Category: General

AEGIS CAPITAL CENSURED, FINED AND ORDERED TO PAY RESTITUTION

FINRA recently issued an Acceptance Waiver and Consent (“AWC”) with Aegis Capital in which Aegis Capital was censured, fined $27,500, ordered to pay $620.30, plus interest, in restitution to customers, and required to revise its written supervisory procedures. (See FINRA Case #2016048939201). Aegis consented to the sanctions and to the entry of findings that it failed to execute orders fully and promptly. FINRA’s findings stated that the firm failed to use reasonable diligence to ascertain the best inter-dealer market and failed to buy or sell in such a market so that the resultant price to its customer was as favorable as possible under prevailing market conditions. FINRA’s findings also stated that the firm’s supervisory system did not provide for supervision reasonably designed to achieve compliance with respect to certain applicable securities laws and regulations and FINRA rules. FINRA further found that Aegis Capital’s written supervisory procedures failed to sufficiently provide for one or more of the minimum requirements for adequate FINRA compliance.

FINRA found that in 22 instances, Aegis Capital failed to execute orders fully and promptly. Additionally, for 11 of the above-referenced 22 orders, the firm failed to use reasonable diligence to ascertain the best inter-dealer market and failed to buy or sell in such market so that the resultant price to its customer was as favorable as possible under prevailing market conditions. FINRA found that Aegis Capital’s supervisory system did not provide for supervision reasonably designed to achieve compliance with respect to certain applicable securities laws and regulations and the Rules of FINRA.

Aegis Capital Corp. was founded in 1984 and is a full service retail and institutional broker-dealer located in New York City.  Aegis Capital Corp.’s main office is located at 810 7th Ave. 18th and 22nd Floor New York, NY 10019.

HANLEY LAW 

Our law firm represents individual investors nationwide with significant losses in their portfolios, retirement plans or investment accounts.  Our securities team is dedicated to assisting investors to recover losses suffered by unsuitability, over-concentration, fraud, misrepresentation, self-dealing, unauthorized trades or other wrongful acts, whether intentional or negligent.  We have experience handling cases against the major Wall Street broker dealers.

Let our team work for you. Call us at (239) 649-0050 or contact us through our Website to arrange a free confidential consultation with an attorney to discuss your experiences with your stock broker which resulted in investment losses.

SEC warns of “Red Flags” when Making Investment Decisions

The Securities and Exchange Commission recently issued an Investor Alert to help older Americans identify signs that what is offered as an investment may actually be a fraud. The SEC’s Office of Investor Education and Advocacy warned that older Americans are often targets of investment fraud, and advised that there are five (5) “red flags” seniors should look out for when making investment decisions:

  1. Promises of High Returns with Little or No Risk. A classic warning sign of investment fraud is the promise of a high rate of return, with little or no risk. The SEC advised that every investment carries some degree of risk, and the potential for greater returns generally comes with greater risk. The SEC warns investors to avoid putting money into “can’t miss” investment opportunities or those promising “guaranteed returns.”
  2. Unregistered Persons. The SEC advises investors to check whether the person offering to sell you an investment is registered or licensed, even if you know him or her personally. Unregisterd/unlicensed persons who sell securities commit many of the securities frauds that target older investors. It is free to research the background of the individuals and firms selling you investments, including their registration/license status and disciplinary history. There are several way you can research the individuals selling you investments:
  • Search the SEC’s Investment Adviser Public Disclosure (IAPD) online database.
    • Search the Financial Industry Regulatory Authority (FINRA)’s BrokerCheck online database.
    • Contact your state securities regulator.
    • Contact the SEC’s Office of Investor Education and Advocacy directly at (800) 732-0330 to help research the person and firm selling you the investment.
  1. Red Flags in the Financial Professional’s Background. The SEC advises investors to be aware of potential red flags in their advisor’s or broker’s background, including: (1) employment at firms that have been expelled from the securities industry; (2) personal bankruptcy; (3) termination; (4) being subject to internal review by an employer; (5) a high number of customer complaints; (6) failed industry qualification examinations; (7) federal tax liens; and (8) repeatedly moving firms. Investors can search the records of the SEC, FINRA, and state securities regulators to identify red flags.
  2. Pressure to Buy Quickly. The SEC warns that if an investment professional attempts to pressures you into making an investment decision quickly, you should walk away as you could potentially be at risk for becoming a victim of investment fraud. The SEC cautions investors that no reputable investment professional should push you to make an immediate decision about an investment, or tell you that you’ve got to “act now.”
  3. Free Meals. The SEC further warns investors to be cautious of “free lunch” seminars. The ultimate goal of investment professionals in offering free meal investment seminars is typically to attract new clients and to sell investment products. The SEC advises investors that even if the free meal does not come with a high-pressured sales pitch, investors should expect the “hard sell” during later contacts from the investment advisor or broker selling the investment.

If you have suffered investment losses as a result of your broker’s or brokerage firm’s misconduct, contact the Hanley Law to discuss your legal options. The Hanley Law is dedicated to helping investors nationwide. If you have lost money as a result of your broker’s recommendations, you may be entitled to recover your investment losses. Contact our office toll free at (239) 649-0050 for a complimentary initial consultation.

Hanley Law Investigating Claims Involving Fredrik Magnus Virgin and Merrill Lynch Pierce Fenner and Smith, Inc.

Hanley Law is currently investigating claims against Fredrik Magnus Virgin (CRD No. 2743410) and Merrill Lynch Pierce Fenner and Smith, Inc. (“Merrill Lynch”) (CRD No.: 7691). The Hanley Law recently filed a FINRA Arbitration claim on behalf of Claimants in which it was alleged that the broker, Fredrick Magnus Virgin, sold an elderly investor a single life Nationwide annuity. On the date of issuance, the investor was 77 years old and legally blind.

The Nationwide Annuity Application lists the investor’s nephew as the primary beneficiary. Furthermore, the application provides that the nephew is to receive 100% of the benefit, confirms that he is the annuitant’s nephew, and also confirms his social security number and birth date. Upon the investor’s passing, the nephew was denied any death benefit payment by Nationwide. Nationwide advised that the annuity contract had a single life payout option which guaranteed the payments for the lifetime of the annuitant only. In a single life payout option, all payments cease with the last payment due prior to the death of the annuitant. Claimants allege that the investor clearly intended to elect a beneficiary to his Nationwide annuity since he completed the beneficiary section on his annuity application and provided all necessary information to elect a beneficiary to his annuity.

The annuity contract at issued was entered into when the investor was 77 years old. The investor lost a significant portion of his originally invested principal, plus the loss of a reasonable return on his investment, because he did not live long enough for his monthly annuity payments to equal to the original purchase price of the annuity. In order for the investor to have broken even on his investment, he would have had to live to be over 85 years old. Claimants allege that there was no reasonable basis to recommend a single life payout annuity to a senior who was 77 years old at the time of purchase. Furthermore, it is alleged that the policy application clearly evidences that it was the investor’s intention to name a beneficiary to the annuity as all the necessary information to elect a beneficiary was provided on the annuity application.

Claimants have alleged that Respondent violated industry rules, including but not limited to FINRA’s customer suitability standard (Rule 2111) as well as FINRA rules 3110 and 2010. Thus, it is alleged that Merrill Lynch violated the duty of care and was negligent. Claimants further allege that Merrill Lynch breached the contract that was entered into and also breached the fiduciary duty that a securities firm and its employees/agents owe to their clients. Claimants alleged that Respondent’s misconduct constitutes common law fraud. Moreover, Claimants allege that the account at issue was handled negligently and Merrill Lynch was negligent in their supervision of Virgin. As such, Claimants allege that Merrill Lynch is liable for their conduct and the conduct of their employees by virtue of the doctrines of agency, respondeat superior, and vicarious liability.

If you were a client of Fredrik Magnus Virgin or Merrill Lynch Pierce Fenner and Smith, Inc. and have suffered investment losses, please contact the Hanley Law to explore your legal options. The Hanley Law is dedicated to helping investors who have been victims of securities fraud. If you have lost money as a result of securities fraud, you may be able to recover your financial losses. Contact us today toll free at (239) 649-0050 for a free initial consultation.

FINRA Issues New Investor Alert, Frontier Funds—Travel With Care

The Financial Industry Regulatory Authority (FINRA) issued a new Investor Alert called Frontier Funds—Travel With Care cautioning investors interested in funds that invest in frontier markets to carefully consider the heightened risks in these markets. While there is no precise definition of a frontier market, frontier funds generally invest in companies located in countries with developing securities markets such as Argentina, Lebanon, Nigeria, Slovenia and Vietnam.

“Investors seeking potentially higher returns in frontier funds should understand that the promise of higher returns always carries more risk—and the past performance of any fund is never a guarantee of future results,” said Gerri Walsh, FINRA’s Senior Vice President for Investor Education. “Before investing in a frontier fund, investors should consider whether and how such an investment might fit as part of a well-diversified portfolio.”

As with any investment, frontier funds have their pros and cons. Frontier Funds—Travel With Care, provides investors with a series of tips to avoid problems.

• Know which frontier markets the fund invests in. Risk factors vary by country—and no two countries share identical risk elements.
• Monitor changes in index components. If you are investing in a frontier ETF or index mutual fund, make sure you know and understand the index that the fund tracks and also the components of that index. The countries included in a frontier index can change over time.
• Geopolitical and currency risks are real. Be aware that some frontier markets are located in parts of the world with unstable political or market environments.
• Factor in costs and fees. Frontier fund costs and fees can be higher than their emerging market peers, and significantly higher than broadly diversified domestic and international managed funds.
• Consider Performance History. Frontier funds are relatively new, and most have limited performance histories.

Frontier Funds—Travel With Care
“Frontier funds” that invest in securities of companies in countries with developing securities markets—like Argentina, Lebanon, Nigeria, Slovenia and Vietnam—are gaining investor attention. Some see investing in frontier funds as a way to diversify assets—going beyond funds that invest in established international and other more developed emerging markets. Frontier funds are also sparking the interest of some investors who are lured predominantly by potential gains.

FINRA is issuing this alert to caution those interested in funds that invest in frontier markets to carefully consider the heightened risks in these markets. Frontier fund investments may provide potential diversification and periods of higher returns than can be obtained through more traditional investments. But products or asset niches that promise higher returns nearly always carry more risk—and the past performance of any fund is never a guarantee of future results.

Frontier Markets

There is no precise definition of a frontier market, or a country classified as such—but words like “small” and “illiquid” are often used to describe these markets.

Frontier economies tend to be smaller, and their markets for trading securities less developed, than emerging economies such as Brazil, Russia, India and China. In addition, compared to more established markets, the legal, financial accounting and regulatory infrastructure of frontier markets may be weaker or less developed, and political stability may be more of a concern. Financial market depth and breadth also may be more limited, and capital flows may be more restricted. Frontier markets may have less investor participation, fewer large global companies and limited international trade compared to established and emerging economies.

At the same time, frontier market countries are often characterized by populations that are making strides in education and entrepreneurship, an expanding economy and a rising standard of living.

Frontier Funds

Currently, there are a limited number of funds that focus specifically on frontier markets. Just as every frontier market is different, so is every frontier fund. Some funds invest in more than 30 frontier markets around the globe. Others invest more narrowly, perhaps focusing on only one region such as Asia, Africa or the Middle East—or even one country. Some mutual funds and exchange-traded funds (ETFs) may concentrate their holdings in a single or small number of economic sectors—such as banking, energy or agriculture—within various frontier markets. Others may track an index that encompasses virtually all of the countries in the frontier market universe. Still other funds invest in both frontier and the generally larger and more developed emerging markets, and some global or international funds may allow for sizable allocations to frontier markets.

A frontier fund that is registered under U.S. law—whether it is a mutual fund, ETF or closed-end fund—is required to provide investors with a prospectus that details the fund’s investment objective, major holdings or index that it tracks, historical returns and information about fees and risks. Think of this prospectus as your “frontier market guide,” complete with advisories and warnings. Read it carefully before you invest. Most frontier funds are designated for “aggressive growth” and described as high risk. Investors interested in frontier funds should carefully consider whether and how such an investment might fit as part of a well-diversified portfolio.

Before You Invest

Like any investment, frontier funds have their pros and cons. Before you invest, here are some tips to help you avoid problems:

• Know which frontier markets the fund invests in. Risk factors vary by country—and no two countries share identical risk elements. Read the fund’s prospectus to determine whether you are buying a fund that is or may become broadly diversified across many frontier markets, or that narrowly invests in only a few frontier markets, sectors or a single region or country.

• Monitor changes in index components. If you are investing in a frontier ETF or index mutual fund, make sure you know and understand the index that the fund tracks and also the components of that index. Be aware that the components or “constituents” of an index can change, potentially affecting the return of the fund. For example, components of the MSCI Frontier 100 Index are undergoing changes after Qatar and the United Arab Emirates—which accounted for more than 30 percent of the value of the MSCI index—were reclassified from “frontier” to “emerging” markets. Following a transition period over several months, these markets will no longer be represented in the index.

• Geopolitical and currency risks are real. Be aware that some frontier markets are located in parts of the world with unstable political or market environments. Regional conflict, civil unrest and regime change are all significant risk factors, as is the risk that currency exchange rates may fluctuate, resulting in changes in the value of a given fund.

• Factor in costs and fees. Frontier fund costs and fees can be higher than their emerging market peers, and significantly higher than broadly diversified domestic and international managed funds. Even small differences in expenses can make a big difference in your return over time, so it’s important to know just how much you are paying for your investment. Use FINRA’s Fund Analyzer to help you compare how sales loads, fees and other fund expenses can impact your return. ETFs have a fee structure that includes trading fees, which can add up if you plan to actively buy and sell.

• Learn as much as you can about the fund manager. Understanding frontier markets and managing investments is a specialized skill. Research the fund manager’s professional experience, including fund management tenure and performance record. Research the professional background of a fund manager and the broker selling you the fund using FINRA BrokerCheck.

• Performance History. Frontier funds are relatively new and most have limited performance histories. Like all investments, performance may fluctuate. You can lose money.

As with any investment that holds out the potential for greater returns, it pays to ask whether you are willing to take on the higher risk that comes with it. In short, are you comfortable with a higher risk of significant investment losses? If not, an investment in frontier funds may not be a destination you want for portfolio.

If you suffered investment losses, please contact the Hanley Law to explore your legal options. The Hanley Law is dedicated to helping investors who have been victims of securities fraud. If you have lost money as a result of securities fraud, you may be able to recover your financial losses. Contact us today toll free at (239) 649-0050 for a free initial consultation.