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Two Colorado Advisers Arrested for Securities Fraud

According to Colorado securities regulators, two men have been arrested in unrelated securities fraud cases. Eddie Johnson of Sterling, Colorado was taken into custody after he was indicted on seven counts of securities fraud and four counts of theft. He is accused of soliciting $162,000 and a car valued at $30,000 from people who believed they were investing in manufacturing companies Johnson owned. William Gardner of Englewood, Colorado was arrested on multiple felony securities fraud and theft charges. He is accused of spending more than $730,000 of his clients' money to cover his own expenses and to pay returns to previous clients, according to a grand jury indictment filed by the Colorado Attorney General. According to Colorado Securities Commissioner Gerald Rome, Johnson told investors that his companies — Overland Trailer Manufacturing and Overland Corp. — were under contract with major sporting goods retailers for the production of trailers. However, Rome's office said, the company did not have the promised contracts [...]

By |December 30th, 2015|Fraud, Press Releases & News|
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FINRA Fines Barclays Capital $13.75M

FINRA ordered Barclays Capital, Inc. to pay over $10 million in restitution, including interest, to affected customers for mutual fund-related suitability violations. These suitability violations relate to an array of mutual fund transactions including mutual fund switches. Further, the firm failed to provide applicable breakpoint discounts to particular customers and was censured and fined $3.75 million. Broker-dealers have an obligation to ensure that any recommendation to switch mutual funds be evaluated with regard to the net investment advantage to the investor. FINRA noted that “switching among certain fund types may be difficult to justify if the financial gain or investment objective to be achieved by the switch is undermined by the transaction fees associated with the switch.” FINRA found that from January 2010 through June 2015, Barclays’ supervisory systems were insufficient to prevent unsuitable switching or to meet certain of the firm’s obligations regarding the sale of mutual funds to retail brokerage customers. In particular, the firm incorrectly defined a [...]

By |December 29th, 2015|FINRA, Press Releases & News|
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Morgan Stanley To Pay $8.8M For Unsupervised Trading

The SEC ordered Morgan Stanley Investment Management and brokerage firm Societe Generale Americas to pay $8.8 million and $1 million respectively for what it says was unsupervised prearranged trading conducted by a portfolio manager and a trader. In what the SEC called an attempt to give certain clients preferential treatment, Morgan Stanley portfolio manager Sheila Huang allegedly arranged the sales of mortgage-backed securities to Societe Generale trader Yimin Ge at predetermined prices in 2011 and 2012. She then bought them back at a small markup. She also sold bonds at above-market prices but repurchased them at “unfavorable prices,” without disclosing this to the client, a scheme called "parking." Marshall S. Sprung, co-chief of the SEC Enforcement Division's Asset Management Unit, said Morgan Stanley failed to see what Ms. Huang was doing because of the firm's lack of supervisory oversight and failure to implement policies against these acts. “Instead of playing by the rules, [Ms.] Huang engaged in prearranged trading schemes that benefited some [...]

By |December 28th, 2015|Broker Check, FINRA, Press Releases & News|
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Lawsuit Alleges Fiduciary Breach Under ERISA

A class-action lawsuit was filed last week alleging breach of fiduciary duty resulting from excessive record-keeping fees and use of proprietary investment funds. The suit, Pledger et al. v. Reliance Trust Co. et al., targets the fiduciaries of the Insperity 401(k) Plan for allegedly causing participants to pay excessive fees to the plan record keeper, Insperity Retirement Services. The complaint further alleges that Insperity and Reliance Trust Co., the plan's discretionary trustee, breached their fiduciary duties under the Employee Retirement Income Security Act of 1974 by offering funds with high expenses and poor performance, including proprietary mutual funds and collective investment trusts offered by Reliance. Insperity also failed to adequately monitor Reliance, a fiduciary responsible for investment selection in the plan. “We allege that Insperity and Reliance Trust together operated the plan for their own self-interest, sending excessive record-keeping fees to Insperity's in-house record keeper,” said one of the plaintiffs' attorneys. “Reliance Trust was a fiduciary responsible for investment selection and [...]

By |December 28th, 2015|Press Releases & News|
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