Each month and again on a quarterly basis, the agency that regulates the financial industry, FINRA (Financial Industry Regulatory Authority), produces a detailed report of disciplinary actions recently taken against brokerage firms and brokers. This list of alleged wrongdoing and misconduct reads a lot like a police blotter on money matters. We strongly encourage any investor who suspects their broker and/or broker-dealer of having lost them money on dubious terms to at least skim this report to see if you recognize any names, schemes, products, or securities.
Securities Fraud Is A "Whole 'Nother Ballgame" For Pro Athletes
Professional athletes are among the most common targets of unscrupulous brokers and money managers. Many of these athletes, while wealthy, are also often young and inexperienced when it comes to finance and investment. Just because pro football, basketball, and hockey players have achieved an elite status in their profession does not make them any more sophisticated when it comes to investment products and strategies than the average American. However, since they do have such a high profile, they tend to attract fraudsters in much higher numbers than the rest of us. Our firm’s experience with professional athletes makes us uniquely sensitive to this situation and the struggle they face trying to recover losses when they’ve been swindled.
Accordingly, we were saddened but unfortunately not very surprised when, once again, we came across this article in the media describing how a dozen pro football players based in Florida were allegedly majorly defrauded. According to the Sun Sentinel, a group of at least twelve former or current NFL players filed claims through FINRA’s arbitration process against two Broward County financial advisors. Allegations made by the players and their attorneys include “unsuitable recommendations to invest in "illiquid, high-risk securities” in a now bankrupt Alabama casino and promissory notes offered by the parent company of Success Trade Securities.
In another case, also based in Florida and involving NFL players but this time filed in federal court, another group of players filed a lawsuit back in October alleging that a bank allowed about $53 million to be taken from players’ accounts for “illegitimate” purposes by the firm of a recently banned advisor named Jeffrey Rubin.
And that’s just recently, just in Florida. Cases like this sprout up all over the country, all the time. Pro athletes who may be unbeatable on the gridiron or on the ice need to be as careful as any other novice investor when it comes to the complex game of securities. As the saying goes, out there it’s “whole ‘nother ballgame.”
If you or anyone you know has been the victim of broker misconduct or securities fraud, please contact us immediately at 1-855-462-3330 or via email by clicking here.
Naming Names: FINRA's December 2013 Disciplinary Action Report
Every month and again on a quarterly basis, the agency that regulates the financial industry, FINRA, produces a report that runs down all disciplinary actions taken against brokerage firms and brokers. This long list of alleged wrongdoing and misconduct reads a lot like a police blotter. We strongly encourage any investor who suspects their broker and/or broker-dealer of having lost them money on dubious terms to at least skim this report to see if you recognize any names. For our part, we like to pick out some of the highlights from each report. Specifically, we’re looking for schemes or abuses that might be more far-reaching than the individual cases brought through the FINRA arbitration process. In other words, we name names here because we hope to raise awareness out there about certain brokers and products that might otherwise go unnoticed except for the case appearing in the report. So, without further ado, here goes:
Virginia-based broker Ramnik Singh Aulakh of Success Trade Securities, Inc. was censured and barred by FINRA for failure to respond to requests for information regarding his allegedly participating in a huge $18 million fraud involving the offering of promissory notes.
Georgia-based broker James Arnold Busch of Wells Fargo Financial Advisors, LLC was barred from FINRA for allegedly using elderly customers’ bank accounts to misappropriate around $1.3 million. According to FINRA, in some cases Mr. Busch also allegedly liquidated securities from his clients brokerage accounts in order to use the funds himself.
Mary Alice Faher, of WR Rice Financial Services, was fined and suspended from FINRA for allegedly recommending and effecting purchases of unsuitable investments for customers who were retired or of limited financial means, including membership interests, diversified land contracts, and limited partnerships. These investments allegedly exposed her clients to high levels of risk and illiquidity.
Broker Francis Melvin Johnson of Newport Coast Securities was barred from FINRA for allegedly borrowing more than $1 million from the family trust of one of his clients.
Martin John Maloney, a broker at Metflife Securities, was barred from FINRA for allegedly diverting a customer’s funds into his own pocket when he represented that the money was going into an indoor golf and driving range.
Christopher Ryan Reber Orlando (that’s a mouthful) of PlanMember Securities Corporation was fined and suspended from FINRA for two years for allegedly handling private securities transactions to the tune of $7 million that were executed outside his firm. Big no-no.
Dallas-based broker Bryan Mark Rigg of WFG Investments, Inc. was censured and suspended by FINRA for allegedly participating in private securities transactions without approval from his brokerage, including $500,000 worth of the company’s preferred stock.
Broker Lawrence Spaulding Rule of Wells Fargo Advisors (Wachovia) was suspended from FINRA for allegedly getting up to some excessive unsuitable trading of customer, including trades totaling over $2.3 million.
Los-Angeles-based broker Scott Donovan Schroeder of Milkie Ferguson Investments, Inc. was barred from FINRA for allegedly making unsuitable investment recommendations to elderly customers, including high-risk life settlement contracts and private placements.
Daniel Edmund Walsh of Securities America, Inc. was suspended from FINRA for allegedly selling almost $5 million worth of equity indexed annuities (EIAs) to customers outside the scope of his employment and without notifying his brokerage.
Bad Brokers Target Pro Athletes
Bad brokers are everywhere. But they tend to really grab headlines--and swindle truly staggering amounts of money--when they defraud professional athletes. We’ve featured more than one post here about individual and groups of pro ballplayers from every major sport who’ve been taken advantage of by close friends or crooked brokers. Unfortunately, so many athletes we know to be unstoppable on the field make for easy targets when it comes to their personal finances.
Photo by Jeramey Jannene
Just this week, news arrived that broker, Jinesh “Hodge” Brahmbhatt formerly of Success Trade Securities, Inc., who was apparently at one time “approved” by the NFL to provide investment advice to players, allegedly sold more than $18 million in bogus promissory notes to 58 different investors. Many of these investors were current or former NBA and NFL players. If you’re wondering why pro players are so susceptible to fraudulent investment schemes, think about it: usually from humble backgrounds, pro players suddenly become very rich, spend quickly, invest poorly, and lack the experience and expertise to evaluate complex financial products.
According to the report on Yahoo sports, athletes who bought the dubious Success Trade notes include Jared Odrick of the Miami Dolphins, Brandon Knight of the Detroit Pistons, Adewale Ogunleye of the Chicago Bears, former Washington Redskin Clinton Portis, the 49ers’ Vernon Davis, and Browns cornerback Joe Haden. Those close to the case expect this list to grow as other players who held the Success Trade notes lawyer up and file complaints with the Financial Regulatory Industry (FINRA). Meanwhile, Mr. Brahmbhatt, who most recently worked for investment adviser firm, Jade Private Wealth Management LLC, has been banned by FINRA.
While the life and means of pro ballplayers may seem distant and out of all proportion to ordinary investors, the lesson here is the same. Bad brokers, as Mr. Brahmbhatt certainly appears to be, are everywhere, and they can and will get over on anyone. The best way to protect yourself against broker misconduct and investment fraud is to practice a form of financial self-defense. For tips and techniques on how to do this, please download our free guide.
If you or someone you know has been the victim of broker misconduct, please contact us immediately toll-free at 1-855-462-3330 for a free consultation.