Securities Fraud Lawyer Blog

On February 1, 2015 Douglas “Dutch” Melzer agreed to a permanent bar from the securities industry as a result of findings that he engaged in private securities transactions away from his brokerage firm, Wells Fargo Advisors

According to filings with FINRA Dutch Melzer introduced clients to a company called Aquatic Synthesis Unlimited, a company that his wife was affiliated with. Melzer received $27,000 as a result of these client transactions.

In August, 2013, after several spills the Pennsylvania Department of Environmental Protection revoked Aquatic Synthesis Unlimted’s permit, and levied on the company’s $1 million bond to use for cleaning up the spill site. According to news reports, the site contains 1 million gallons of shale wastewater and tons of contaminated soil.

On July 1, 2015 the Securities and Exchange Commission filed a complaint accusing former registered representative Malcolm Segal of operating a ponzi scheme that raised over $15 million by selling fake certificates of deposit.

According to the complaint filed by the SEC Segal began the scheme in 2009 by purchasing numerous CDs and instead of returning those proceeds to the investors, Segal used the funds for personal expenses, including a house in South Florida, and to make outsized ponzi like “interest” payments to his investors.

In 2011, Malcolm Segal changed brokerage firms and began soliciting investors to purchase fake CDs. Segal represented that his brokerage firm Aegis Capital sponsored the CD program.  To entice new investors, Segal increased the interest rates to 12% annually. By 2013, with investors seeking return of their principal, Segal ran out of new investors to fund the ponzi, and it collapsed. Before it did, the SEC alleges that Malcolm Segal began misappropriating funds from his customers’ accounts.

On May 6, 2015, FINRA reported that LPL Financial had been fined $10 million and censured for failing to supervise its sales force in their sales of non-traditional exchange-traded funds, variable annuities, non-traded REITs and other nontraditional investments

According to FINRA LPL failed to devote enough resources to their compliance department to review and approve the sales of these products, to adequately train their registered representatives, and to monitor the length of time customer’s held these complex ETF products.   As to the variable annuities, LPL permitted sales to occur without without disclosing surrender fees to the client. In settling this matter, LPL neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

LPL Financial is a registered broker dealer doing business in all fifty states. According to FINRA LPL has been the subject of 58 regulatory investigations and the firm discloses 50 arbitrations involving customers in its broker check CRD report.

On March 17, 2015 Kenneth Statly a broker with State Farm VP Management Corp of Grand Ledge, Michigan was barred from the securities industry by FINRA. Statly consented to the issuance of findings that he fabricated insurance claims for two customers in order to offset those customers’ insurance premiums. According to the findings, which Kenneth Statly neither admitted nor denied, Statly fabricated insurance claims, without the customers’ knowledge, and then issued the customers checks which he told the customers were reimbursements.

Kenneth Statly had been licensed with State Farm since 1998, and prior to his permanent bar from the securities industry, had not been the subject of any customer complaints.

Kenneth Statly’s registration and disciplinary history

In May, 2015 Farmer’s Financial Solutions registered representative Keilen Wiley of Houston, Texas was barred from the securities industry by FINRA. Wiley has appealed the decision to the SEC.

FINRA alleged that Keilen Wiley converted over $6,000 of insurance premiums entrusted to him by his clients by depositing the funds into his business bank account and using the funds for personal and business related expenses. FINRA also contends that Keilen Wiley provided FINRA with misleading answers during a formal on the record interview concerning this issue.

Keilen Wiley’s registration and disciplinary history

In March, 2013 FINRA regulated broker dealer Kalos Capital, Inc. was fined $45,000 as a result of failing to maintain and enforce an effective supervisory system that ensured emails sent between its clients and Kalos Capital’s brokers were reviewed and retained. FINRA alleged that the firm’s brokers who conducted business with customers outside of the firm used personal email addresses, rather than approved Kalos Capital email addresses. The risk of doing so is that such communications could contain recommendations to purchase products that are not approved by the broker dealer. Without proper systems in place to ensure that all emails were reviewed and retained, FINRA alleged that Kalos Capital maintained a deficient supervisory system, and fined the firm $45,000.

Kalos Capital is a broker dealer that sells alternative investments such as non-traded REITs, oil and gas programs, private placements and securities of business development companies. Many alternative investments are illiquid and charge high fees. All investors considering investing in alterative investments should carefully read the private placement memorandum for risks, conflicts of interest and fees. What may be sold as an alternative to stock market volatility could, in fact, be a high risk, highly leveraged investment.

Kalos Capital’s registration and disciplinary history

In May, 2015 Jeffrey Meyer was barred from the securities industry as a result of engaging in private securities transactions on behalf of several firms. FINRA’s Department of Enforcement filed a complaint alleging that between November 2008 and September 2009 Jeffrey Meyer engaged in private securities transactions by participating in sales to 20 investors of corporate guarantees issued by United Private Capital, Inc. totaling $1 million.

The Complaint further alleges that, between January 2010 and July 2012 Jeffrey Meyer engaged in private securities transactions by participating in sales to 13 investors of Strategic Lending Solutions promissory notes totaling $300,000, and that Meyer participated in the sales without providing prior written notice to his broker dealer. The Complaint also alleges that, between August 2010 and July 2011, Meyer engaged in private securities transactions by participating in sales to eight investors of K&M Oil Company, Inc. promissory notes totaling $238,000. The Complaint alleges that, by engaging in the actions alleged, Meyer violated NASD Rules 3040 and 2110 and FINRA Rule 2010.

Jeffrey Meyer’s registration and disciplinary history

Giovanni L. Acevedo, a former financial advisor with Voya Financial Advisors of Wilton Manors, Florida was named as Respondent in a FINRA complaint alleging that he converted $162,848.42 in funds belonging to customers.

The complaint alleges that Giovanni Acevedo received a customer’s check, and instead of investing the funds on the customer’s behalf, converted the funds for his own use and benefit.

Giovanni Acevedo then created a false account statement to cover up his actions. Acevedo also persuaded a customer to give him signed checks for investment, with the payee and dollar amount of the check blank. Acevedo then either cashed the checks or deposited the funds into a personal account. The complaint alleges that Acevedo repeated similar conduct with other customers, who provided Acevedo with funds for investment, which Acevedo converted for his own personal use. Finally, FINRA contends that Giovanni Acevedo provided false information in response to FINRA requests made during its investigation.

Charles Fackrell a former broker with LPL Financial in North Carolina was barred from the securities industry after FINRA filed a complaint alleging that Fackrell converted customer funds and engaged in a private securities offering. Charles Fackrell also refused to cooperate with FINRA’s investigation into the matter.

Fackrell had been securities licensed since 2007, obtaining a principal’s license in 2008 while with SunTrust Investment Services. Since acquiring a license, Charles Fackrell has been the subject of six customer complaints and was fired by LPL after allegations were raised that he sold away from the firm.

Charles Fackrell’s registration and disciplinary history

Douglas Finlay Jr, a former registered representative of Cadaret Grant of Point Pleasant Beach, New Jersey was suspended from the securities industry for 18 months by FINRA for making unsuitable investments in his client’s account.

The findings in FINRA’s action against Douglas Finlay state that Finlay over concentrated his clients’ retirement account in an illiquid real estate investment trust (REIT), and that the recommendation to purchase the REIT was unsuitable in light of the clients’ risk tolerance, investment objectives and financial circumstances. FINRA’s complaint further alleges that Douglas Finlay falsified his firm’s books and records to make it appear that the transaction was suitable for the customer.

Douglas Finlay consented to the suspension, which is in effect from April 20, 2015, through October 19, 2016.