Did You Have an Account Managed by Kevin McCallum of LPL Financial?
Meyer Wilson is investigating allegations that Alabama-based broker Kevin McCallum engaged in unauthorized trading and unsuitable purchases of risky investments. McCallum worked for LPL Financial until 2019 and has not been registered since.
McCallum has been the subject of eight customer disputes and one regulatory action. Four disputes against McCallum are currently pending and four were settled. McCallum consented to a one-year suspension by the Financial Industry Regulatory Authority (FINRA) for allegedly recommending unsuitable investments to twelve customers. According to FINRA, these unsuitable recommendations resulted in his customers’ investments being overconcentration in a high-risk business development company.
FINRA rules require brokers to obtain customer’s permission prior to making any trades on their account. Failure to do so may result in unauthorized trading. Brokers must consider enough information about the financial situations of individual customers and have a reasonable basis for believing a recommendation of a purchase or sale of an investment is suitable for you. Otherwise, they may be liable for recommending an unsuitable investment.
Firms are required to supervise the activities of brokers. If you suffered financial losses due to McCallum’s actions, you may be able to hold Kevin McCallum and LPL Financial liable. The experienced securities and investment fraud attorneys at Meyer Wilson would like to discuss your legal options with you. Please contact Meyer Wilson today for a no-cost consultation.
Are You a Former Client of Ricky Mantei?
Meyer Wilson is investigating claims that South Carolina-based registered representative Ricky Mantei violated industry rules in recommending investments to his customers.
Mantei was associated with the brokerage firm JP Turner & Co., LLC, from 2010 to 2015. He has been registered with Centaurus Financial, Inc., since 2015. Mantei has worked in the securities industry since 1983. Previous employment stints include Merrill Lynch, First Allied Securities, and GunnAllen Financial.
Regulatory records show that Mantei has been the subject of 36 previous customer complaints, most of which relate to his time as a branch office manager. Three customer complaints against Mantei are currently pending. Mantei was previously sanctioned by FINRA in 2019 alleging that he willfully violated MSRB Rule G-17 by circumventing the supervisory system of his member firm while he was seeking to effect a trade between firm customers.
Stockbrokers and investment advisors have special duties to their customers. If they don’t fail to meet these duties, sell unsuitable investments, ignore industry rules, or engage in other misconduct, then they and their supervising brokerage firm can be held legally responsible for customers’ losses.
If you are a former or current customer of Mantei, contact Meyer Wilson today and schedule a free consultation today to learn about your legal options.
Ohio National Life Insurance Broker-Dealer Affiliate Sanctioned Over $1.275 Million for Improper Variable Annuity Sales
O.N. Equity Sales Company, Inc. (“ONESCO”), a broker-dealer affiliate of Ohio National Life Insurance, headquartered in Cincinnati, was recently sanctioned by securities regulators for failing to supervise variable annuity sales by one of its registered agents who was also one of the firm’s top producers. The sanctions included a fine of $275,000 and restitution payments of $1,001,141.86 to the customers who were harmed.
According to the Financial Industry Regulatory Authority (“FINRA”), ONESCO’s now-former registered representative, Richard M. Wesselt (CRD No. 2195569), “recommended an unsuitable investment strategy to 76 customers involving variable annuities and whole life insurance policies that he characterized as ‘building your own bank’ or ‘infinite banking.’”
In announcing the sanctions, FINRA stated that Wesselt’s “strategy was predicated on persuading customers to liquidate their retirement accounts, which typically held a portfolio of mutual funds, to use the proceeds of that liquidation to purchase variable annuities, and then to liquidate the variable annuities in order to build cash value in whole life insurance policies.”
FINRA claims that by liquidating their retirement accounts, Wesselt’s customers lost benefits associated with those accounts, including protections from creditors, legal judgments, and penalty-free withdrawals.
Moreover, according to FINRA, the specific annuities that Wesselt sold typically had very long surrender periods, and were thus “uniquely unsuited for customers who intended to make short-term withdrawals from the annuities.”
Finally, FINRA states that Wesselt recommended that “his customers take early withdrawals, causing them to lose benefits associated with the variable annuity and incur surrender charges.”
Under securities industry rules, brokerage firms must supervise the suitability of securities recommendations, including the purchase and liquidation of variable annuities.
According to FINRA, ONESCO failed to reasonably supervise Wesselt’s recommendations by, among other things, failing to provide any guidance to supervisors about what they should do if they identified a potentially unsuitable transaction as part of their supervisory review.
FINRA also states that ONESCO failed to reasonably investigate and act upon red flags, including customers who were incurring surrender charges sometimes only days after purchasing an annuity.
Wesselt agreed to separate FINRA sanctions, including a permanent bar from the securities industry, in November 2020.
If you have questions or concerns about a variable annuity transaction that was recommended to you by your financial advisor, contact the experienced investment fraud lawyers at the law firm of Meyer Wilson.
For over 20 years, the law firm of Meyer Wilson has focused its practice on representing investors who have claims against their brokers, investment advisers, and insurance companies. Contact them today for a no-cost, confidential consultation.
Chicago Broker Bhenoy Dembla Barred by FINRA Over Falsifying Mutual Fund Sales Orders
FINRA has permanently barred Bhenoy Dembla (CRD# 4357042) over claims that he falsified documents concerning the sale of mutual funds. Dembla had been employed by Merrill Lynch from March 2001 through September of 2016.
The FINRA findings indicate that Dembla purposefully circumvented Merrill Lynch’s electronic order system that provides protections and restrictions from mutual fund providers on the amount of Class B shares a single investor may own. The system would have prevented the submission of Class B share purchase orders once they exceeded an accumulation limit. FINRA found that Dembla would falsify and submit fake sales orders, which the system would accept, and then promptly cancel the orders so certain customers’ accounts could exceed restrictions. Between December of 2015 and April of 2016, FINRA claims Dembla sold over $860,000 in excess of the accumulation limit on the accounts of 18 customers.
Dembla was formally discharged by Merrill Lynch in September 2016 and has four settled customer complaints from 2016 and 2017 involving excessive trading and unsuitable investments.
Class B Mutual Fund Shares and Investment Fraud / Misconduct
Dembla’s sanction and ousting from the securities industry comes after FINRA issued an alert to investors cautioning against the purchase of Class B mutual fund shares when purchasing a different mutual fund share class may be more cost-effective. Investors should consider whether such purchases are truly in their best interests, and not solely in the interests of their stockbroker or financial advisor, who likely benefit as a result of the high fees associated with this particular class of shares.
Investment fraud and misconduct involving mutual fund shares, which allow broker-advisors to collect higher fees, is unfortunately not uncommon. If you or someone you love have lost money as a result of broker misconduct or fraud involving mutual share funds, our nationally recognized team of investment loss attorneys at Meyer Wilson is available to help you explore your rights and available options.
Call (800) 738-1960 or contact us online to speak with an attorney.
Former Ohio Broker John Schmidt Charged by the SEC With Defrauding Seniors
Earlier this week, former Ohio broker John Schmidt was charged by the Securities and Exchange Commission (SEC) for defrauding his elderly retail brokerage clients out of more than $1 million in a long-running scheme.
According to the SEC's complaint, Schmidt allegedly participated in selling securities belonging to at least seven of his former clients and secretly transferred more than $1 million in proceeds to accounts belonging to 10 other clients. He was able to carry out the suspected scheme by allegedly taking part in unauthorized sales and by making withdrawals from his client's variable annuities. Also, the SEC claims that Schmidt secretly transferred funds using fake letters of authorization and issuing false account statements. Most of the clients claiming to be affected by his scheme were vulnerable elderly customers. In total, the SEC states that Schmidt received more than $230,000 in brokerage commissions from the elderly clients.
The SEC's original complaint was filed in federal district court in the Southern District of Ohio and is charged with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5. The SEC is requesting a judgment that would require Schmidt to pay civil penalties and disgorge the money he fraudulently received from his elderly clients.
Prior to becoming charged, Schmidt worked as an investment broker with Wells Fargo Advisors Financial Network in Dayton, Ohio from 2006 to 2017. He was terminated from his position in November 2017, according to his BrokerCheck report.
Did You Lose Money While Investing with John Schmidt?
If you lost money investing with John Schmidt, Meyer Wilson may be able to assist you to recover your losses. Give our office a call today at (800) 738-1960 to speak to one of our experienced investment fraud attorneys.
Are the Sales of Private Placements an Indication of Brokers Gone Bad?
The rise in sales of private stakes in companies is raising concerns among regulators and investors about investment fraud. The sale of private placements to investors, especially senior investors are popular among unethical brokers who are looking to increase personal profits.
Do Sales of Private Placements Indicate Fraud?
According to the Wall Street Journal, high-risk brokers are selling billions of dollars of private placements every year. In reviewing over one million regulatory records, the Journal found more than 100 firms where 10 to 60 percent of in-house brokers had three or more complaints from investors, regulatory actions, and/or criminal charges on their records. These brokerages sold more than $60 billion in private placements to investors.
According to market studies, sales of private placements are on the rise. In 2017, more than 1,200 securities firms sold approximately $710 billion of private placements. The first five months of 2018 are expected to top last year's record-setting numbers. Private placements can be stakes in oil companies, construction projects, real estate, high-tech companies, bio-tech research, and many other privately-held enterprises. They offer investors higher returns than publicly traded stocks and bonds, but limited company information creates a greater risk for financial losses.
With the rising numbers of lucrative sales of private placements, regulators are worried about high-risk brokers and brokerage firms looking to increase their profits. High commissions create strong motivations to sell, often without considering an investor's best interests. The Financial Industry Regulatory Authority (FINRA), a watchdog agency has expressed concerns about private placements. They are investigating broker markups and sales perks, how private placements are sold to investors, and whether the companies involved are legitimate businesses. Sophisticated and wealthy investors like insurers and hedge funds are often drawn to private placements as alternatives to publicly-traded stocks and bonds.
The Wall Street Journal states that high-risk brokers tend to flock to brokerages selling private placements. Reports show that unethical brokers with questionable tactics can make huge commissions on the sale of private placements at the expense of their clients who often suffer significant losses. Investors who suffer losses due to broker fraud and misconduct can often recover their investment principal, the expected gains (if money had been invested appropriately), arbitration costs, attorney's fees, and punitive damages for egregious misconduct. According to the SEC, private placements are considered unregistered offerings, and investors should be aware of fraudsters using unregistered offerings to conduct investment scams.
If you lost money because of an investment scam, broker misconduct, fraud, etc., contact Meyer Wilson today. Our securities fraud attorneys have secured more than $350 million in verdicts and settlements since we first opened our doors, and we will fight to secure the compensation you deserve. Call us at (800) 738-1960 today to speak with a member of our firm, or send us your information through our online form to schedule a free case consultation.
Committee for the Fiduciary Standard Pushes for Financial Advisers to Sign Fiduciary Oath
The Committee for the Fiduciary Standard is renewing its push for financial advisors to sign its fiduciary oath with the recent pressure from insurance companies that are lobbying to kill the Labor Department's fiduciary duty rule.
Its oath, a one-page document (PDF) lists five fiduciary principles that the Committee believes financial advisers need to follow in order to ensure that their clients’ interests are put ahead of their own. The oath has been around for a few years now, but the 5th Circuit Court of Appeals’ striking down of the Labor Department's rule, in addition to other influences, increased the Committee’s urgency in pushing it into circulation.
"With the 5th Circuit ruling, it is just so important to have this oath out there because it states fiduciary principles," said Patti Houlihan, president of Houlihan Financial Resource Group and Chair of the Committee for the Fiduciary Standard. "The oath is the answer, given that the DOL rule is gone."
Other supporters of the oath believe that even brokers who keep their client’s best interests in mind may be restricted from following the five principles because of their firms’ compensation policies and product platforms.
"We think this helps sort out who is willing and able to act as your fiduciary from someone who may want to but is hampered by the way their firm is set up," said Kathleen McBride, founder of consulting firm FiduciaryPath and member of the Committee for the Fiduciary Standard. "There's nothing in that oath that anyone providing advice shouldn't be doing anyway."
Our investment fraud attorneys at Meyer Wilson are committed to protecting victims of fraud, and fighting for their rights in arbitration, in court, and at the negotiation table. If you lost money because of your broker’s actions, call us to speak with a member of our firm today, or fill out our online form to set up a free, in-depth consultation.
The 10 Most Common Investment Scams
Scammers have spent millennia refining old schemes and creating new ones to separate a mark from their money. While people are constantly testing out new ideas in an attempt to strike gold, the main rotation of scams that you need to look out for remains more or less the same:
- Ponzi Schemes: Ponzi schemes work by paying earlier investors back with later investor’s money. When executed well, this cycle can last for a long time, potentially securing the scammer billions of dollars before they’re caught.
- Promissory Notes: This scam mostly targets senior citizens, the most commonly targeted demographic. These notes are sold to investors looking for investments with high interest rates and low risks in order to keep up their standard of living throughout their retirement.
- Loans: While loans on their own aren’t a scam, they can become one when the lender isn’t actually a credit-worthy, collateralized borrower.
- Currency Scams: These scams are especially popular with criminals because it can feel exotic to trade foreign bank notes, and because the complexity in these transactions can add an extra layer of credibility to the scammer.
- Investing in Precious Metals: Similar to trading currency, investing in precious metals can seem like an exciting prospect. These scams work because scammers are confident that investors won’t visit the company or mine that supposedly contains the metals, and will just take their word that everything is going well.
- Life Settlements: These scammers usually target senior citizens with a terminal illness, though they also go after people worried about what will happen to their dependents after they die. It’s difficult to actually predict when someone is going to die, and investing in these scams can lock up your money for years, if not forever.
- Unregistered Investments: There’s a reason regulatory bodies like the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) exist – keeping financial advisors, brokers, and brokerage companies registered allows them to be regulated and tracked. Otherwise, anyone could simply copy official-looking documents and offer “deals” to unwitting investors.
- Prime Bank Scams: These scams target people who believe that the wealthiest people have access to exclusive investment opportunities that produce unbelievable results.
- Investment Seminars: While seminars aren’t necessarily scams, the only people who directly make money from them are the people who do the presentation. When the ideas they teach are useless, attendees gain nothing of value and are out the cost of a ticket.
- Annuities: Fraudulent brokers may attempt to generate additional commission for themselves by replacing your current annuities with lesser products. In most cases, they don’t even inform their client of the transactions.
Meyer Wilson was founded to provide investors with the legal representation they require to fight for the compensation they deserve. Though our efforts over the past 19 years, we have helped our clients recover more than $350 million in verdicts and settlements, and we are committed to using the extensive experience and knowledge of how the legal system works to help each new client get back on their feet and move forwards. Send us your information through our online form to start out with a free case evaluation today, or call us at one of our office locations to discuss your situation with a member of our firm.
Former Broker Donald A. DeVito II Accused of Churning and Unauthorized Trading
Donald A. DeVito II, a former Wells Fargo stockbroker, has been accused of churning and unsuitability in a recent customer complaint filed in May 2017.
Regulatory documents show that Donald DeVito was terminated from Wells Fargo in late 2016 because of “concerns related to the level of trading in accounts.” He is not currently registered with any investment firm.
Mr. DeVito has previously been the subject of at least five other customer complaints that ultimately settled. The combined settlement amounts for the five previous complaints total approximately $600,000.
Churning is Illegal
When a broker engages in excessive trading to generate commissions, they breach their obligation to put their client’s interests first. This “churning” of investments is against the law and cost clients additional fees that can eat away at their money.
Sometimes brokers and firms claim that clients agree to excessive trading because they have indicated they have an “aggressive” risk tolerance. However, if the main goal of the broker or firm is to generate fees through excessive buying and selling of stock, it is churning.
How to Spot Churning
Evidence of churning can be found in investor accounts. It can include brokers selling well-performing stocks while keeping low-performing stocks in their client portfolios. It looks like the investment portfolio is doing well because of the selling, but in reality, the broker is charging fees and filling the portfolio with low-performing stocks.
An experienced investment attorney can help you if you believe you have been a victim of churning. Call the attorneys at Meyer Wilson for a free and confidential case evaluation.
Duration - How Interest Rate Hikes Can Affect Your Bond Portfolio
If you have money in a bond fund or if you own a bond, you should pay close attention to an important number known as duration. This will signal the likely change in the price of your bond when interest rates either go up or go down – the higher the number, the more your investment will likely react to market changes.
If you have invested in outstanding bonds, especially ones with a high duration and low interest rate, the price could drop from time to time as interest rates go up, and the value of bond funds that mostly hold primarily long-term bonds are also likely to drop over time as interest rates go up.
How Price Is Affected By Duration Risk
While a number of factors can affect the prices of bonds and bond funds, changes in interest rates are among the most important to monitor. It’s a well-known fact among the investment community that any time interest rates go down, bond and bond fund prices go up, and when rates go up prices go down. However, not all bonds and bond funds react the same way to changes in interest rates – some will react more dramatically than others, which is why the duration is so important.
The lower a bond or bond fund’s duration, the less sensitive it is to changes in interest rates which means that changes in price, whether they are positive or negative, will not affect your investment as much as one with a high duration. As long as the company keeps paying interest to bondholders, holding your bond to maturity likely means that you will receive the face value of your investment when your principal is repaid. However, selling your bond or bond fund before it reaches maturity means that the price you receive will be affected by the duration and interest rates.
Calculating the duration includes factors like the amount of time it takes for the bond or bond fund’s principal to be repaid, changes in credit quality, yield and call features. However, just because your bond or bond fund has a low duration doesn’t mean that you’re safe from risk. You should always speak with your financial adviser about any investments you are considering, and if you believe that your financial adviser misled you, provided false information, or committed any other type of misconduct, you should speak with one of our investment fraud attorneys at Meyer Wilson to discuss your case today.