Law Firm, LLC is investigating potential securities law claims involving United Development Funding (UDF) and its real estate investment trusts (REITs) including United Development Funding IV (UDF IV), a publicly-traded REIT that has plummeted more than 80% since December 2015. If you are an investor who invested in United Development Funding IV, United Development Funding III, L.P. (UDF III) or United Development Funding Income Fund V (UDF V) at the recommendation of your financial advisor, you may be able to recoup some or all of your losses through the FINRA arbitration process.

Following a Dallas hedge fund manager’s allegation that UDF IV exhibits characteristics of a “Ponzi” scheme, the value of the REIT’s shares began to decline dramatically from its share price of approximately $18 per share in mid-November 2015. As reported by major news sources, on February 18, 2016, the FBI raided UDF’s offices in Grapevine, Texas. According to reports, UDF IV subsequently was subpoenaed for documents in connection with an ongoing grand jury investigation. UDF IV’s share price has fallen to approximately $3.20 per share and does not appear to be actively trading (the security is listed on the NASDAQ – Ticker Symbol: UDF).

Financial advisors have an obligation to perform adequate due diligence before recommending an investment, and also to determine that any investment recommendation is “suitable” for the customer in view of the customer’s needs, financial situation and investment objectives.

If you or a family member invested in securities offered by UDF, such as United Development Funding IV, please contact Amato Law Firm, LLC at (630) 352-2226 or via e-mail at ramato@ramatolaw.com to discuss your legal options. We have more than 15 years of experience representing investors in securities arbitration before FINRA (and its predecessor, NASD). We offer a free, no obligation initial consultation and handle most cases on a contingency fee basis (meaning that the firm is only compensated if you recover).

Oil and Gas Investments Rack Up Large Losses

The securities law firm of Amato Law Firm, LLC is investigating large losses in oil and gas related investments, such as publicly-traded master limited partnerships (MLPs) and private placements (limited partnerships that do not trade on a securities exchange). If you are an investor who invested in this volatile area at the recommendation of your financial advisor, you may be able to recoup some or all of your losses through the FINRA arbitration process.

In recent years, many financial advisors have recommended oil and gas securities to retail investors, including Linn Energy, LLC (LINE), LinnCo (LNCO), Emerge Energy Services LP (EMES), BreitBurn Energy Partners LP (BBEP), Hi-Crush Partners LP (HCLP), and Crestwood Equity Partners LP (CEQP), to name a few, due to the high yield paid by those investments relative to fixed-income securities like bonds and CDs. Unfortunately, some advisors recommended such investments to seniors and retirees as a safe alternative to traditional fixed-income investments, without disclosing the substantial risks. MLPs, normally reserved for sophisticated investors, can be inappropriate and unsuitable investments for retirees in search of income along with capital preservation. (A number of MLPs have lost more than 60% of their value over the past 12 months.)

Likewise, investors in private placements (high-risk ventures that lack liquidity), such as drilling programs offered through Reef Oil & Gas Partners and Atlas Energy LP, have seen the value of their investments plummet due, in part, to high commissions and conflicts of interest. As reported by Reuters, of 34 oil and gas programs promoted by Reef since 1996, only 12 paid out more cash to investors than they initially contributed. Similarly, in 29 of 43 private placements issued by Atlas, Atlas did better than investors. These investments typically are sold by financial advisors who stand to pocket commissions of 10%. Our firm has handled several claims involving Reef. In those cases, we successfully have argued that a concentration into these private placement investments was unsuitable for investors given their needs, financial situation and investment objectives.

If you or a family member invested in oil and gas MLPs or private placements such as those offered by Reef and Atlas, please contact Amato Law Firm, LLC at (630) 352-2226 or via e-mail at ramato@ramatolaw.com to discuss your options. We have more than 15 years of experience representing investors nationwide in securities arbitration before FINRA (and its predecessor, NASD).

 

 

New Pricing Rule for Non-Traded REITs Will Impact Independent Broker-Dealers and Their Customers

At long last, FINRA’s revisions to Rules 2340 and 2310 (originally proposed in 2014) have been approved by the SEC and will go into effect on April 11, 2016.  In short, the purpose of the new rules is to provide increased transparency to investors regarding the value of illiquid securities, such as non-traded real estate investment trusts (REITs), that they are holding in their accounts.

While they have been heavily sold by independent broker-dealers in recent years, non-traded REITs and similar direct participation programs are not publicly traded and generally are illiquid investments.  The lack of an active market for these types of securities has led some broker-dealers to reflect the initial offering price of $10 per share as the current value of an investment on customer statements – despite the fact that, in reality, the actual per share price is much lower (due to high commissions paid to salespeople and negative developments in an underlying issuer’s operations).

When it goes into effect in April, FINRA Rule 2340, as amended, will require member firms to provide a reliable per share price estimate for illiquid securities such as non-traded REITs on investors’ monthly account statements.  This could be an eye-opening experience for some investors, and, according to commentators, could change the manner in which illiquid investments such as non-traded REITs are marketed and sold.

The foregoing information is provided by Amato Law Firm, LLC and Chicago securities lawyer Ronald M. Amato.  Mr. Amato has extensive experience representing investors in investment disputes involving the unsuitable sale of non-traded REITs and other illiquid securities, such as oil and gas limited partnerships and other direct participation programs.  He represents investors and financial advisors in FINRA arbitration on a nationwide basis.  Mr. Amato can be reached at 630.352.2226 or through the firm’s website at www.ramatolaw.com

Ronald Amato Quoted in IA Watch Article Regarding Broker U5 Issues

Attorney Ron Amato recently was quoted in an article appearing in IA Watch entitled “Vindicated Rep Offers Warning that U5 System Can Punish Whistleblowers.”   The article relates to a Form U5 defamation case, brought in FINRA arbitration by a former Raymond James Financial Services representative named Scott McCaskill, in which Mr. McCaskill was awarded substantial damages and expungement of Form U5 language from FINRA’s CRD system.  The article touches on a number of subjects, including, generally, some of the problems inherent in the Form U5 system that sometimes can lead to false, defamatory and/or inaccurate Form U5 filings when a rep is terminated by his/her broker-dealer.  Such Form U5 information can make a rep virtually unemployable in the industry.

When asked to comment on the state of FINRA’s U5 system, Ron stated, among other things, that, “it’s certainly a system that can be abused  .  .  .  firms can frame things in a way that make an advisor appear to have done something egregious [upon an advisor’s termination].”  The full article can be viewed here (tiered subscription model):  http://iawatch.com/Content/View/271718?challenge=True

The foregoing information is provided by Amato Law Firm, LLC and Chicago securities attorney Ronald M. Amato.  Mr. Amato has substantial experience representing securities professionals, investment firms and investors in securities arbitration and securities-related employment and regulatory matters.  He can be reached at 312.466.5521 or through the firm’s website at www.ramatolaw.com