Legal Matters

Lek Securities Corporation was recently found by the Financial Industry Regulatory Authority (“FINRA”) to have failed in implementing Anti-Money Laundering (AML) policies and internal controls to detect suspicious transactions and comply with the Bank Secrecy Act and regulations from the Department of the Treasury. Samuel Lek was the firm’s CEO, chief compliance officer (CCO), and AML compliance officer, who was responsible for the corporation’s supervisory system, including its certificate review process. Under Lek’s direction, the corporation sold unregistered securities in transactions which were not eligible for any exemption from the requirements for registration. As a result, the corporation’s accounts liquidated microcap stocks and generated around $100 million of proceeds, which produced about $1.6 million in commissions for the corporation. The FINRA findings stated that: Samuel Lek and the corporation failed to establish reasonable written supervisory procedures (WSPs) before liquidating microcap securities, to conduct a searching inquiry and determine the registration or potential exemption status of the customer’s resale of the [...]

The value of New York City REIT, Inc. has tanked since its public listing in August 2020. According to Investment News, some investors have suffered losses as high as 80% from its initial sales price. If you invested in New York City REIT, Inc., or your broker or advisor recommended New York City REIT, Inc., contact the Frankowski Firm for a consultation, and continue reading below. What is New York City REIT, Inc.? New York City REIT, Inc. (NYSE:NYC) is a public real estate investment trust that owns a portfolio of high-quality commercial real estate located within the five boroughs of New York City, particularly Manhattan. The high-commission REIT had an offering price of $25 per share. After a 2.43 reverse split in its July and August listing, the REIT’s shares were trading below $12.00 at time of writing. What is a REIT? A Real Estate Investment Trusts is a company that owns or finances real estate. The real estate [...]

On October 19, 2020, the Financial Industry Regulatory Authority fined and suspended former broker of SagePoint Financial, Troy Robert Baily, for engaging in four undisclosed and unapproved private securities transactions totaling $210,000. From November 2016 through March 2018, Baily was registered with FINRA as an investment company and variable contracts products representative, and associated with SagePoint Financial. FINRA found that, between February and May 2017, Baily solicited investors to purchase securities in Future Income Payments, LLC (“FIP”). FIP represented itself as a structured cash flow investment, claiming to purchase pensions at a discount from pensioners and then selling a portion of those pensions as a “pension stream” to investors. FIP generally promised investors a 7% to 8% rate of return on their investment. During the Relevant Period, Baily sold $210,000 in FIP purchase agreements to four investors, including three who were customers of SagePoint Financial. Baily received a total of $8,900 in commissions in connection with these transactions. At all [...]

Morgan Stanley Smith Barney LLC was recently sanctioned for failing to reasonably supervise a representative for recommending short-term trades of corporate bonds and preferred securities for ten customer accounts. On hundreds of occasions, the representative at issue recommended the buying and prompt selling of preferred securities or corporate bonds to customers of Morgan Stanley, which are generally more suitable to customers if long term instead of short-term. In September 2014, Morgan Stanley reviewed the questionable recommendations and concluded that his recommendations were “generating high costs/commissions and the products/investment strategies were costing the clients more money than they are making the client.” However, no action was taken by Morgan Stanley to address the problem. The ten accounts affected by these recommendations generated several alerts of potentially excessive turnover and cost-to-equity ratios. The representative continued to recommend short-term trades of corporate bonds, and Morgan Stanley did not take reasonable steps to review whether such recommended trades were suitable. In January 2016, the [...]