Can My Broker or Financial Advisor Trade in My Account Without My Permission?
What to Do If You Suspect Your Broker Engaged in Unauthorized Trading
Under most circumstances, a broker or financial advisor cannot trade in your account without your permission. There are very limited exceptions to this rule. Unauthorized trading is a serious offense that can result in liability. In order to prove that your broker engaged in unauthorized trading, it is strongly recommended that you consult with an experienced attorney.
At Meyer Wilson, we represent clients who have suffered financial losses related to investment fraud and stockbroker misconduct. Our experienced attorneys will fight hard to hold brokerages and other financial institutions accountable for their wrongdoing while helping you recover your losses.
Did your broker or financial advisor trade in your account without your permission? Contact our office at (800) 738-1960 for a free consultation.
When a Broker Can Make Transactions Without Your Permission
In most cases, a broker or financial advisor will be prohibited from making any trades or transactions within your account without your permission. One of the few exceptions to this rule is if you have a discretionary account.
A discretionary account gives the broker or financial advisor the ability to use their “discretion” in making trades (buying or selling securities) without your prior authorization. Discretionary accounts are somewhat rare and are required to be in writing. The customer agreement you sign will expressly state that the broker has the authorization to make trades without obtaining your permission.
Discretionary vs. Non-Discretionary Account
Because a discretionary account allows a broker or financial advisor to make transactions in a customer’s account without their express authorization, the Financial Industry Regulatory Authority (FINRA) imposes special supervisory requirements.
Additional supervisory requirements include reviewing all discretionary accounts at “frequent intervals.” Discretionary accounts may be more prone to inappropriate trading since they do not require client approval for transactions. Even though an account may be marked “discretionary,” all trades that the broker makes in the account still must be in the client’s best interests.
In non-discretionary accounts, a broker or financial advisor must obtain a client’s permission before making any transactions. Any buying or selling of securities without a client’s authority is considered unauthorized trading and is a direct violation of FINRA Rule 2010.
The other exception to the rule is if the broker or financial advisor was executing a margin call. If you have a margin account where you have borrowed money from your broker to buy a stock, the broker may be able to sell your securities without first obtaining your permission. The account must have fallen below a firm’s maintenance requirement in order for this exception to apply.
Buying investments on margin is risky and may be unsuitable for the average investor. It is vital that you understand all of the potential downfalls and risks of loss before agreeing to trade any investments on margin. However, if you do not have a margin account or a discretionary account, any trading in your account without your permission may be considered investment fraud.
Suffered Losses Related to Unauthorized Trading? Contact Our Office.
If you have sustained losses related to unauthorized trading on your account, you might be entitled to compensation. Contact our office at (800) 738-1960 for a free, no-obligation consultation. We represent clients nationwide for investment and securities fraud claims. Call now to get started.
SEC Indicts Former LPL Broker Kerry L. Hoffman on $3.3m Investor Fraud
Kerry Lee Hoffman (CRD# 1061740) has been sued by the SEC for allegedly defrauding at least 46 investors out of $3.3 million dollars. The alleged fraud occurred between July 2015 and July 2018 while Hoffman was a registered broker with LPL Financial LLC in Mundelein, Illinois.
Hoffman, who was employed by LPL Financial from February 2010 through October 2018 (and subsequently by Union Capital Company in Chicago, IL from November 2019 through June 2019) is no longer a registered broker in the securities industry.
SEC Charges Allege Multi-Million Fraud Involving GT Media Securities Sales
An SEC complaint filed on July 1, 2019 alleges that Kerry L. Hoffman, along with childhood friend and co-defendant Thomas V. Conwell, defrauded at least 46 investors across a dozen states out of $3.3 million in unregistered securities.
Here are few details about the SEC complaint:
- According to the SEC, Hoffman and Conwell sold GT Media, Inc. securities to investors between July 2015 and July 2018;
- Hoffman is alleged to have received $50K in commissions from GT Media for offering and selling $500K of company stock and $350K of GT Media convertible promissory notes to advisory clients;
- The SEC claims Hoffman failed to disclose significant conflicts of interest to his clients, including his commissions and warrants from GT Media, and his loans to GT Media repaid with investor money, and that he failed to notify LPL of his outside activities.
- Conwell, who was previously barred from the securities industry in 2000, is alleged to have sold roughly $2.5M of the unregistered securities to over 40 investors, often by means of misrepresentations, including claims that Fortune 500 companies were looking to acquire GT Media, an IPO was expected, he was a co-investor, and that he was not being paid by the company.
FINRA’s online BrokerCheck database shows Hoffman resigned from LPL Financial in July 2018 over allegations that he served as a GT Media consultant without notifying his brokerage firm or obtaining its approval, and for assisting family members and clients with making GT Media investments.
He was subsequently employed by Union Capital in Chicago before being permitted to resign in June 2018. Hoffman additionally has a regulatory disclosure from 2007 indicating that he was discharged by UBS Financial for allegedly placing trades in a customer account without written authorization.
Lost Money? Meyer Wilson Can Help.
If you or someone you love has lost money investing with Kerry L. Hoffman, Thomas V. Conwell, or GT Media, you may have the right to seek a financial recovery of your losses. In addition to helping investors nationwide explore their options for pursuing claims against bad brokers, Meyer Wilson can also evaluate whether a broker / adviser’s member firm can be held responsible for investor losses due to negligence, failures to supervise, and other forms of investment fraud and misconduct.
Meyer Wilson is a nationally recognized civil trial law firm that has recovered hundreds of millions of dollars for wronged investors and consumers across the country. Call (800) 738-1960 or contact us online to speak with a lawyer about your potential claim.
New Jersey Broker Andrew F. Perry Faces Investor Complaints
Financial Broker Andrew F. Perry’s conduct is the subject of two pending complaints lodged by customers who claim they suffered significant financial losses when working with the New Jersey-based advisor during his time at UBS Financial Services.
According to FINRA’s BrokerCheck, Perry (CRD# 1726938) entered the securities industry in the 1980s. He has been registered with UBS Financial Services Inc. since October 2008, and is currently affiliated with the firm’s branch locations in Short Hills, NJ, Margate, NJ, and New York City.
Alleged Misrepresentation & Unsuitability Over Options Overlay Strategy
FINRA’s BrokerCheck report indicates that Perry is facing two pending customer disputes alleging unsuitability and misrepresentation related to an options overlay strategy. Both disputes involve alleged misconduct between March 2017 and the present.
Options involve risks and are not suitable for every investor. Using the wrong strategy in options trading can lead to disastrous results. Taking unnecessary risks can result in big investment losses. You can read more about options trading here.
Meyer Wilson is a national trial practice with a reputation for protecting the rights of investors who’ve lost money due to investment misconduct. If you have questions regarding a potential claim, contact us to speak personally with a lawyer.
Say, What?!? Brokerage Firms Pushing Regulators to End On-Site Inspections
If brokerage firms have their way, temporary measures adopted in response to COVID may become permanent, putting customers at risk.
Routine onsite inspections of brokerage firm branch offices have been part-and-parcel of securities industry rules and best practices for decades. Such inspections play a critical role in combatting broker fraud, particularly in remote branch offices that lack day-to-day oversight and where Ponzi schemes and other unauthorized securities sales may flourish.
But while regulators relaxed certain on-site inspection requirements during the past year because of COVID-19, brokerage firms are now pushing to make these changes permanent. If adopted, these changes will make it easier for bad brokers to hide their misconduct from supervisors, putting customers’ life savings at substantial risk.
In response to the pandemic, and in specific recognition of health and safety concerns as well as state and local orders that limited the ability to conduct in-person meetings, FINRA adopted temporary relief to brokerage firms allowing them to complete their calendar year 2020-21 office inspection obligations without conducting on-site visits to branch offices.
In December 2020, FINRA issued Regulatory Notice 20-42 seeking comments from stakeholders, including brokerage firms and customers, regarding lessons learned during the pandemic. In response, many brokerage firms have urged FINRA to end on-site inspections altogether.
Firms contend that improved technology allows remote inspections to be just as effective as on-site inspections. In addition, firms claim that costs associated with conducting on-site inspections are too onerous and that compliance resources can be better shifted toward virtual inspections and exams.
The investing public should be alarmed at the prospect of on-site inspections being scrapped. This is particularly so with regard to remote branch offices where a single broker may work alone, far away from the watchful eye of a branch manager or compliance personnel. The SEC has long recognized these sort of remote office arrangements as a “recipe for trouble.” In re Royal Alliance Associates, Exchange Act Rel. No. 38,174 (Jan. 15, 1997).
In our law firm’s experience, brokers working in remote offices are much more likely to engage in serious misconduct involving the sale of unlicensed securities and Ponzi scheme “investments.” Frequent, unannounced audits of these remote offices have proven to be the most effective way to detect and prevent unlawful activity. Moving to a system of strictly virtual oversight would create a tremendous gap in firms’ compliance programs, allowing bad brokers to conceal misconduct in physical files and offline systems that are not connected to a firm’s authorized network, and thus never reviewed as part of any supervisory process.
FINRA must ignore the securities industry’s pleas for loosening on-site inspection requirements. Experience has shown a robust system of routine, unannounced audits plays a crucial role in ensuring compliance with industry rules and protecting customers from serious misconduct.
With decades of experience, our firm has the experience, resources, and tenacity needed to tackle even the largest cases nationwide. Contact us today for a free case evaluation.
Malachite Capital LP Being Investigated For Investment Losses
Malachite Capital Partners LP is currently being investigated for possible fraud or breach of fiduciary duty to investors. At Meyer Wilson, we have extensive experience handling these cases and are ready to help investors who have suffered losses after investing in Malachite Capital Partners LP.
What Is Happening With Malachite LP & Investment Loss Claims?
Malachite Capital Partners LP is under investigation based on allegations of breach of fiduciary duty and possible fraud of investors. We know that Malachite was channeled endowment and foundation money through Fund Evaluation Group.
Fund Evaluation Group is responsible for advising or directly operating portfolios of many universities, charities, and other institutions. Malachite is based in New York and oversees around $600 in investments. Malachite recently announced plans to dissolve its fund due to adverse market conditions.
This firm was founded by former Goldman Sachs traders Joe Aitken and Jacob Weinig. They recently told Bloomberg News that, “[d]ue to the extreme adverse market conditions of recent weeks and the resultant funds’ performance, the current and projected assets will not justify or support the current structure of the funds. It is in the best interest of the funds and their investors to dissolve the funds immediately pursuant to their governing documents in order to commence an orderly wind-down.”
Who Does Malachite Represent?
Malachite represents various educational organizations and charities, along with other institutions. Fund Evaluation Group consultants allegedly recommended Malachite as a suitable firm for investments as recently as late 2019. This includes Utah’s public education trust, the University of Toledo Foundation, and the University of Illinois.
At the end of 2019, Malachite represented 5.6% of a pool of hedge fund investments that Fund Evaluation Group built for their clients (in a fund-of-funds). This is called the “FEG Absolute Access Fund,” and is one of several vehicles that the firm uses to channel money from institutions whose portfolios the firm is responsible for.
As we have previously stated at Meyer Wilson, hedge funds are known for underperforming or shutting down entirely. Recent volatility in the stock market has led many industry experts to indicate that hedge fund dissolutions could become inevitable.
In a brochure used by Malachite in 2019, the firm stated that it “seeks to capture short-term volatility risk premium within the global equity markets while diligently monitoring risk and adhering to a strict risk management process.” Unfortunately, it seems that when stock prices dropped significantly, and market volatility peaked, Malachite did not take steps to protect investors.
If you believe you have been misled or have suffered losses after working with Malachite Capital Partners LP, contact Meyer Wilson today. You can contact us by calling (800) 738-1960 or contact us online to speak confidentially with an attorney today. At this point, the investigation into Malachite is ongoing, and it is not clear right now whether there are any investor funds left at all. Not only will we keep a close eye on this investigation, but we will also monitor whether or not Fund Evaluation Group becomes involved in any investigations.
Massachusetts Charges GPB Capital Holdings With Securities Fraud
William Galvin, the top securities regulator in Massachusetts, filed a Complaint against GPB Capital this week that alleges GPB Capital issued illegal marketing materials filled with misstatements and omissions of material fact in the course of selling its investments to clients.
Meyer Wilson has been on top of the GPB Capital debacle since it started last year, and we currently represent dozens of investor victims across the country. You can read more about our efforts and lawsuits at our website, www.gpblawyer.com.
Galvin identifies some of GPB Capital’s self-dealing in the Complaint, which includes a network of entities that sought to appear different but were one-and-the-same. GPB Capital paid Ascendant Alternative Strategies and Ascendant Capital millions of dollars in connection with marketing GPB Capital funds and in connection with acquisitions made by GPB Capital. Publicly, GPB Capital and Ascendant Capital sought to appear as two distinct companies, but in reality, the Massachusetts regulator says they were one-and-the-same.
The Complaint also details some of the underlying securities fraud under Massachusetts Blue Sky laws – that investors contributed to GPB Capital funds under false and misleading pretenses, in reliance on GPB Capital private placement memoranda and marketing materials, and without knowing that GPB Capital continually engaged in self-dealing from inception.
As time went on and GPB Capital raised more money, Galvin says that GPB Capital was unable to use its capital efficiently. As investor contributions increased, so did the funds required to continue to pay investor distributions. In order to keep up with distributions, GPB Capital began dipping into investor contributions to meet the demands of the 8% monthly distributions. According to the Complaint, the GPB Capital funds’ financials show that distributions were issued that exceeded the funds’ net incomes. But GPB Capital never updated any of its disclosure or marketing materials to reflect this.
In an interview with the Boston Globe, Galvin said,
“CLEARLY THE MATERIALS THAT WERE PRESENTED, THE REPRESENTATIONS THAT WERE MADE, WERE NOT TRUE…. WE’RE LOOKING TO FREE THESE INVESTORS OF THEIR OBLIGATIONS.”
Coronavirus Causes Continued Losses For UBS Yes Investors: How To Recover Losses
The coronavirus pandemic has led to an unprecedented situation in this country. We have dealt with, and are still going through, an unimaginable health crisis. The country’s economy has also taken a sharp hit as millions of Americans have filed for unemployment, and businesses in every state continue to suffer. Unfortunately, many investors have also faced major losses over the last few months. One thing has become very clear – that some investors have suffered losses due to the negligent or willful wrongdoing of investment advisors and stockbrokers. Those who were recommended high-fee, high-risk strategies like UBS Yield Enhancement Strategy (YES) have likely sustained significant losses and just the matter of a few weeks.
What Is a UBS Yield Enhancement Strategy (UBS YES)?
Without getting too technical, a UBS YES investment strategy is a form of investing where “call” and “put” option spreads on the S&P 500 Index (SPX) are traded on a certain strategy (Iron Condor Strategy) to enhance returns when markets are relatively stable or flat. Many investors were pitched UBS YES-type investment strategies by their investment advisors as being low-risk or neutral investment options. Unfortunately, these strategies have left them open to substantial losses in light of the recent economic crash.
Why Are UBS Yes Invest Strategies Risky During COVID-19?
While most investors having incurred some losses over the last few months, those who made investments based on fraudulent or deceptive recommendations have faced the steepest declines in their portfolios. Many investors who have been led into UBS YES investment strategies they suffered losses of as much as 30% or more since the beginning of the COVID-19 crisis. As the S&P 500 has dropped from an all-time high of above 3,200 to below 2,500, the UBS YES strategy has likely yielded steep losses. In addition to these losses, the underlying bond and stock portfolio that collateralize a UBS YES strategy have also likely deteriorated significantly.
What Is the Financial Industry Regulatory Agency (FINRA)?
The Financial Industry Regulatory Agency (FINRA) is a non-profit organization under the supervision of the Securities and Exchange Commission (SEC). FINRA works to ensure fairness. Investment advisors, stockbrokers, and the financial institutions that employ them have a duty to make suitable recommendations to investors and to fully disclose risks associated with every recommendation they make. If these individuals and institutions fail to do so, they could be held liable for damages and losses that their investors incur. An experienced FINRA arbitration lawyer can help with this.
Recovering Investment Losses Due to UBS YES
If you or a loved one have suffered losses after being advised to invest in UBS YES, you need to seek legal assistance as soon as possible. At Meyer Wilson we want to help you recover damages is through Financial Industry Regulatory Agency (FINRA) arbitration or a class action lawsuit. We firmly believe that financial institutions, investment advisors, and stockbrokers should be held accountable for making unsuitable recommendations, failing to disclose certain risks to investors, and overconcentrating their clients’ portfolios. Our team will thoroughly analyze the UBS YES investment strategy that you were advised to take. You can contact us by calling (800) 738-1960 or contact us online to speak confidentially with an attorney today.
Morgan Stanley Loses Appeal of $3.3 Million Finra Arbitration Award
According to InvestmentNews, a federal judge denied Morgan Stanley’s motion last week to appeal a $3.3 million FINRA arbitration award it lost to investors in Puerto Rican bonds. The award included a $3 million sanction against Morgan Stanley for purposefully concealing evidence in a hearing, which Morgan Stanley argued was excessive. The court’s decision denying Morgan Stanley’s request makes clear that even if the sanction was excessive, that’s not a basis for overturning an arbitration award.
So when can arbitration awards be changed or overturned by reviewing courts?
The general rule is that arbitration hearings are a one-shot deal. A reviewing court cannot look into the facts of the case or the merits of the decision – its only job is to determine whether the arbitrator was fair and the final decision is valid. A high standard of deference is given to the arbitrator’s decision, and only in very rare instances will an arbitration award be disturbed by a reviewing court. Any ability to change or vacate an arbitration award is governed by the each state’s arbitration acts and the Federal Arbitration Act.
These statutes were primarily written to allow courts to enforce arbitration agreements. In some cases, it is necessary for one of the parties to take the arbitration award and submit it to a court of law for confirmation, making it a legally enforceable judgment. This is sometimes just part of the process and does not mean that the arbitration award is under review.
The bottom line is that even if it is clear that an arbitrator completely missed the boat, unless a losing party can prove fraud or a conflict of interest, that losing party is typically bound by the arbitration award.
If you have any questions about investment losses, FINRA arbitration & awards contact an experienced securities arbitration lawyer at meyer
Meyer Wilson Investigates Claims Against Newbridge Securities Broker Scott S. Brooks for the Sale of GBP Capital Funds
Meyer Wilson is currently investigating claims against Newbridge Securities broker Scott Brooks of San Clemente, California for the inappropriate sale of GPB Capital Funds to his customers.
Brooks’s employing brokerage firm, Newbridge Securities Corporation, approved the sale of a series of limited partnerships issued by GPB Capital Holdings, including GPB Automotive Portfolio, to its customers. What Newbridge should have easily uncovered during the due diligence process for the GPB funds should have precluded them it selling GPB funds to its customers entirely. GPB was riddled with irreconcilable red flags, such as conflicts of interest, questionable funding, and insanely high costs to investors and commissions to the brokers who sold it.
Financial advisors have a legal and regulatory obligation to recommend only suitable investments that are appropriate for their clients. Their employing brokerage firm has a legal and regulatory obligation to supervise the financial advisor’s sales practices and dealings with clients. Firms also have a duty to conduct adequate due diligence on investments before offering them to customers. To the extent that any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.
Meyer Wilson represents dozens of investors across the country who invested in GPB Capital funds at the recommendation of their financial advisors. You can learn more about our firm and our work on GPB cases on www.gpblawyer.com. If you invested in any of the GPB Capital Funds, give us a call for a free consultation.
Financial Planners: What Are They and Who Is Regulating Them?
Investors are confronted with a variety of professional designations for people in the financial services industry, but it can be difficult for the average investor to understand and appreciate the wide distinctions between them. One particular designation that implies specialized skill might mean much less than you think.
A financial planner prepares financial plans for clients. It requires no license, no experience, no qualifications, and is subject to no regulatory oversight. The kinds of services financial planners offer can vary widely and can include every aspect of your financial life, including savings, investments, insurance, taxes, retirement, and estate planning.
Unlike other financial services professions, such as stockbrokers, investment advisers, and insurance agents, the financial planning profession does not have its own regulator. Instead, individuals who call themselves financial planners might be regulated in relation to other services they provide. For example, an accountant who prepares financial plans would be regulated by the state Board of Accountancy, and a financial planner who is also an investment adviser would be regulated by the SEC.
It is important to make certain you fully understand which areas of your financial life a particular planner can—and cannot—help with before you hire that person. If a financial planner sell products, their recommendations typically will correspond with the products or services they sell and may not offer an actual comprehensive view of your financial options. For example, an insurance agent will tell you about insurance products (such as life insurance and annuities) but likely will not discuss other investment choices (such as stocks, bonds or mutual funds).
If a financial planner is simply a financial planner, he or she flies under the radar of any regulatory body tasked with protecting the public. Given the importance of financial planning to the well-being of millions of people, appropriate regulations are needed to require financial planners to meet ethical and competency standards.
Looking for a “Certified Financial Planner,” or CFP, may help locate a financial professional who has at least met certain educational and experience criteria and has passed an exam. Additionally, a professional who is also a licensed stockbroker or investment adviser will at least assure you that he or she is subject to some regulatory oversight.