Morgan Stanley Hit With $20mil Whistleblower Suit

Posted on August 28, 2015August 28, 2015 by admin

Two ex-brokers hit brokerdealer Morgan Stanley with a $20 million lawsuit this week, alleging that they were fired in retaliation for complaining about improper practices and violations of securities law at the wirehouse, according to news from BankInvestmentConsultant.com.

In a news story filed Aug 27, Jamie Feldman-Boland and her husband, John Boland, say that they witnessed trainees and interns entering in trades on behalf of advisors, and presumably doing so with brokers’ access codes in violation of the broker-dealer firm’s policy.

Other misconduct they say witnessed: an advisor trying to improperly get an insurance commission; cancelling a business deal worth $200 million to punish Feldman; and harassment of Feldman by another advisor and her branch manager.

Morgan denies the allegations.

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“These former financial advisor trainees have filed numerous unsubstantiated claims since their terminations in 2011. To date, none have been found to have any merit. We believe this latest claim is equally without merit and will be dismissed,” a Morgan spokeswoman said.

Alice Keeney Jump, an attorney at law firm Reavis Parent Lehrer who is representing the Feldman and Boland, rebutted Morgan’s argument, saying that the couple’s allegations are straightforward.

“I disagree any arbitration panel has settled these claims,” Jump says.

She adds, “My clients are fully confident in the truth of their allegations and have decided to pursue their rights.”

COLD CALLS

Feldman, 38, joined Morgan in 2008 after four years at Merrill Lynch, according to Finra’s BrokerCheck. Boland followed her to the firm in 2010 while the two were engaged, according to the complaint, which also stated that Morgan knew of their relationship.

When she joined the firm at its Midtown office in New York, she was part of a joint production agreement with two other advisors, according to the complaint. Her partner for high-net-worth clients, Michael Silverstein, had more than thirty years of industry experience, according to FINRA records.

According to the complaint, Silverstein did not devote time to meeting with or serving prospective clients that Feldman brought in, which in turn hurt her production numbers at the firm. Feldman alleges that by January 2011 she had presented clients with more than $100 million in assets to Silverstein, but he failed to prepare any investment portfolios.

In their complaint, Feldman and Boland also allege that trainees and interns cold-called Pfizer and Verizon employees close to retirement to urge them to roll-over their 401(k)s to Morgan Stanley, guaranteeing them a 15% return, according to the complaint.

The investments were in fact in closed-end mutual funds which experienced sharp fluctuations in net value, according to the complaint.

In April 2011, Feldman went to her branch manager to complain about these and other violations she had witnessed. The manager, David Turetzky, told her to leave his office, and later asked for a list of her clients, according to the complaint.

The following month, Turetzky called Feldman into his office to tell her that the firm would not pursue “at this time” a $200 million commodities deal that one of her clients wanted, according to the complaint.

Feldman alleges this was retaliation for her earlier complaints as well as a confrontation with Silverstein, who tried to claim that he was in fact the introducing broker and therefore entitled to the fees and commissions.

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Citigroup Bagged By SEC For Defrauding Muni Investors

Posted on August 18, 2015 by admin

BrokerDealer.com picks up where Bondbuyer.com leaves off in reporting an outsized fined against big bank broker-dealer Citigroup…

WASHINGTON – Two Citigroup companies on Monday agreed to pay $180 million to settle charges they defrauded investors by misrepresenting that investments in two now-defunct muni-related hedge funds were safe, low-risk and suitable for traditional bond investors.

New York-based Citigroup Global Markets and Citigroup Alternative Investments raised almost $3 billion in capital from about 4,000 investors between 2002 and 2007 through the two funds — ASTA/MAT and Falcon – before they collapsed in 2008 during the financial crisis, resulting in billions of dollars of losses, according to the SEC.

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Without admitting or denying the SEC’s findings, CAI, the investment manager for the two hedge funds, and CGMI, which employed the financial advisors that recommended the funds to investors, agreed to disgorge more than $139. 95 million of ill-gotten gains and pay prejudgment interest of more than $39.61 million to the SEC under the settlement.

Danielle Romero, managing director of global public affairs for Citigroup, said the company is “pleased to have resolved this matter.”

The SEC found the two Citigroup affiliates continued accepting additional investments and assuring investors of the funds’ safety even as they started to decline in late 2007. The “misleading representations” the Citigroup companies made were “at odds with disclosures made in marketing documents and written material provided to investors,” the SEC said in a release.

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SEC OK’s Start-Ups’ Use of Social Media

Posted on July 2, 2015July 2, 2015 by admin

Trying to figure out how many investors might want to fund your small business? Go ahead and tweet about it.

The US Securities & Exchange Commission (SEC) has given a social media greenlight to startups seeking to raise money and this week updated rules allowing for use of Twitter and other social media tools to solicit investors.

The Division of Corporate Finance announced that tweets of 140 characters or less are a proper way for a startup to gauge potential investor interest in a stock or debt offering. The posting must include a link to a disclaimer that says the firm isn’t yet selling securities.

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Bloomberg noted that the SEC has been warming up to social media since April 2013, when it approved the use of posts on Facebook and Twitter to communicate corporate announcements such as earnings. Its latest endorsement of social media applies only to companies looking to raise up to $50 million a year.

Firms that use Twitter to solicit investor interest must include a link to a required disclaimer that says the firm isn’t yet selling securities, the SEC said in this week’s announcement.

It’s not clear how many companies will take advantage of the higher fundraising cap. Fewer than 30 offerings were made from 2012 to 2014, when the limit was $5 million, according to the SEC.

This post is from raisemoney.com.

SEC Busts Boca Raton For Unregistered Broker-Dealer Activity

Posted on June 27, 2015 by admin

The Securities and Exchange Commission said Tuesday that it has charged two firms with illegally brokering more than $79 million of investments from foreigners seeking U.S. residency through the government’s EB-5 Immigrant Investor Program.

The charges, the first against brokers handling investments in the EB-5 program, follow earlier SEC actions against fraudulent EB-5 offerings.

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Ireeco LLC, originally of Boca Raton, Florida, and its successor Ireeco Ltd., a Hong Kong-based company operating in the U.S., were charged with acting as unregistered brokers for 158 EB-5 investors. The EB-5 program, administered by the U.S. Citizenship and Immigration Services (USCIS), provides a path to legal residency for foreigners who invest directly in a U.S. business or private “regional centers” that promote economic development in specific areas and industries, the SEC states. According to the SEC’s order, Ireeco LLC and Ireeco Ltd. used their website to solicit EB-5 investors, some of whom were already in the U.S. on a temporary visa.

The two companies offered to help potential EB-5 applicants choose the right regional centers. The centers paid the companies commissions of about $35,000 per investor once U.S. Citizenship and Immigration Services approved the green card petition, according to the SEC.

To read the full article by the South Florida Business Journal, click here.

Rules on Foreign Finders Incorportated In Recent SEC Approval

Posted on June 25, 2015 by admin

The longstanding rules on foreign finders – when a brokerage firm can pay transaction-based compensation to a non-registered foreign finder – will be incorporated into new FINRA Rule 2040, effective August 24, 2015.

Rule 2040(c) replaces NASD Rule 1060(b) and NYSE Interpretation 345(a)(i)/03, and provides that a member firm and persons associated with a member firm may pay transaction related compensation to non-registered foreign finders where the finders’ sole involvement is the initial referral to the member firm of non-U.S. customers, and the member firm complies with all the conditions set forth in the rule.

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Based solely on its activities in compliance with Rule 2040(c), a foreign finder would not be considered an associated person of the member firm. However, unless otherwise permitted by the federal securities laws or FINRA rules, a person who receives commissions or other transaction-based compensation in connection with securities transactions generally has to be a registered broker-dealer or an appropriately registered associated person of a broker-dealer who is supervised by a broker-dealer. Member firms that engage foreign finders would be required to have reasonable procedures that appropriately address the limited scope of activities permissible under such arrangements.

Where an arrangement with a foreign individual goes beyond initial referrals, the member firm may register that individual as a foreign associate under NASD Rule 1100. Foreign associates must conduct all of their activities outside the US and cannot engage in any securities activities with US persons. Although deemed an associated person for whom a Form U4 must be filed, a foreign associate is not required to pass a qualifying examination. For arrangements with foreign groups whose activities for foreign customers go beyond the initial referral to the member, registration of a foreign branch may be an alternative. To the extent a foreign finder solicits or negotiates with US persons, entering into a 15a-6 agreement may be a viable alternative.

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