Securities Fraud Lawyer Blog

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.

On March 6, 2015 securities regulator FINRA fined and suspended Douglas Dannhardt of San Antonio, Texas from the securities industry. Without admitting or denying FINRA’s findings, Dannhardt consented to a nine month suspension from membership (from April, 2015 to January, 2016) and a $25,000 fine. He also consented to an entry of findings that he engaged in excessive and unsuitable trading in three customer IRA accounts.

FINRA alleged that Douglas Dannhardt excessively traded (“churned”) the IRA accounts in a manner that was inconsistent with the customer’s investment objectives (a suitability violation). FINRA also found that Douglas Dannhardt improperly exercised discretion in the customer’s accounts and accepted trade orders from a third party without obtaining the customer’s written authorization.

Douglas Dannhardt had been securities licensed since 1984, and had been with Prospera Financial Services of San Antonio, Texas from 1995 through January, 2014.

On February 11, 2015 former registered representative Daniel Retzke agreed to a permanent bar from the securities industry. Securities regulator FINRA filed a complaint alleging that Daniel Retzke, of Freeport, Illinois engaged in private securities transactions in violation of FINRA rules. Daniel Retzke was licensed with Edward Jones from 1992 until 2014.

Daniel Retzke’s registration and disciplinary history

Daniel Retzke was registered with the following firms

On March 27, 2015 Daniel Glavin of Tinley Park, Illinois was barred from working in the securities industry as a registered representative. Daniel Glavin consented to the findings that he misappropriated $45,000 from one of his customers, who had requested that Glavin purchase certificates of depot on his behalf. Instead of completing the transaction, Glavin kept the money, and then sent doctored account statements to the client purporting to show the purchase. After several demands by the customer, Daniel Glavin returned the funds. After a complaint was filed by FINRA regarding this transaction, Glavin refused to cooperate with the investigation, and in March, 2015 he consented to a permanent bar from the industry.

Daniel Glavin’s licensing and disciplinary history

Daniel Glavin is not currently licensed with a FINRA broker dealer, but was previously licensed through the following firms:

On May 15, 2015 FINRA announced the filing of a complaint against ARI Financial Services, Inc. and William Brian Candler. FINRA alleged that Candler and ARI Financial Services failed to conduct reasonable due diligence regarding a private placement, failed to prevent a general solicitation of unregistered securities, and failed to document the written approval of the advertising and sales material.

The complaint concerns an investment known as Bridgeport Oaks Fund and its sale to ARI Financial’s customers via a branch office formerly owned by the principal of the Bridgeport Oaks Fund.

The complaint alleges that ARI Financial Services lacked a reasonable basis to believe that the Bridgeport Oak Fund private placement was suitable for any investor (Reasonable basis suitability) , and that because of a substandard supervisory system, ARI Financial allowed misleading advertising and sales materials to be used as art of the offering. The allegations also state that because of a deficient supervisory system, ARI Financial allowed offering materials that contained insufficient and inaccurate disclosures to be disseminated.

On August 3, 2015 Aegis Capital Corp. was fined $950,000 by FINRA for selling unregistered penny stocks and failing to supervise its securities business. In addition, two Aegis Capital Corp compliance officers were fined and suspended. In a related FINRA proceeding the firm’s president and CEO was suspended and fined for failing to disclose certain financial matters

Over the course of nearly two years Aegis Capital Corp. sold nearly 4 billion shares of unregistered penny stocks into the market at the behest of a former broker who had been barred from the securities industry. FINRA found that the firm and its compliance officers maintained an ineffective supervisory system that failed to adequately investigate “red flags” that indicated securities law violations, including the sale of unregistered penny stocks.

The firm consented to the entry of FINRA’s findings without admitting or denying the allegations.

Noted energy analyst David Fessler recently published a report through The Oxford Resource Explorer warning investors about coming defaults and bankruptcies for 19 publicly traded oil and gas companies.  According to Fessler’s report “The oil company death list,  these 19 oil and gas stocks will die soon” the 19 companies profiled are over leveraged and have lost the ability to service their debt. With oil prices in the $40-$50 range, Fessler contends these companies are barely staying afloat, and need to drastically reduce spending, or sell off assets to stay in business

The number in parentheses following the name of the company is the debt-to-earnings ratio.

If you have invested in any of these companies and have lost money, call The Law Office of David Liebrader for a free, confidential consultation.

Much has been written about the concept of suitability as it pertains to investments.

In essence, the “suitability rule” mandates that all licensed financial professionals have an obligation to make appropriate (suitable) investment recommendations to their clients, given their clients’ needs and objectives.

The rule has a long history and is codified as Rule 2111 in the FINRA manual.

Investors will sometimes get pitched an investment by their financial advisor that doesn’t clear through normal channels. These types of transactions are considered to be outside business activities, and are also referred to as “selling away.”

Licensed financial advisors are required to transmit all of their business through the broker dealer with whom they are licensed, unless they have written permission to do otherwise. For a variety of reasons, financial advisors may choose to get involved with a startup company, whose investments aren’t approved for sale, and whose securities aren’t traded on a public market.

In a typical situation the financial advisor will approach an existing (or prospective client) touting the investment. If the client is interested he or she will write a check directly to the new company, bypassing the broker dealer. The investor will then receive the shares from the financial advisor or from the company.

A promissory note is a contract whereby the borrower – usually a business- promises to repay the lender at a specific time in the future. Sometimes the contract calls for the payment of periodic interest; oftentimes the interest is paid upon maturity, along with principal.

Promissory notes with maturities longer than nine months are generally considered to be securities, and as a result they must be registered for sale, or exempt from registration. Usually this entails a filing with either the SEC or with a state securities regulator.

In addition strict rules govern who can sell the promissory notes; generally, they can be sold only by employees of the business, and only to people with whom an existing relationship exists. These restrictions are why these types of investments are rarely sold through traditional brokerage firms.