FINRA Arbitration Panel Orders Morgan Stanley to Pay $519K for Client Losses

Timothy J. Prouty

A couple from New Mexico claiming that a Morgan Stanley financial advisor, Timothy J. Prouty, persuaded them to buy complex financial instruments were awarded $519,089, plus interest by a FINRA Arbitration Panel.

In 2016, a couple alleged that Morgan Stanley’s broker engaged in unauthorized trading, among other things, resulting in losses of within their eight accounts. The couple’s main allegation focused on suitability violations.

Suitability violations occur when brokers fail to conduct reasonable due diligence and understand the potential risks and rewards of a recommended strategy. A broker is required to analyze a customer specific factors before making a determination that a particular investment is suitable to a customer. In other words, an investment recommendation must be consistent with client’s age, income, investment objectives and/or investment risk tolerance.

In this instance, the couple alleged that Timothy J. Prouty, their broker, persuaded them to purchase junk bonds, options and ETFs that were invested in derivates and futures.
A FINRA panel ruled in favor of the couple. The award found Morgan Stanley liable in the amount of $519,089, plus interest at the rate of 8.75% per annum from April 5, 2019 until paid in full. The broker’s request for expungement of his CRD record was denied.

If you or someone you know lost money due to suitability violations with Morgan Stanley and/or Timothy J. Prouty you may be entitled to recover your investment losses through FINRA arbitration. CMD accepts cases on a contingency fee basis, which means we only get paid if you get paid. Your time to file a claim may be limited, so contact us today at (212) 658-0458 or contact@cmdllp.com for a free and confidential case evaluation.

Christhian Palacios of Garden State Securities Subject to Two Customer Complaints

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Christhian Palacios (Palacios) has been subject to two customer complaints and four tax liens during the course of his career.  Palacios is currently employed by Garden State Securities, Inc. (Garden State Securities).  One of the customer complaints against Palacios concern allegations of high frequency trading activity also referred to as churning and unsuitable investments.

In June 2018 a customer filed a complaint alleging their account was excessively traded and unsuitable from January 2009 until March 2016.  The claim alleged $298,109 in damages and is currently pending.

In July 2016 Palacios disclosed a tax lien of $140,000.

If you or someone you know lost money investing with Christhian Palacios and/or Garden State Securities you may be entitled to recover your investment losses through FINRA arbitration. CMD accepts cases on a contingency fee basis, which means we only get paid if you get paid.  Your time to file a claim may be limited, so contact us today at (212) 658-0458 or contact@cmdllp.com for a free and confidential case evaluation.

Scott Mass of David Lerner Associates has been subject to five customer complaints

According to BrokerCheck records financial advisor Scott Mass (Mass), currently employed by David Lerner Associates, Inc. (David Lerner) has been subject to five customer complaints.  According to records kept by The Financial Industry Regulatory Authority (FINRA), most of Mass’ customer complaints allege that Mass made unsuitable recommendations in a variety of investments including REITs, Puerto Rico bonds, and mutual funds.

In July 2018 a customer complained that Mass violated the securities laws by recommending unsuitable investments, breach of fiduciary duty, negligence, fraud and breach of contract in connection with the sale of Puerto Rico Bonds.  The customer alleges $500,000 in damages.  The claim is currently pending.

In December 2016 a customer complained that Mass violated the securities laws by recommending unsuitable investments from June 2007 through July 2015 causing $90,000 in damages.  The claim settled for $15,000.

If you or someone you know lost money investing with Scott Mass and/or David Lerner Associates you may be entitled to recover your investment losses through FINRA arbitration. CMD accepts cases on a contingency fee basis, which means we only get paid if you get paid.  Your time to file a claim may be limited, so contact us today at (212) 658-0458 or contact@cmdllp.com for a free and confidential case evaluation.

Mitchell Rock of Wells Fargo Subject to Numerous Customer Complaints

According to BrokerCheck records financial advisor Mitchell Rock (Rock), currently employed by Wells Fargo Clearing Services, LLC (Wells Fargo) has been subject to nine customer complaints.  According to records kept by The Financial Industry Regulatory Authority (FINRA), most of Rock’s customer complaints allege that Rock made unsuitable recommendations in a variety of investments structured products.

In July 2018 a customer complained that Rock violated the securities laws by telling the client that the accounts were subject to a certain rate for fees and commissions that were not correct and that his accounts were charged more than the rate that was told to him.  The customer alleges $500,000 in damages.  The claim was denied by the firm.

In November 2012 a customer complained that Rock violated the securities laws by making an investment that the broker represented would make a profit.  The claim was denied by the firm.

In September 2012 a customer complained that Rock violated the securities laws by making unsuitable investments in structured products causing $175,000 in damages.  The claim settled for $61,000.

If you or someone you know lost money investing with Mitchell Rock and/or Wells Fargo you may be entitled to recover your investment losses through FINRA arbitration. CMD accepts cases on a contingency fee basis, which means we only get paid if you get paid.  Your time to file a claim may be limited, so contact us today at (212) 658-0458 or contact@cmdllp.com for a free and confidential case evaluation.

Investors Harmed By Faulty Variable Annuity Exchanges Have Recourse

Two recent enforcement actions from the Financial Industry Regulatory Authority Inc. demonstrate FINRA’s attention on variable annuities, especially faulty annuity exchanges.

Brokers typically recommend clients replace annuities under Section 1035 of the tax code. That provides a tax-free transfer for the client, but also generates additional commission for the broker. As such, 1035 exchanges are typically how abusive account churning occurs with annuity products.

Clients can incur higher annuity fees and surrender charges due to the exchanges, but they also can have significant tax liabilities because the brokers, in trying to conceal their abuse, don’t categorize the annuity replacements as 1035 exchanges.

FINRA levied $30.3 million in fines among 30 variable annuity cases in 2016, including a $25 million penalty against MetLife Securities Inc. in May for negligent behavior regarding variable annuity replacements.

If you or someone you know lost money in a variable annuity exchange, you may be entitled to recover your investment losses through FINRA arbitration. CMD accepts cases on a contingency fee basis, which means we only get paid if you get paid.  Your time to file a claim may be limited, so contact us today at (212) 658-0458 or contact@cmdllp.com for a free and confidential case evaluation.

CMD Investigating Claims Against Berthel, Fisher & Company Financial Services, Inc. and Jeffrey Paul Dragon for Unsuitable UITs

Securities law firm Carmel, Milazzo & DiChiara LLP (CMD) is investigating claims against Berthel, Fisher & Company Financial Services, Inc. and Jeffrey Paul Dragon for recommending and effecting a pattern of unsuitable short-term trading of UITs (Unit Investment Trusts).

FINRA has alleged that the short-term trading patterns were inconsistent with the design of the securities at issue and required the customers to pay substantial sales charges, most of which came back to the firm and the representative in the form of dealer concessions. Dragon recommended to the customers—many of whom were seniors, unsophisticated investors, or both—that they liquidate UIT positions that they had held for only a few months, and which they had purchased on Dragon’s recommendations, and then use the proceeds to purchase other UITs. Because each UIT purchased carried a new sales load, and because UITs are designed not to be actively traded, Dragon’s recommendations were excessive and unsuitable. Dragon made the recommendations to the customers that they buy and sell UITs without having reasonable grounds for believing that the consistent pattern of short-term UIT trading he recommended was suitable for any of the customers, given their age, personal and financial situations and needs, the nature of the recommended UIT transactions, including the sales charges and other costs associated with them, and the availability of less costly alternatives. Dragon also routinely structured the UIT purchases he recommended to the customers in order to prevent the customers from qualifying for sales-charge discounts, which would have reduced the dealer concessions paid to him and the firm. Dragon made the structured recommendations to the customers without having a reasonable basis to believe that those recommendations, which prevented the customers from receiving available discounts to which they were entitled, were suitable for those customers or for any customer,

FINRA also alleges that Berthel, Fisher allowed this activity to occur, and in fact, profited from it, as a direct result of its inadequate system for supervising UIT trading. Berthel, Fisher failed to establish and maintain a supervisory system that was reasonably designed to ensure compliance with its and its representatives’ suitability obligations under the federal securities laws and FINRA and NASD rules in connection with sales of UITs, and to ensure that customers received sales-charge discounts to which they were entitled on UIT purchases. The firm’s supervisory system was also inadequate because it was not reasonably designed to prevent short-term and potentially excessive trading in mutual funds.

From 2010 through 2014, the firm failed to detect that more than 2,700 of its customers’ UIT purchases did not receive applicable sales-charge discounts. As a result, firm customers paid excessive sales charges of approximately $667,000, nearly all of which was paid to the firm and its registered representatives as dealer concessions

If you or someone you know lost money investing with Jeffrey Paul Dragon and/or Berthel, Fisher & Company Financial Services, Inc. you may be entitled to recover your investment losses through FINRA arbitration. CMD accepts cases on a contingency fee basis, which means we only get paid if you get paid.  Your time to file a claim may be limited, so contact us today at (212) 658-0458 or contact@cmdllp.com for a free and confidential case evaluation.

CMD Investigating Claims Against Brent Porges and Zachary Bader for Churning, Unsuitability, Unauthorized Trading and Fraud

Securities law firm Carmel, Milazzo & DiChiara LLP (CMD) is investigating claims against brokers Brent Porges and Zachary Bader for churning (excessive trading), making unsuitable recommendations, unauthorized trading and fraud, particularly related to ETFs (exchange traded funds) and ETNs (exchange traded notes).

According to Brent Porges’ FINRA BrokerCheck, he has been the subject of at least five (5) customer complaints, which include allegations of churning, fraud, unauthorized trading, and unsuitability.

Similarly, according to Zachary Bader’s FINRA BrokerCheck, he has been the subject of at least eight (8) customer complaints, which include allegations of churning, fraud, unauthorized trading, and unsuitability.

These acts may have occurred while Mr. Porges and Mr. Bader were registered with the following broker-dealers: Craig Scott Capital, LLC, National Securities Corporation, Newbridge Securities Corporation and Meyers Associates, L.P.  These broker-dealers have an independent duty to supervise Mr. Porges and Mr. Bader, as well as the customer accounts they service.  If the broker-dealers did not properly supervise Brent Porges and/or Zachary Bader, they can be held liable for their acts.

If you or someone you know lost money investing with Brent Porges and/or Zachary Bader you may be entitled to recover your investment losses through FINRA arbitration. CMD accepts cases on a contingency fee basis, which means we only get paid if you get paid.  Your time to file a claim may be limited, so contact us today at (212) 658-0458 or contact@cmdllp.com for a free and confidential case evaluation.

CMD Investigating Claims Against Kelly Althar and Financial West Group for Unsuitable Recommendations and Engaging in Excessive Trading

Securities law firm Carmel, Milazzo & DiChiara LLP (CMD) is investigating claims against Kelly Althar and Financial West Group for unsuitable recommendations, engaging in excessive trading (churning) and failure to supervise, particularly related to elderly customers.

According to FINRA, Kelly Althar made unsuitable recommendations and engaged in excessive trading in an elderly customer’s accounts. FINRA alleges that Althar engaged in high-volume trading to generate commissions and over-concentrated the customer’s accounts in risky securities, despite the fact that the customer was close to retirement and wanted only low-risk investments. Althar’s trading decimated the customer’s accounts, which constituted the bulk of her net worth and retirement savings. Althar exercised control over the customer’s account at his member firm. Althar rarely consulted the customer about the transactions in her accounts and made the investment decisions for her, including what to buy and sell, the quantities, and when each transaction would occur.  Althar used this control to excessively trade the accounts in a manner that was inconsistent with the customer’s investment objectives, financial situations and needs.

If you or someone you know lost money investing with Kelly Althar and Financial West Group you may be entitled to recover your investment losses through FINRA arbitration. CMD accepts cases on a contingency fee basis, which means we only get paid if you get paid.  Your time to file a claim may be limited, so contact us today at (212) 658-0458 or contact@cmdllp.com for a free and confidential case evaluation.

CMD Investigating Claims Against Mauricio Jaramillo and Ultralat Capital Markets, Inc. for Unsuitable Trading, Unsuitable use of Margin, Short-term Trading and for Failure to Supervise

Securities law firm Carmel, Milazzo & DiChiara LLP (CMD) is investigating claims against Mauricio Jaramillo and Ultralat Capital Markets, Inc. for unsuitable trading, unsuitable use of margin, short-term trading and for failure to supervise.

As reported by FINRA, Mr. Jaramillo recommended unsuitable trades in at least three customer accounts, in that he recommended short-term trading in bonds, undue concentration of positions, and the use of margin to customers who were not suitable for such trading. The findings stated that Jaramillo maintained limited trading authorization over various customer accounts at his member firm and received compensation on trades he placed in such accounts. Two of the customers had long-term growth investment objectives and another customer had a moderate risk tolerance, but their accounts were almost totally concentrated in bonds typically denominated in Brazilian Reais. These customers also had significant margin balances in their accounts. Jaramillo did not have any reasonable basis to believe that such short-term trading, concentrations of positions and use of margin was suitable for the customers, or that such trading was consistent with their investment objectives, risk tolerances, and financial situations and needs.

If you or someone you know lost money investing with Mauricio Jaramillo or Ultralat Capital Markets, Inc., you may be entitled to recover your investment losses through FINRA arbitration. CMD accepts cases on a contingency fee basis, which means we only get paid if you get paid.  Your time to file a claim may be limited, so contact us today at (212) 658-0458 or contact@cmdllp.com for a free and confidential case evaluation.