Your Parents Are In Danger

The incompetents who promise outrageous returns make the newspapers, but they have very little in common with the community of competent financial scamsters who make off with billions in investor savings every year.

Maybe you comfort yourself with the idea that your parents — as elderly as they’ve become — are too smart, sensible, or responsible to ever fall for an investment scam. When you think about financial scams you think of a Nigerian general who wants to borrow your bank account or a fly-by-night huckster who promises to double your money in 90 days. Surely, you think, my Mom and Dad would never fall for one of those. Mom and Dad are conservative investors who deal with a big-name brokerage firm. Take a look at this news release about a recent case in Nevada: (more…)

Crystal Ball Right Again

As much as you think otherwise, these scams are so slick that you’ll never see them coming unless you know more about them.

When I first launched the Investor’s Watchdog website, I took the opportunity to look into the future of investment fraud and created a page called Crystal Ball. Among the types of scams that we anticipated seeing with more frequency were health care scams. The Atlanta office of the SEC believes that it has found another such scam. According to the SEC’s press release: (more…)

$25 for a Cheeseburger?!

They graduated from the Ivy League. They’ve got PhDs. They’ve earned every meaningful professional designation imaginable. How could they miss these things?

I remember listening to the Pretenders in the 70’s and 80’s, and I remember reading a Rolling Stone interview with the band’s lead singer, Chrissie Hynde. Talking about the hassle’s of the road, she recounted how, once people learned who they were, the price for everything would skyrocket.  The owner of one roadside diner decided that his $2.95 cheeseburger cost $25 the night the band stopped in for dinner. Last week, the SEC filed an enforcement action with parallels to that story. According to the SEC’s press release: (more…)

From ‘Trust Us’ to ‘Get Lost’

But, complain about mistreatment at the hands of their employees, and they’ll be telling you to get lost quicker than you can say “false advertising.”

Among the questions I get most often is “I’ve got my money with _____, a big brokerage firm, so I don’t need to worry about fraud, right?” They’re always disappointed with my answer. A recent case from Florida illustrates why even having a solvent brokerage firm behind your financial adviser is very little protection, and how brokerage firms really view clients who complain about mistreatment. According to Orlando Sentinel: (more…)

Page Perry Pursuing Actions Against ICC

ICC has a long history of regulatory actions arising from lax supervision.

Atlanta law firm Page Perry, LLC, has filed an arbitration action against Investors Capital Corporation (ICC) seeking to recover losses suffered by five former employees of a Georgia Power plant in Rome, Georgia. According to the Statement of Claim, ICC, with a long history of regulatory actions arising from lax supervision of its securities business, is responsible to investors for the acts of its broker/representative and for failure to reasonably supervise that broker, Henry Wilder Bailey of Watkinsville, Georgia, who handled the retirement nest eggs of the five Georgia Power employees. (more…)

What You Have in Common with Millionaire Athletes

In the way that matters most, you are just alike.

Someone could write a dictionary-thick book about the professional athletes who have lost a fortune to bad stockbrokers and Ponzi scamsters. It happens that often. The latest case comes from the NFL. According to philly.com: (more…)

California Case Provides Primer on Pump and Dump Schemes

Organized crime loves them because they are more lucrative and require less violence than the traditional alternatives.

Just about every sports nut has seen the movie Rudy, about a football crazed walk-on at Notre Dame University who finally gets his chance to play in a game, and makes the most of it. The real Rudy, Daniel “Rudy” Reuttiger, founded a sports drink company called Rudy Nutrition. Rudy’s company was back in the news last week, and the story wasn’t quite so inspirational. According to MercuryNews.com: (more…)

Investors Say Morgan Stanley Broker Put Them in a Ponzi Scheme

Did your broker convince you to buy a hedge fund, limited partnership, promissory note, non-traded REIT, or some other alternative investment in the past four years?

Chances are that you don’t recognize most of the names that pop up in our blog posts as the targets of civil or criminal enforcement actions. That does not mean that well-known brokerage firms are never involved in the kind of misconduct that leads to those actions. According to Courthouse News Service: (more…)

The Eternal Dream of a Crystal Ball

If someone has a machine that can predict stock market movements, he shouldn’t need your money.

It stands to reason that new technology will be able to do things that old technology could not. Maybe that is why we are so prone to believe that someone will someday create technology that accurately and reliably picks stocks poised for a rise. Personally, I’m skeptical, as you should be. According to Bloomberg Businessweek: (more…)

Georgia Power Employees Pursue Investors Capital Corp.

Regulators have been unable to deter this kind of conduct. Maybe a big enough group of investors will have a better result.

It always seems that part of my caseload as an attorney representing investors includes a series of cases by retirees from a particular employer against the same brokerage firm for the same conduct. I’ve represented folks who took early buyouts from the Georgia Paper pulp mill in Brunswick, Georgia, retirees from Sears in Columbus, Georgia, and retirees from Bellsouth here in Atlanta. And now I am representing retirees from a Georgia Power plant in Rome, Georgia. All of those cases involved the same kind of investment. Readers of The Vigilant Investor will be able to guess that the investment in all of those cases was variable annuities. (more…)

Former Wells Fargo Broker Shown the Door

Vigilant investors long ago jettisoned romantic notions of the stockbroker as protector of the nest egg.

A recent enforcement action from the Financial Industry Regulatory Authority (FINRA) answers one of the questions I get most often: “If I’m with a big name brokerage firm, I don’t have anything to worry about, right?” According to FINRA, Ralph Edward Thomas Jr., while a representative for Wells Fargo Advisors, stole money from many of his clients. One of the accounts from which he stole was set up to benefit a child suffering from cerebral palsy. According to a story from Investment News: (more…)

Regulatory Rap Sheet - Banc of America Merrill Lynch

Learn these things, and you’ll be safer overnight. Remain ignorant of them, and you run the risk of learning them the hard way.

The Financial Industry Regulatory Authority (FINRA) has fined BOA Merrill Lynch $35,000 and forced it to pay more than $11,000 to customers. According to FINRA, BOA Merrill charged its customers unfairly high prices for corporate bonds.  BOA Merrill consented to the sanction without admitting or denying liability. (more…)

Another Recidivist Headed Back to the Gray Bar Hotel

With the impending passage of the JOBS Act, we can expect a spike of fraud led by career criminals.

“Professional scam artists put in long hours of planning and preparation before they talk to their first mark.” — The Vigilant Investor, p. 39

With the impending passage of the JOBS Act, we can expect a spike of fraud led by career criminals. These are the guys who know the law well enough to be dangerous and will spin the text of the new law into scams that will take tens of billions, if not hundreds of billions, of dollars from unsuspecting investors this year and every year for the next generation. A recent case in Colorado gives us a peek into the lives of these characters. According to Coloradoan.com: (more…)

For the Love of God, Do Not Let Your Broker Choose Your Investment Objectives!

You will see that paperwork again when the broker has drained your account through horribly risky investments that paid the broker huge commissions.

“A broker might change your account objectives without telling you because this makes it easier for her to make more and riskier trades in your account . . .” — The Vigilant Investor, p. 168

Yesterday, I was in Chattanooga meeting with a prospective client whose broker began the relationship with the well worn words, “just sign here.” I’ve seen it more times than I can count. Maybe that’s how your relationship with your broker began. You received the account opening paperwork, which reflects your account objectives and your risk tolerance. You gave it a glance and saw that the broker has indicated that your objective is “speculation” and your risk tolerance is “high.” You tell the broker that you want to be safe with the money, that you do not want to speculate. He or she says that the paperwork is just a formality and that filling it out this way will save innumerable hassles down the road. “Just sign where indicated,” the broker says. You do as instructed and send in the paperwork. You will see it again. (more…)

Afghan Murder Suspect a Bad Broker

Until you understand why you’ll be so stubbornly reluctant, a book full of warnings from investor protection experts will not drag you to the phone.

“Brokers know that a customer who is in declining health is unlikely to notice unauthorized trading.”  - The Vigilant Investor, p. 234

Army Staff Sergeant Robert Bales, accused of massacring Afghan women and children earlier this month, used to be a stockbroker. He worked for Ohio-based brokerage firm MPI Financial and left the industry on the heels of a finding that he abused at least one of his customers, draining what once was an $850,000 retirement account. According to a story from ABC News: (more…)

LPL Financial Broker Steals Nearly $1.8 Million

It’s a common belief of people who hire brokers at recognized firms, but often incorrect.

“Investors are prone to believe that any firm with an impressive name and a long history is reputable.” — The Vigilant Investor, p. 153.

Elliott Kravitz was a broker for LPL Financial Services, one of the biggest independent broker-dealers in the world. Perhaps his clients felt safe having such a well known company standing behind their broker. Perhaps they assumed that LPL would never hire someone who would take advantage of investors. It’s a common belief of people who hire brokers at recognized firms, but often incorrect. Kravitz’s story makes the point. According to WLWT.com:


Investors as Muppets - A View from the Inside

What the sunshine reveals is sometimes harsh, but it’s better to know than to encounter those things in the dark.

Investment fraud happens at all types of brokerage firms, and it’s getting worse.  - The Vigilant Investor

Having seen into the dark corners of the industry during my time as a Branch Chief at the SEC, I know that what actually happens at brokerage firms is as far from their trustworthy image as Homer Simpson is from a vegetarian diet. So, I was glad, but not surprised, to read a New York Times editorial from Greg Smith, who spent 12 years inside Goldman Sachs. The whole piece is well worth your time. For my purposes, I’ve pulled out the following quotes: (more…)

Sign of Trouble?

You have to wonder whether things will soon be so bad that we start thinking wistfully of 2008, when things were merely bleak.

Think back to the Lehman Brothers collapse in 2008. If you knew anyone who worked there at the time, that person knew what was around the corner before you did. Before the rest of the world appreciated that the world economy was on a bullet train to the bottom, they knew. If you could transport yourself back to that time and watch that person, do you think that you’d be able to notice the stress of the knowledge in the way they talked or moved or acted? Most likely.  What would it have looked like? Irritability? Strange silence? Out of proportion anger in response to minimal provocation? Well, a story from New York makes me wonder whether that scene is playing out again now. According to InvestmentNews: (more…)

Former Raymond James Broker Indicted

The reality of the securities industry is nothing like the portrait firms paint in commercials that air during golf tournaments.

You can slice and dice the characters who commit investment crimes any number of ways; by modus operandi, by personality traits, by size of their cons. In The Vigilant Investor we divided them into five categories: the Professional Criminal, the  Golden Boy, the Fibber, the Bungler, and the Thief. Prosecutors in Indiana have indicted a man who, if the allegations against him are true (he is presumed innocent), would fit solidly into the Thief category. According to journalgazette.net: (more…)

A Course at College, But Not a College Course

Get advice from someone who has no financial interest in managing your money before you venture into the world where everyone wants a piece.

One of my partners recently received a very interesting brochure in the mail. It was an invitation to enroll in an “Educational Course for Adults — Ages 50 to 70.” The brochure states that the course is being conducted at Oglethorpe University, a well respected institution of higher learning here in Atlanta. In parenthesis (and smaller font), they disclose that the course is not affiliated with the university. It seems that the course presenters are only renting out a classroom. The brochure is eight pages long and includes a Course Outline and a Course Preview. They plan to cover “Retirement Needs and Expenses,” “Retirement Roadblocks and Mistakes,” and many other areas of interest to retirees and those approaching retirement. The instructors represent that they have earned the Certified Financial Planners designation. They are affiliated with LPL Financial, which is the largest independent broker-dealer in the U.S..  (more…)

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