Legal Matters

Northwestern Mutual Investment Services, LLC, headquartered in Milwaukee, Wisconsin, has been fined and censured by FINRA for failing to establish, maintain, and enforce a supervisory system reasonably designed to review and monitor transfers of monies from customer accounts to third party accounts and outside entities. According to FINRA’s findings of fact, between September 2005 and February 2017, a Northwestern Mutual registered representative stole $473,496 from five of his customers’ variable annuities. The same representative also was found to have moved $121,123 from two customers’ variable annuities into another customer’s bank account in order to conceal his previous thefts from that customer. FINRA found Northwestern Mutual to be in violation of FINRA Rule 3110 which requires member firms to implement a supervisory system for the activities of its registered representatives that is reasonably designed to achieve compliance with applicable securities law and regulations and FINRA’s rules. Northwestern Mutual’s registered representative used forgeries of customer signatures on variable annuity distribution requests and [...]

Last month, investors filed a class action suit against blockchain software firm Block.one, alleging that the company defrauded investors through the sale of unregulated assets. Over the course of about a year, Block.one allegedly sold 900 million EOS cryptocurrency tokens during its initial coin offering, which netted over $4 billion for the company, but left investors with an effectively worthless unregulated product. The complaint alleges that Block.one has deceived investors in "the biggest of all crypto frauds." The class action complaint alleges that Block.one, along with some of its leaders, promoted, offered, and sold an unregistered security called “EOS” throughout the United States, in violation of federal securities laws. Specifically, the plaintiffs assert claims related to the sale of an unregistered security, material misrepresentations and/or omissions in the sale of the security, use of manipulative and deceptive practices, insider trading, and control person liability. The complaint further alleges that Block.one willfully evaded SEC regulations to keep investors in the dark [...]

The Financial Industry Regulatory Authority (“FINRA”) has permanently barred Corpus Christi, Texas stockbroker Jesse Gil, III from the securities industry based on findings that Gil made unauthorized withdrawals from the account of an 82-year-old widow, to whom he was providing financial advice away from his employing firm, Allstate Financial Services, LLC. According to FINRA’s findings, in July and August 2016, while associated with Allstate, Gil converted approximately $2,500 of his elderly customer’s funds, using the money to pay his own personal credit cards for items like spa massages, sporting goods, and expenses incurred during an overseas trip to Madrid (including at a hotel, perfume store, museum, and flamenco show). Also, as of July 18, 2016, Gil obtained a power of attorney over the former client. Gil failed to disclose the power of attorney or obtain Allstate’s approval before taking on the role, as Allstate’s policies required. As early as 2014, the client began to pay Gil for advice he provided [...]

The Financial Industry Regulatory Authority (“FINRA”) has permanently barred Staten Island, New York stockbroker Louis Cook from the securities industry based on findings that he fraudulently induced his customers to give him access to withdraw funds and stole money from their accounts. According to FINRA’s findings, between August and December 2016, Mr. Cook sent letters to at least 11 of his customers at National Planning Corporation, requesting the customers to sign a third-party authorization form. The form designated Cook to make changes and/or withdraw funds from the customers' variable annuities. FINRA found that many of the customers were elderly investors or the parents of developmentally disabled children. FINRA held that Cook misrepresented the nature and purpose of the authorization forms in inducing the customers to sign them. Cook used the forms to withdraw more than $150,000 from his customers’ variable annuity accounts and converted those funds to his own personal use, according to the findings of fact. Cook’s conduct violated [...]