• On July 31, 2024, the SEC announced that it had reached an agreement with Western International Securities and five of its registered representatives to settle an ongoing lawsuit arising out of the sale of high-risk and speculative L Bonds issued by the now-bankrupt GWG Holdings, Inc.
• On July 28, 2024, the SEC fined broker-dealer LifeMark Securities Corp. for failing to comply with Regulation Best Interest connected with recommending GWG L Bonds to retail customers between July 2020 and January 2022 without exercising reasonable diligence, care, and skill to understand the potential risks, rewards, and costs associated with the recommendations.
• On July 29, 2024, the SEC filed a lawsuit against Garrett Moretz, a LifeMark Securities Corp. broker, alleging that he fraudulently sold high-risk and speculative GWG L Bonds to customers by misrepresenting them as “guaranteed.”
• Retail Investors who purchased GWG L Bonds are encouraged to contact the GWG L Bond lawyers at Iorio Altamirano LLP to review their legal rights to recover their investment losses.

Western International Securities Agrees to Settle Lawsuit with the SEC

On July 31, 2024, the SEC announced that it had reached an agreement with Western International Securities and five of its registered representatives to settle an ongoing lawsuit arising out of the sale of high-risk and speculative L Bonds issued by the now-bankrupt GWG Holdings, Inc.

The SEC filed its complaint on June 15, 2022, that the brokerage firm and several of its representatives violated Regulation Best Interest by failing to perform due diligence regarding the inherent risks associated with L Bonds issued by GWG Holdings, Inc. and recommending the L Bonds to its customers. The alleged violations were made in connection with the sale of approximately $13.3 million in L Bonds sold to retail customers.

To read more about the allegations, please see our previous blog post: Law Firm Investigating the Sale of GWG L Bonds to Retail Investors by Western International Securities, Inc.

As part of the settlement, which requires court approval, Western International agreed to disgorge $34,468 in commissions it received in connection with the transactions at issue. The brokerage firm also agreed to pay a civil fine of $160,000. The financial penalties represent a small portion of commissions that the firm and its brokers received in selling GWG L Bonds to retail investors. According to court records, Western International received at least $3 million in commissions from GWG Holdings for selling L Bonds to retail investors between April 2018 and April 2022.

Investors who purchased GWG L Bonds should know that they will not be receiving monetary compensation from the SEC’s settlement. Instead, they will need to file their own independent securities arbitration claim to seek recovery.

GWG L bond investors should contact our law firm to review their legal options. Customers may be entitled to compensation without paying any out-of-pocket fees or costs through a contingency fee arrangement with securities arbitration law firm Iorio Altamirano LLP.

SEC and LifeMark Securities Corp Settle GWG L Bond-Related Charges

Western International Securities is not the only broker-dealer to settle GWG L Bond-related charges with the SEC this week. On July 28, 2024, the SEC announced that it had reached a settlement with broker-dealer LifeMark Securities Corp. The settlement was reached in anticipation of the SEC initiating administrative and cease-and-desist proceedings connected with Regulation Best Interest violations arising out of the sale of GWG L Bonds.

According to the SEC, between July 2020 and January 2022, LifeMark Securities and one of its registered representatives failed to comply with Regulation Best Interest’s Care Obligation, Exchange Act Rule 15l-1(a)(2)(ii), when the registered representative recommended GWG L Bonds to retail customers without exercising reasonable diligence, care, and skill to understand the potential risks, rewards and costs associated with their recommendations.

Specifically, the SEC alleged that LifeMark Securities, through its broker, unreasonably disregarded, dismissed, misunderstood, or failed to take reasonable steps to understand significant disclosures and information regarding GWG and L Bonds contained in prospectuses and SEC filings. Instead, the broker allegedly relied on LifeMark Securities’ approval of L Bonds without question or inquiry. For example, according to the SEC, the broker did not know what was meant by GWG’s statement in the June 2020 Prospectus that L Bonds were only suitable for people with substantial financial resources and did nothing to find out prior to recommending L Bonds to retail customers.

The SEC also alleged that the broker failed to comply with the customer-specific prong of Regulation’s Best Interests Care Obligation by recommending investing $50,000 into an illiquid 5-year GWG L Bond to a 63-year-old semi-retiree with a moderate risk tolerance and a documented investment objective of preservation of capital. The broker supposedly did not know and could not explain how it was in the customer’s best interest to buy an illiquid 5-year L Bond when at the time he made the recommendation, there was “substantial doubt” about GWG’s ability to continue as a going concern for the next 12 months following the filing of its 2020 Form 10-K.

LifeMark Securities consented to a civil monetary penalty of $85,000 and a disgorgement of $4,410 in commissions.

Unfortunately, sanctions such as these do not put money back into the pockets of retail investors who lost money due to failures by firms and brokers in selling GWG L Bonds.

However, retail investors who purchased GWG L Bonds based on the recommendation of their brokers are not without recourse and should contact our GWG L Bond lawyers for a free and confidential consultation to review their legal rights.

SEC Charges LifeMark Securities Corp. Broker with Fraud Related to the Sale of GWG L Bonds

On July 29, 2021, the Securities and Exchange Commission filed a lawsuit against another LifeMark Securities Corp. broker related to the sale of GWG L Bonds. The complaint, filed in Federal Court in Charlotte, NC, alleged that broker Garrett Moretz fraudulently sold high-risk and speculative GWG L Bonds to customers by misrepresenting them as “guaranteed” from at least September 2019 until about August 2020.

For example, the SEC’s complaint alleges that the broker sent emails to customers that contained material misrepresentations, such as:

• “Are you looking for a great guaranteed rate of return and payout on your money?”
• “We have fully guaranteed investment/income options available in 2-, 3-, 5-, and 7-year terms.”
• “These are guaranteed to pay the specified rate of return MONTHLY for the predetermined period after which you get your full investment returned.”
• “These are all great opportunities for folks that want a steady rate of return and guaranteed payout.”

The complaint also alleges that Mr. Moretz represented to another customer that the bonds were “safe” and “guaranteed.’ GWG L Bonds were neither. Instead, they were speculative, high-risk, illiquid, high-commission, and unrated bonds.

Mr. Moretz is facing charges of violating Section 17(a) of the Exchange Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder.

About the L Bonds

GWG L Bonds were speculative, high-risk, illiquid, and unrated alternative investments suitable only for customers with substantial resources.

Brokerage firms are required to make investment recommendations that are in the best interest of their customers. Financial advisors also have an obligation to be truthful and disclose all material facts and risks to customers when making investment recommendations. Firms and brokers must also conduct reasonable due diligence on the securities they offer before recommending them to customers. Iorio Law PLLC is investigating whether brokerage firms and their brokerages met these obligations connected with their sale of L Bonds to retail investors.

About Iorio Law PLLC

Iorio Law PLLC is a securities arbitration law firm in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

August M. Iorio, managing attorney of Iorio Law PLLC, was at the forefront of the investigation into the GWG L Bonds starting in late 2021 and has already helped investors recover over $3.5 million in losses.

GWG L Bond investors should contact securities arbitration law firm Iorio Altamirano LLP to review their legal options. The firm will review the terms of investors’ GWG L Bond investments at no cost and provide a free consultation. Customers may be entitled to compensation without paying any out-of-pocket fees or costs through a contingency fee arrangement with securities arbitration law firm Iorio Altamirano LLP. To set up an evaluation, email securities arbitration attorneys August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

• The GWG Wind Down Trust has sold two of its three tangible assets for a total of approximately $10.58 million.
• The sale of its life insurance policy portfolio generated $10 million in cash.
• The sale of shares in FOXO stock generated $586,942.
• The GWG Wind Down Trust settled a dispute with Fifth Season Investments, LLC for $8 million. Thus far, the Trust has paid $1,848,738 in cash to Fifth Season, still owing $6,151,262. The GWG Wind Down Trust previously set aside a reserve of 20 million shares of BENF. Those shares currently have a book value of $5.12 million. Accordingly, there is currently a $1 million shortfall, which the GWG Wind Down Trust will need to pay out of its cash holdings, presumably diminishing the cash it received from the sale of two of its three tangible assets.
• The $10.5 million in cash proceeds represents approximately .0065% of the 1,618,517,956 in Series A1 (formerly L Bonds) WDT Interests.
• The third tangible asset owned by the GWG Wind Down Trust is 169,701,487 shares of Beneficient (NASDAQ:BENF).
• The Beneficient share price has dropped significantly since going public at $15 per share. On June 20, 2023, the share price closed at $4.57. By August 1, 2023, the share price closed at $2.00. On February 15, 2024, the share price closed at $0.2561.
• The GWG Wind Down Trust is finding it difficult to sell its shares in Beneficient. There appears to be little to no interest on behalf of investors in purchasing shares of BENF, with shares trading in a very thinly traded market.

We believe that there is no obvious or foreseeable path to monetization for the GWG Wind Down Trust. Beneficient has made the following disclosures since August 2023:

• On June 29, 2023, Beneficient received a “Wells Notice” from the SEC’s Division of Enforcement, stating that the SEC has made a preliminary determination to recommend that the SEC file a civil enforcement action against the company alleging violations of certain provisions of the Securities Act and the Securities Exchange Act relating to the Company’s association with GWG Holdings. In addition, the company’s Founder, CEO, and Chairman, Brad Heppner, also received Wells Notices related to the investigation of GWG Holdings.
• Beneficient sustained an operating loss of $2.45 billion between April 1, 2023, and December 31, 2023.
• As of December 31, 2023, Beneficient only had $11.2 million in unrestricted cash. In mid-2023, Beneficient disclosed that it would meet its ongoing obligations by furloughing and potentially laying off employees.
• As of December 31, 2023, Beneficient’s assets were approximately $500 million, down from $2.9 billion as of 3/31/2023, driven by a goodwill impairment of $2.28 billion.

The only other asset owned by the Wind Down Trust is a beneficial interest in the GWG Litigation Trust. However, the Litigation Trust is only in an information-gathering phase.

When Can GWG L Bond Investors Expect to Receive a Payment (Distribution) from the GWG Wind Down Trust?

The GWG Wind Down Trust has not determined when a distribution will be paid. Distributions can only be paid upon receipt of sufficient cash proceeds from the assets to be able to make a distribution. The sale of the life insurance portfolio and FOXO shares, which generated only $10.5 million in cash, is below the minimal threshold needed for the GWG Wind Down Trust to make a distribution.

The GWG Wind Down Trust has only two more ways to generate cash: (1) the sale of its stock in Beneficient and (2) receiving proceeds from the GWG Litigation Trust. Whether the GWG Wind Down Trust will be able to monetize these two assets remains unknown, and some believe it is doubtful.

However, that has not appeared to stop some brokers from still telling investors that they will receive most or all of their invested capital back. We believe that these assurances are not only false but irresponsible. The GWG Litigation Trustee recently published a letter to GWG Investors where he addressed these unsupported assurances:

Over the past few months, numerous investors have reached out to me inquiring when they will receive their money back because their brokers have assured them they will receive all their money back. To be completely candid, I simply don’t understand how anyone can make any such assurances at this point in time.

To that end, I strongly encourage all GWG investors to consult their own independent counsel to discuss any potential claims they may have against any third parties who may have recommended this investment to them.

To put it simply, no one knows when or if the GWG Wind Down Trust will be able to make any distributions, but the outlook gets bleaker with every update.

How Else Can GWG L Bond Investors Recover Their Investment Losses?

Many GWG L Bond investors have retained securities arbitration law firm Iorio Altamirano LLP to file FINRA arbitration claims against brokerage firms that sold these speculative, high-risk, and illiquid financial products to recover their investment losses. These claims are separate and in addition to the liquidation of GWG through the GWG Wind Down Trust.

We continue to believe that GWG L Bonds investors’ best avenue for potential recovery of losses is to file a separate FINRA arbitration claim against their brokerage firms. Iorio Altamirano LLP has already helped GWG L Bond investors recover nearly $2 million in losses.

If you would like more information about how to file a claim, please respond to this email to schedule a free and confidential consultation.

To read more about our investigation into the sale of GWG L Bonds to retail investors and to watch videos of our GWG Panel Discussions, please visit our investigation page: www.gwglawyer.com

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in L Bonds offered by GWG Holdings, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

The arbitration claim also alleges that David Lerner Associates and its broker, Robert Rasbach, misrepresented and omitted material information about the investment strategy and the energy investments, including:

• That investing in Energy 11 and Energy 12 involved a “high degree of risk” and was only appropriate for investors willing and able to assume the risk of a “speculative, illiquid, and long-term investment.”
• Energy 11 and Energy 12 were risky energy start-ups that were run by individuals with no experience in the oil and gas industry who were “wildcatting,” or drilling for oil and natural gas in unproven areas that have no concrete historical production, with its success tied to the energy industry and the ability of the partnerships to engage in a “liquidity event.”
• Energy 11 and Energy 12 were “blind pool” investment vehicles that put very few restrictions on what and how they could invest.
• The risks related to concentrating a significant portion of their portfolios into the volatile and risky energy sector.

Customers of David Lerner Associates, Inc. that have purchased proprietary energy-related securities from David Lerner, including Energy 11 and SOAEX, should contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of their legal rights.

Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as David Lerner Associates, Inc.

Energy 11, Energy 12, and SOAEX

Energy 11 and Energy 12 are illiquid and high-risk limited partnerships that were sold exclusively by David Lerner Associates. Each limited partnership was formed to acquire and develop oil and gas properties. The partnerships were “blind pools,” meaning at the time of the initial offering, the partnership had not identified any properties for acquisition.

Additionally, the partnerships’ objectives included making distributions to investors and, five to seven years after the termination of the offering, engaging in a liquidity event. Each limited partnership’s ability to make a return of capital distributions to its partners and to engage in a liquidity event was substantially dependent on the performance of the oil and gas properties in which the partnerships invested.

According to the Energy 11 and Energy 12 prospectuses, investments in the partnerships involve a “high degree of risk,” and these limited partnership interests were appropriate only for investors willing and able to assume the risk of a “speculative, illiquid, and long-term investment.”

Energy 11 suspended distributions to its limited partners in March 2020 before resuming them at a reduced rate in late 2021. Energy 11 accumulates unpaid distributions based on an annualized return of seven percent (7%), and all accumulated unpaid distributions are required to be paid before a final payout can occur. As of December 31, 2022, the unpaid payout accrual for the period from March 2020 through November 2021 totaled $2.387671 per common unit, or approximately $45 million.

In addition, as of Energy 11’s most recent 10-Q filing with the SEC, the limited partnership had $20.38 million in total liabilities for the quarter ended June 30, 2023.

The following is a summary of Energy 11’s current liabilities, including accrued unpaid distributions:

• Total Liabilities: $20.38 million
• Unpaid Accrued Distributions: $45 million
• Total Liabilities 45+ Unpaid Accrued Distributions: $65.38 million.

The Spirit of America Energy Fund (SOAEX) is a mutual fund created for customers of David Lerner Associates that invests 80% of its net assets in energy and energy-related companies. The Spirit of America Energy Fund primarily invests in energy-related entities such as exploration, production, and transmission companies, as well as Master Limited Partnerships (“MLPs”). The fund’s investment objective is to provide investors with long-term capital appreciation and current income. SOAEX’s stock price has plummeted since 2015.

David Lerner Associates, Inc.

David Lerner Associates, Inc. is an SEC-registered broker-dealer and FINRA member with six branch offices in New York, Connecticut, New Jersey, and Florida. David Lerner is notorious in the securities industry and has been sanctioned numerous times by securities regulators, including censures, injunctions, monetary fines, and restitution orders.

David Lerner Associates was the exclusive dealer-manager for Energy 11 and received 6% in selling commissions. David Lerner Associates is also entitled to a contingent incentive fee of up to an amount equal to 4% of gross proceeds of units sold. Based on public disclosures, it appears that David Lerner Associates has received over $22 million in seller commissions for selling Energy 11 to its customers and is potentially entitled to an additional $15 million in contingent incentive fees.

FINRA has brought numerous actions against brokers and supervisors who sold or supervised the sale of David Lerner Associates’ proprietary energy-sector securities. Those include:

• FINRA v. Abbe Jan Wollins, AWC No. 2019063686205 (June 20, 2023)
  • “Between August 2015 and April 2018, while associated with [David Lerner Associates], Willins recommended that two customer accounts invest in limited partnerships formed to acquire and develop oil and gas properties without having a reasonable basis to believe those illiquid investments were suitable for the customers. Therefore, Wollins violated FINRA Rules 2111 and 2010.”
  • “Customers A and B were a retired married couple who held an investment account with DLA. In August 2015, when Wollins recommended that they invest in an illiquid limited partnership, Customers A and B were approximately 82, retired, and receiving pension and social security benefits and savings. Between August 2015 and December 2016, at Wollins’ recommendation, Customers A and B invested a total of $128,907 in one of the limited partnerships. Wollins also recommended that senior Customer C invest $25,000 in one of the limited partnerships. At the time of his investment, Customer C was 93 and, received social security benefits, and took required withdrawals from an IRA. Customer C understood that his investment in the limited partnership would supplement his monthly income with these returns. Wollins’ recommendations that Customers A, B, and C invest in the energy partnerships were not suitable given their investment profiles. Wollins received $2,448.30 in commissions from these investments.”
• FINRA v. Rande Aaronson, AWC No. 2019063686204 (May 30, 2023)
  • “From January 2015 through October 2019, branch manager Aaronson failed to reasonably supervise sales of two illiquid oil and gas limited partnerships, Energy 11, L.P. (E11) and Energy Resources 12, L.P. (E12), to ensure that the sales were suitable for customers given their investment profiles, as required by FINRA Rule 2111 and the firm’s policies and written supervisory procedures (WSPs). Therefore, Aaronson violated FINRA Rules 3110 and 2010.”
  • “E11 and E12 are illiquid limited partnerships that registered representatives at DLA sold to their customers. Each limited partnership was formed to acquire and develop oil and gas properties. Additionally, the partnerships’ objectives included making distributions to investors and, five to seven years after the termination of the offering, engaging in a liquidity event. Each limited partnership’s ability to make a return of capital distributions to its partners and to engage in a liquidity event was substantially dependent on the performance of the oil and gas properties in which the partnerships invested. According to the E11 and E12 prospectuses, investments in the partnerships involve a “high degree of risk,” and these limited partnership interests were appropriate only for investors willing and able to assume the risk of a “speculative, illiquid, and long-term investment” (emphasis added).
  • “The firm’s WSPs also included a policy specific to a customer’s change of their risk tolerance, as reflected on each customer’s Suitability Profile. The policy prohibited changes to a customer’s risk tolerance solely for the purpose of qualifying the account to engage in a certain transaction. Branch managers had the supervisory responsibility to review Suitability Profiles, to assess the appropriateness of any risk tolerance changes on Suitability Profiles, and to accept and sign Suitability Profiles.”
• FINRA v. Russ Kory, AWC No. 2019063686203 (September 2, 2022)
  • “Between August 2015 and September 20 19, while associated with David Lerner Associates, Kory recommended that three firm customers invest in the firm’s proprietary limited partnerships formed to acquire and develop oil and gas properties without having a reasonable basis to believe those illiquid investments were suitable for the customers. Therefore, Kory violated FINRA Rules 2111 and 2010.”
  • “Each limited partnership was formed to acquire and develop oil and gas properties located onshore in the United States. The partnerships were “blind pools,” meaning at the time of the initial offering, the partnership had not identified any properties for acquisition. The partnerships’ objectives included making distributions to investors and, five to seven years after the termination of the offering, to engage in a liquidity event. Each limited partnership’s ability to make return of capital distributions to its partners and to engage in a liquidity event was substantially dependent on the performance of the properties in which the partnerships invested. Additionally, according to the prospectuses, investments in the partnerships involve a “high degree of risk” (emphasis added).
• FINRA v. Jeffrey D. Basford, AWC No. 2019063686202 (August 15, 2022)
  • “During the course of a FINRA investigation into potential unsuitable sales of proprietary energy products at the firm, Basford declined to appear for on-the-record testimony requested pursuant to FINRA Rule 8210.”
• FINRA v. Charles Bonilla, AWC No. 2020067626001 (February 8, 2021)
  • “Between December 2015 and December 2017, while associated with David Lerner Associates, Bonilla recommended that his customers invest in energy sector securities without having a reasonable basis to believe those investments were suitable. Due to Bonilla’s failure to conduct reasonable diligence, there were potential risks and costs of the investments, among other things, that Bonilla did not adequately understand. Accordingly, Bonilla violated FINRA Rules 2111 and 2010.”
  • “The fund’s holdings are concentrated in energy-related securities, and the fund’s performance is largely dependent on the condition of the energy industry.”

About Iorio Altamirano LLP

Iorio Altamirano LLP is investigating claims on behalf of David Lerner Associates’ customers who purchased Energy 11 and SOAEX.

To read more about the investigation, please click on the following links:

Energy 11, L.P. and Energy Resources 12 L.P.: How to Recover Investment Losses from David Lerner Associates, Inc.

Investor Update: Energy 11, L.P.’s Substantial Debt and Missed Accrued Distributions Could Take Years to Pay Off

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have suffered investment losses, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

In 2021, a federal grand jury brought criminal charges against Lash, David Gentile (founder and owner of GPB Capital), and a third individual, Jeffry Schneider. The charges are related to their management of the company, which has been described as a “Ponzi-like scheme.” In February 2021, the SEC also charged GPB Capital, Ascendant Capital, and Ascendant Alternative Strategies with running a Ponzi-like scheme that raised roughly $1.7 billion from over 17,000 investors, many of whom were retirees.

The criminal complaint alleged that Mr. Gentile, Mr. Lash, and Mr. Schneider used new money invested by retail investors to cover the promised 8% returns to prior investors, yet failed to disclose the source of the distributions to investors.

Mr. Lash could face more than 15 years in prison as a result of the guilty plea for his alleged role in the Ponzi-like scheme. Sentencing is scheduled for October 4, 2023.

A trial for Mr. Gentile and Mr. Schneider is scheduled to begin in June 2024.

Since February 2021, GPB Capital has been operating under the supervision of a court-appointed monitor. Despite liquidating a significant portion of the firm’s assets, the company’s managers have struggled to devise a plan for distributing the cash at their disposal to investors and other claimants.

The court-appointed monitor and the United States Securities and Exchange Commission have recommended putting GPB Capital into receivership, a court-appointed tool that would put the entire company, its assets, and all financial and operating decisions under the control of a single court-appointed receiver. The proposal has been contested by the company’s owner, David Gentile. The Court has yet to act on the receivership proposal.

GPB Capital had stated on its website in April 2023 that it could not come up with a distribution plan or make any distributions to investors until the court rules on a receivership. Limited partners have not received distributions since 2018, while their invested capital remains in limbo.

According to the recent regulatory filings, it appears that GPB Capital is holding back a significant reserve to cover potential liabilities arising out of numerous regulatory, ligation, arbitration, and other proceedings. The company disclosed that any liability originating from such actions could result in an outflow of cash, which would most likely not occur until 2024 at the earliest.

Further, GPB Capital’s partnerships, such as GPB Automotive, GPB Holdings, GPB Holdings II, GPB Waste Management, or GPB Cold Storage, are setting aside a large amount of money to cover the legal expenses of its current and former officers, directors, principals, representatives, and affiliates, for any legal expenses and costs they are incurring connected within the numerous litigations and disputes that are currently pending. GPB Capital has disclosed in regulatory filings that distributions may be delayed or withheld until such reserves are no longer needed or the escrow period expires.

GPB Fraud and Brokerage Firms’ Liability

GPB Capital Holdings LLC, a private-equity firm based in New York, was established in 2013. It acted as the primary partner of several investment funds, including GPB Holdings, LP, GPB Holdings II, LP, GPB Automotive Portfolio, LP, GPB Waste Management, LP, and GPB Cold Storage, LP.

In February 2021, the SEC accused GPB Capital, Ascendant Capital, and Ascendant Alternative Strategies of orchestrating a Ponzi-like scheme, defrauding nearly 17,000 retail investors across the nation and gathering approximately $1.7 billion via securities issued by GPB Capital.

GPB Capital solicited capital from private retail investors via private placement offerings, which were sold by nearly sixty broker-dealers and investment advisory firms across the country. However, significant concerns have been raised regarding the broker-dealers’ failure to conduct proper due diligence regarding GPB Capital and the GPB funds.

The Financial Industry Regulatory Authority (FINRA) mandates that “reasonable diligence” provides the firm or associated person with a clear understanding of the potential risks and rewards of the recommended security or strategy. Brokerage firms may have neglected to conduct sufficient due diligence into GPB Capital and its funds before selling the private placement offerings to their clients, possibly overlooking numerous red flags, including detecting whether distributions were being paid out from operating revenue or from invested capital. In the case of GPB Capital, the operating revenues of its partnerships were not sufficient to cover the company’s promised 8% distributions, yet the payouts continued. Brokerage firms either failed to detect these discrepancies or ignored them.

Investors may have legal recourse against brokerage firms or investment advisory firms due to such due diligence failures or other sales practice violations. It’s important to note that filing an arbitration claim does not prevent an investor from receiving potential future distributions from the GPB funds.

Investors can potentially recover investment losses by filing claims against broker-dealers or investment-advisory firms that sold GPB private placement offerings for large commissions.

Through 2021, GPB Capital investors have won over $2.4 million in monetary awards in 10 out of 12 (over 83%) arbitration claims that have proceeded to a final hearing.

What Can GPB Investors Do?

Iorio Altamirano LLP, a leading securities arbitration law firm based in New York, NY, is investigating claims on behalf of defrauded investors who were victims in the GPB funds scheme. Investors who have purchased GPB Automotive, GPB Holdings, GPB Holdings II, or GPB Waste Management through a broker or brokerage firm have successfully recovered investment losses by filing securities arbitration claims.

Our law firm pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.

Iorio Altamirano LLP is actively investigating claims on behalf of GPB investors who purchased the security through a broker-dealer or registered investment advisor, including:

• Aegis Capital Corp.
• Aeon Capital Inc.
• American Capital Partners
• Arkadios Capital
• Ausdal Financial Partners, Inc.
• Avere Financial Group, LLC
• Axiom Capital Management, Inc
• BCG Securities, Inc.
• Cabot Lodge Securities LLC
• Calton & Associates, Inc.
• Capital Financial Services, Inc
• Capital Investment Group, Inc.
• Cascade Financial Management, Inc.
• Crystal Bay Securities, Inc.
• David A. Noyes & Company
• Dempsey Lord Smith, LLC
• Detalus Securities, LLC
• DFPG Investments, Inc.
• DH Hill Securities, LLLP
• Dinosaur Financial Group, L.L.C.
• Geneos Wealth Management, Inc.
• Emerson Equity LLC
• Financial West Group
• Great Point Capital LLC
• HighTower Securities, LLC
• IBN Financial Services, Inc.
• Innovation Partners, LLC
• International Assets Advisory, LLC
• Investment Architects, Inc.
• Kingsbury Capital, Inc.
• Landolt Securities, Inc.
• Lion Street Financial, LLC
• Lowell & Company, Inc.
• McDonald Partners LLC
• MML Investor Services
• Moloney Securities Co., Inc.
• Money Concepts Capital Corp
• MSC – BD, LLC
• National Securities Corporation
• Newbridge Securities Corporation
• Orchard Securities, LLC
• Pariter Securities, LLC
• Purshe Kaplan Sterling Investments
• Private Client Services, LLC
• Royal Alliance Associates, Inc.
• SagePoint Financial, Inc.
• Sandlapper Securities, LLC
• Silber Bennett Financial, Inc.
• Stephen A. Kohn & Associates, Ltd.
• Uhlmann Price Securities, LLC
• United Planners Financial Services
• Vanderbilt Securities, LLC
• Vestech Securities, Inc.
• Western International Securities, Inc.
• WestPark Capital, Inc.
• Whitehall-Parker Securities, Inc.
• Wilmington Capital Securities, LLC
• Woodbury Financial Services, Inc.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses. Our law firm has helped GPB investors recover hundreds of thousands of dollars in losses.

We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have lost money on the GPB funds, contact securities arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com, or toll-free at (646) 330-4624 for a free and confidential consultation and review of your legal rights.

The Plan will now be sent to creditors, including L Bondholders, to accept or reject the Plan. GWG’s Plan is essentially an “orderly” liquidation. If the Plan is accepted, GWG will be liquidated in accordance with the terms of the Plan. If the Plan is rejected, GWG will likely be liquidated in accordance with Chapter 7 of the United States Bankruptcy Code. Either way, GWG will be liquidated and will not continue as a business. Creditors will need to decide which path of liquidation will be more favorable to them.

We believe that it is highly unlikely that L Bondholders will obtain a quick and full recovery through either the Chapter 11 Plan or a Chapter 7 liquidation.

Accordingly, Iorio Altamirano LLP encourages L bondholders to contact the firm to evaluate their other legal options to recover their investment losses.

L bondholders with meritorious claims may also be able to obtain some relief and recovery by filing a claim against their brokerage firm. These claims are separate and in addition to GWG’s bankruptcy proceeding. Nothing prevents an investor from filing a claim against their brokerage firm for breaching their duties and also collecting through the bankruptcy proceeding.

Iorio Altamirano LLP represents GWG L Bondholders throughout the country in FINRA arbitration claims against the brokerage firms and financial advisors that recommended and sold the L Bonds to retail investors.

GWG sold the L bonds through Emerson Equity LLC and a network of regional broker-dealers, including Centaurus Financial, Inc., Great Point Capital LLC, National Securities Corporation, Western International Securities, Inc., Aegis Capital, LLC, Newbridge Securities Corporation, Dempsey Lord Smith LLC, Coastal Equities, Inc., International Assets Advisory, LLC, Arete Wealth Management, LLC, Westpark Capital, Incl, Ausdal Financial Partners, Inc., Moloney Securities, Center Street Securities, NI Advisors, Inc., Intervest International Equities Corporation, Cabot Lodge Securities, LLC, Portsmouth Financial Services, Capital Investment Group, Inc., Lifemark Securities, Corp., American Trust Investment Services, Inc., IFP Securities, LLC, Kingswood Capital Partners, LLC, SW Financial, Paulson Investment Company LLC, Ages Financial Services, Ltd., Independence Capital, Co., Inc., Landolt Securities, Inc., JRL Capital Corporation, TFS Securities, and American Equity Investment Corporation.

What’s in GWG Holding, Inc.’s Chapter 11 Reorganization Plan?

Under the Plan, GWG will be liquidated through an “orderly wind-down.”

Two liquidating trusts will be established: (i) a Wind-Down Trust and (ii) a Litigation Trust.

The Wind Down Trust will issue trust interests (the New WDT Interests) to creditors. L Bondholders will exchange their current L Bonds for New Series A1Trust interests.

A Wind-Down Trust will be established to take all necessary steps to wind down GWG’s business affairs and monetize GWG’s non-litigation assets. The term of the Wind-Down Trust will be three (3) years. The term may be extended by court approval for up to two (2) additional years.

GWG’s primary non-litigation assets are its (i) portfolio of life insurance policies (the “Policy Portfolio”); and (ii) passive non-controlling equity interest in The Beneficient Company Group, L.P. (“Ben LP” and, together with its subsidiaries, “Beneficient”) and FOXO Technologies, Inc. (“FOXO”).

The Litigation Trust will receive all of GWG’s litigation claims and all of GWG’s interests in the D&O Liability Insurance Policies. The Litigation Trustee will pursue legal claims or settlements for the benefit of the estate. The potential claims and causes of action arise under or relate to transactions, relationships, or conduct involving GWG and third parties, including, without limitation, Beneficient and current and former directors and officers of GWG that occurred prior to the filing of the Chapter 11 bankruptcy proceeding.

The Plan is a “waterfall” plan, which means that, in general, the L Bondholders are first in line to receive distributions from the Wind Down Trust (subject to certain limited exceptions), and the L Bondholders and general unsecured creditors, pro rata, are first in line to receive distributions on account of the success of monetizing the litigation assets.

See Also: GWG Bankruptcy Update (April 17, 2023): Liquidation Options Become Clearer as Recovery for Bondholders Remain Uncertain.

How and when will L Bondholders be paid?

GWG currently does not have cash available to make L Bondholders whole or close to whole. The financial situation of GWG is bad, which is why it filed for Chapter 11 bankruptcy.

L Bondholders will receive senior-most interests in the Wind Down Trust (called “New Series A1 WDT Interest.” Those interests will entitle each L Bondholder to future cash distributions if GWG can monetize its assets.

L Bondholders will receive payments over time. The timing and amount of the cash distributions remain extremely uncertain and will likely take multiple years to be settled.

The uncertainty and long wait period are due to the type of assets held by GWG. GWG does not have significant tangible assets that it can sell to raise cash and return to creditors, including L Bondholders.

GWG’s assets consist of the following: (i) the portfolio of life insurance policies owned by GWG, (ii) GWG’s equity interest in Beneficient, (ii) GWG’s equity in interest in FOXO, and (iv) GWG’s potential legal actions against third parties.

The portfolio of life insurance policies owned by GWG that will be sold will not lead to a significant recovery of capital to L Bondholders. The net residual equity interest in the Polity Portfolio has a present value ranging from approximately $0 to $78 million. That means that L Bondholders will receive anywhere from $0 to $78 million from the sale of the life insurance policies. If GWG is able to distribute $78 million to L Bondholders, that would likely lead to a return of 4-6% to L Bondholders.

The equity interest in FOXO is nominal ($3.3 million) compared to GWG’s outstanding obligations owed to L Bondholders ($1.6 billion).

For L Bondholders to receive significant cash distributions, they depend on either Beneficient’s business success or GWG’s ability to monetize its legal claims against third parties, including Beneficient (a catch-22 with inherent conflicts of interest).

The ability of the Wind Down Trust and Litigation Trust to receive cash for these assets, and the amount of cash that may be received and distributed to Bondholders, is subject to the risks set forth below and others discussed in greater detail in the revised Disclosure Statement. The following is a summary of some of those risks:

GWG estimates that the total amount that L Bondholders will recover will be between 3.9% and 100%. The very broad range is due to the nature of GWG’s assets and the uncertainty as to whether GWG will be able to monetize its equity interest in Beneficient or its litigation assets.

The truth is, no one knows the exact amount that L Bondholdres will receive through the liquidation process, and it’s going to take a long time for that to be settled.

Upcoming Deadlines

As part of the Court’s order on April 21, 2023, the following confirmation deadline has been set:

• April 28, 2023: Solicitation Deadline. Deadline for GWG to distribute “Solicitation Packages” to creditors, including L Bondholders. The Solicitation Packages will include links to GWG’s Chapter 11 Plan and Disclosure Statement, which explain the Chapter 11 Plan in detail. L Bondholders will also receive a plain-English summary of the treatment of L Bondholder claims.
• May 31, 2023, at 4:00 p.m. CT: Voting Deadline. Deadline for Donlin, Recano, & Company, Inc. to actually receive probably executed and completed ballots from all eligible creditors, including L Bondholders.
• June 12, 2023: Deadline to file Voting Report. Deadline for GWG to file a report tabulating the voting of the Plan.
• June 15, 2023, at 1:30 p.m. CT: Confirmation Hearing. Date of the Confirmation Hearing at which the Court will consider Confirmation of the Plan.

All L Bondholders can vote on the Plan by submitting a ballot that they will receive along with the other solicitation materials. Each ballot will state the principal amount of the L Bonds that the bondholder owned as of February 24, 2023, based on GWG’s records.

The voting deadline is May 31, 2023, at 4:00 p.m. CT.

L Bondholders can vote for acceptance or rejection of the Plan. If the Plan is approved, the Court will have a hearing on June 15, 2023, at 1:30 p.m. CT to confirm the Plan. It will likely take an additional two to three months for GWG to exit bankruptcy.

If the Plan is not accepted, the most likely outcome is that GWG’s Chapter 11 bankruptcy proceeding (restructuring) will be converted to a Chapter 7 bankruptcy proceeding (liquidation), and GWG’s assets will be liquidated under Chapter 7 of the Bankruptcy Code.

GWG believes that less money would be available for distribution to L Bondholders under Chapter 7 liquidation, as opposed to the “orderly liquidation” proposed in the Plan.

Can L Bondholders do anything else?

Yes. Many L Bondholders have filed separate, independent arbitration claims against their broker-dealer, who received a large commission for selling the L Bonds to retail investors. These arbitration claims are in addition to the GWG bankruptcy proceeding.

When a broker makes an investment recommendation, the broker must make a recommendation that is suitable and in the customer’s best interest. When brokers make a recommendation, they must also be truthful and disclose all material information, which they must learn through reasonable due diligence. When a firm or advisor fails to meet these standards of conduct, they can be held liable for damages.

Based on the law firm’s investigation, there appears to have been widespread negligence and misconduct connected with the sale of GWG L Bonds to retail investors, specifically related to what was and was not disclosed to investors at the time the broker made the recommendation to purchase the L Bonds.

For more information about potential broker-dealer liability, you may wish to read these recent blog posts:

• Broker-Dealers Sold GWG L Bonds Using Aggressive and Misleading Marketing
• SEC Finds That Some Broker-Dealers Are Using Outdated, Incomplete, and Inaccurate Risk Disclosures

Investors who purchased GWG L Bonds through a financial advisor are encouraged to contact Iorio Altamirano LLP (gwglawyer.com) for a free and confidential consultation and to review their legal rights. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

How much does it cost to hire a securities arbitration attorney?

Nothing, there is no up-front cost. We represent individuals on a contingency fee basis. That is, our fee is contingent upon getting you a monetary recovery. If we do not obtain a recovery, we do not collect a fee.

Further, there is no out-of-pocket cost to clients to initiate an arbitration claim to recover GWG L Bond losses.

Helping investors recover investment losses is our primary focus. We have already helped GWG L Bond investors recover their losses and continue to do so. You can read more about how we helped a 75-year-old retiree recover her losses here: GWG L Bond Investor Recovers Losses After Filing a FINRA Arbitration Claim.

If you have already retained legal counsel or would prefer not to receive future correspondence from our law firm related to GWG L Bonds, please let us know, and we will be happy to comply with your request.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in L Bonds offered by GWG Holdings, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

In a separate action, the U.S. Attorney’s Office for the Eastern District of New York filed criminal charges against Mr. Perera. He was arrested on Monday, March 27, 2023, and arraigned on a 16-count indictment charging him with securities fraud, investment advisor fraud, wire fraud, and money laundering, in connection with a scheme to induce an investor to purchase stock in companies that traded on the NASDAQ and New York Stock Exchange (NYSE).

Customers of Mr. Perera or Aegis Capital Corp. who have suffered financial losses as a result of Mr. Perera’s negligence or misconduct can contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of their legal rights.

Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as Aegis Capital Corp.

Securities and Exchange Commission v. Surage Kamal Roshan Perera and Janues Capital Incorporated, 2:23-cv-02316

On March 27, 2023, the United States Securities and Exchange Commission (“SEC”) filed a lawsuit in federal court against Mr. Perera and his firm, Janues Capital Incorporated (“Janues”), alleging that from February 2022 until March 2023, Mr. Perera defrauded at least one investor (“Investor A”) out of millions of dollars by lying about investment opportunities and strategies; misappropriating the investor’s money by, in part, not purchasing the securities she subscribed to through Janues and using a substantial portion of her money to engage in high volume, highly leveraged trading in other securities; lying to her about non-existent investment profits; and concealing large trading losses.

According to the complaint, Mr. Perera falsely told Investor A that his firm had access to specific restricted securities at discounted prices through connections with large institutional investors. Investor A first met Mr. Perera through a mutual friend when Mr. Perera was a registered broker of Aegis Capital Corp.

Mr. Perera also allegedly claimed to exercise a trading strategy—which he called “options straddles”—that would not only prevent any trading losses but also, for some of the supposed investments, guarantee returns on the investment of at least 9% and up to as much as 50%. Perera’s false promises convinced the investor to give him approximately $4.3 million.

According to the lawsuit, Mr. Perera did not use Investor A’s funds to purchase the securities she had subscribed to and did not engage in the promised “options straddles” to prevent trading losses and generate the profits he had guaranteed. Instead, he transferred at least $3.5 million of Investor A’s funds to a brokerage account in the name of his wife, Nishani Alahakoon, and used those funds to engage in highly speculative, leveraged trading, which resulted in over $3 million in trading losses.

Mr. Perera allegedly concealed his misappropriation of Investor A’s funds and his trading losses by providing Investor A with phony trade confirmations and account statements that falsely showed the expected returns and by using funds received from other sources to partially repay the investor victim.

The SEC’s complaint alleges that Mr. Perera and Janues violated antifraud provisions of the federal securities laws. Mr. Perera also was charged with aiding and abetting Janues’ alleged violations. The SEC’s complaint names Nishani Alahakoon, whose brokerage account Perera and Janues traded, as a relief defendant.

Financial Advisor Surage Kamal Roshan Perera (CRD No. 4716321)

Roshan Perera had 18 years of experience in the securities industry and was associated with 11 different brokerage firms, including five different firms that have been expelled from the securities industry by the Financial Industry Regulatory Authority (“FINRA”). Mr. Perera was registered with Aegis Capital Corp from April 18, 2018, through September 12, 2018.

According to his public disclosure report with FINRA, Mr. Perera has been the subject of at least one customer dispute, which included allegations of unauthorized trading. The 2009 dispute was settled.

Investors who have disputes with their financial advisors and brokerage firms can file securities arbitration claims to resolve the disputes and seek recovery of investment losses.

FINRA’s BrokerCheck tool can be used to obtain Mr. Perera’s complete and updated disclosure report.

Aegis Capital Corp. – A Duty to Supervise

Selling away is when a financial advisor solicits a customer to participate in a private securities transaction that is “away” from the firm. In other words, when a broker recommends a transaction to buy or sell a security that is not offered or approved by the brokerage firm where the financial advisor is employed or registered.

A brokerage firm can be held responsible for its financial advisors’ conduct in “selling away” cases under certain circumstances.

Pursuant to FINRA Rule 3280, when a broker-dealer approves a private transaction away from the firm, the firm assumes legal responsibility for the trade. There are no exceptions to this rule. Broker-dealers can be held responsible for the conduct of their financial advisors in connection with these approved transactions.

Even if a transaction is not approved by a firm, a brokerage firm can also be held liable if the financial advisor acted with apparent authority or the investor reasonably believed that the advisor’s activities were approved or part of the broker’s services.

Brokerage firms like Aegis Capital Corp. must properly supervise financial advisors and customer accounts. Brokerage firms must also establish and maintain a reasonably designed system to oversee account activity, such as private securities transactions, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

See Also:

Law Firm Investigating the Sale of GWG L Bonds to Retail Investors by Aegis Capital Corp

Iorio Altamirano LLP Files GPB Automotive Claim Against Aegis Capital Corp

Aegis Capital Corp. Ordered to Pay Nearly $2.7 Million for Supervisory Failures Related to Rampant Excessive and Unsuitable Trading

How to Recover Financial Losses or Obtain a Free Consultation

If you have suffered investment losses with Mr. Perera or Aegis Capital Corp or suspect other inappropriate activity occurred in your investment or retirement account, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential review of your legal rights.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

Reg BI requires that brokerage firms and brokers act in the best interest of a retail customer at the time of a recommendation to purchase, sell, or hold a security or investment strategy. The broker-dealer and broker must place their retail customers’ interest ahead of their own financial interest. The standard of care also applies to recommendations of account types.

Reg BI requires compliance with four component obligations:

1. Disclosure Obligation: Firms and brokers are required to provide certain disclosures before or at the time of the recommendation about the recommendation and the relationship between the retail customer and the broker-dealer.
2. Care Obligation: Firms and brokers are required to exercise reasonable diligence, care, and skill in making a recommendation, including understanding the potential risks, rewards, and costs associated with a recommendation and having a reasonable basis to believe that the recommendation is in the best interest of a retail customer.
3. Conflict of Interest Obligation: Broker-dealers are required to establish, maintain, and enforce written policies and procedures reasonably designed to identify and address conflicts of interest.
4. Compliance Obligation: Broker-dealers are required to establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance with Regulation Best Interest.

SEC Warns Broker-Dealers That Policies and Procedures Must Be Specific When Outdated Disclosures Need to be Updated

In connection with conducting regulatory examinations of broker-dealers, the SEC observed that some broker-dealers did not have written policies and procedures reasonably designed to achieve compliance with the Disclosure Obligation. Specifically, the SEC noted that some brokerage firms’ written policies and procedures did not specify when disclosures should be created or updated (i.e., when the disclosures contain materially outdated, incomplete, or inaccurate information) or how the updated disclosures should be delivered. For example, according to the SEC’s risk alert, some policies and procedures did not identify the parties responsible for creating or updating disclosures, how to identify that material changes have occurred, or when material changes should result in new or updated disclosures.

In practice, while representing investors who have been harmed by the conduct of broker-dealers, our law firm has observed the same failures by brokerage firms. Most recently, we have observed that many broker-dealers maintained and used outdated risk disclosure materials when recommending GWG L Bonds after GWG Holdings Inc., the issuer of the bonds, completely changed its business model in 2018. As a result, brokers were recommending, and customers were purchasing bonds based on outdated, incomplete, and inaccurate information.

Had the brokerage firms’ policies and procedures specified when the GWG L Bond disclosures should have been updated, how the updated disclosures should have been delivered, and who was responsible for monitoring the security for material changes, customers would have been able to make informed decisions about whether they were willing to invest in the speculative, high-risk, illiquid, and unrated GWG L Bonds.

Instead, thousands of retail investors purchased billions of dollars of GWG L Bonds, following the recommendation of their financial advisors, and have suffered significant losses after GWG Holdings, Inc. defaulted on their debt obligations in January 2022 and filed for Chapter 11 bankruptcy in April 2022.

For the latest on Iorio Altamirano LLP’s investigation of GWG L Bonds, including a key event timeline, visit our firm’s investigation page: Iorio Altamirano LLP’s Investigation of GWG L Bonds.

See Also:

“GWG Was a Classic Ponzi Scheme” – Official Committee of Bondholders of GWG Holdings, Inc.

GWG Bankruptcy Update: Questions Remain as to When, or If, GWG L Bond Investors Will Receive Future Distributions

GWG L Bond Investor Recovers Losses After Filing a FINRA Arbitration Claim

Brokerage Firm Liability

An L bond is a financial product created by GWG Holdings, Inc. (GWGH). The L Bonds are speculative, high-risk, illiquid, and unrated alternative investment offerings.

Initially, GWG Holdings pooled money from bond investors to purchase life insurance policies on the secondary market, paid the policy premiums, and then collected the death benefit when the insured individual passed away. However, beginning in 2018, GWG Holdings used the investor capital to invest in a new business model, exposing the company to riskier alternative assets. Many GWG L Bond investors were utterly unaware that GWG materially reoriented its business model, which, in our view, made it a much bigger credit risk. Additionally, many GWG L bond investors were not told by their financial advisors that GWG used investor capital to pay out the high distributions owed to other GWG L Bond investors in a Ponzi-like scheme.

GWG sold the L bonds through Emerson Equity LLC and a network of regional broker-dealers, who pitched the products to individual retail investors. The network of regional broker-dealers who sold L Bonds and shared in the selling commissions included the following firms, as well as other broker-dealers:

• Centaurus Financial, Inc.
• Great Point Capital LLC.
• National Securities Corporation.
• Western International Securities, Inc.
• Aegis Capital, LLC.
• Newbridge Securities Corporation.
• Dempsey Lord Smith, LLC.
• Coastal Equities, Inc.
• International Assets Advisory, LLC.
• Arete Wealth Management, LLC.
• Capital Investment Group, Inc.
• Lifemark Securities, Corp.
• Westpark Capital, Inc.
• Ausdal Financial Partners, Inc.
• American Trust Investment Services, Inc.
• Moloney Securities.
• IFP Securities, LLC.
• Center Street Securities.
• Cabot Lodge Securities LLC.
• Kingswood Capital Partners, LLC.
• American Trust Investment Services, Inc.
• SW Financial.
• Paulson Investment Company LLC.
• Ages Financial Services, LTD.
• Independence Capital Co., Inc.
• Landolt Securities, Inc.
• Intervest International Equities Corporation.
• Titan Securities.
• NI Advisors.
• JRL Capital Corporation.
• The FIG Group, LLC.
• M Stevens Securities, LLC.
• TFS Securities, Inc.
• Integrity Brokerage, LLC.
• American Equity Investment Corporation.

Brokerage firms are required to make investment recommendations that are suitable and in the best interest of their customers. Brokerage firms and financial advisors must also disclose all material facts and risks of a security when making a recommendation. When a firm or advisor fails to meet these standards of conduct, they can be held liable for damages.

Firms and brokers must also conduct reasonable due diligence on products they offer before recommending them to any clients. There are serious concerns that some broker-dealers recommended GWG’s L Bonds to customers without first conducting sufficient due diligence on the GWG L bonds or GWGH.

Investors who purchased GWG L Bonds through a financial advisor are encouraged to contact Iorio Altamirano LLP (gwglawyer.com) for a free and confidential consultation and to review their legal rights. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in L Bonds offered by GWG Holdings, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

On April 20, 2022, GWG Holdings, Inc. filed for Chapter 11 bankruptcy, allowing GWG Holdings to propose a reorganization plan. On May 17, 2022, the Nasdaq Stock Market announced that it would delist the common stock of GWG Holdings, Inc.

Many GWG L Bond investors, who have not received interest or maturity payments since January 2022, are skeptical that they will see a return of their invested capital. Investment News has reported that one anonymous GWG L bond investor estimates that the GWG L Bonds may now be worth 20 to 30 cents on the dollar.

According to the bankruptcy filings, the SEC has been investigating the sales practices related to GWG L Bonds. It has been reported that the SEC’s investigation began in May 2021. We believe that this investigation includes the sales practices of Emerson Equity and its regional broker-dealers, such as Aegis Capital Corp.

Brokerage firms like Aegis Capital Corp. are required to make investment recommendations that are suitable and in the best interest of their customers. Brokerage firms and financial advisors must also disclose all material facts and risks of a security when making a recommendation. Firms and brokers must also conduct reasonable due diligence on products they offer before recommending them to any clients. When a firm or advisor fails to meet these standards of conduct, they can be held liable for damages.

Investors who purchased the L Bonds offered by GWG Holdings are encouraged to contact Iorio Altamirano LLP (gwglawyer.com) for a free and confidential consultation and to review their legal rights. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

For the latest on Iorio Altamirano LLP’s investigation of GWG L Bonds, including a key event timeline, visit our firm’s investigation page: Iorio Altamirano LLP’s Investigation of GWG L Bonds.

About GWG L Bonds

An L bond is a financial product created by GWG. Initially, GWG pooled money from bond investors to purchase life insurance policies on the secondary market, pay the policy premiums, and then collect the death benefit when the insured individual passed away. However, beginning in 2018, GWG used the investor capital to invest in a new business model, exposing the company to much riskier alternative assets. Many GWG L Bond investors were utterly unaware that GWG materially reoriented its business model, which, in our view, made it a much bigger credit risk. Additionally, many GWG L bond investors were not told by their financial advisors that GWG used investor capital to pay out the high distributions owed to other GWG L Bond investors in a Ponzi-like scheme.

GWG Holdings offered the L Bonds with a maturity ranging from 2 to 7 years and paying an interest rate of 5.50% to 8.50%.

The L Bonds are speculative, high-risk, and illiquid private placement offerings. They are secured by the assets of GWG Holdings and a pledge of all of the common stock by its largest stockholders.

GWG L Bonds were likely not suitable for investors with a low-to-moderate risk tolerance or investors who had liquidity needs.

Investors who purchased GWG L Bonds should contact New York Securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation to review their legal rights.

Aegis Capital Corp. (CRD No. 15007)

Aegis Capital Corp. is an SEC-registered broker-dealer and investment advisor based in New York, NY. The firm, licensed to sell securities in 53 U.S. states and territories, currently has a roster of approximately 325 registered brokers and investment advisors across the country. Aegis Capital Corp., which has been a FINRA member since 1984, provides, among other things, services in connection with wealth management, retirement planning, investment banking, and fixed income trading.

Aegis Capital has repeatedly run afoul of FINRA rules, particularly regarding supervisory violations and excessive trading. According to the firm’s public disclosure report, it has been sanctioned 36 times by regulators for alleged misconduct. The most recent sanction was settled in November 2021. FINRA fined Aegis over $1 million and ordered the firm to pay an additional $1.7 million as restitution after FINRA’s investigation concluded that Aegis failed to establish, maintain, and enforce a supervisory system reasonably designed to achieve compliance with the suitability requirements of FINRA Rule 2111 as it pertains to excessive trading. FINRA alleged that Aegis failed to identify trading in hundreds of customer accounts that were potentially excessive and unsuitable

Additionally, according to a 2017 investigation by Reuters, Aegis Capital hired more brokers with a history of significant “red flag” public disclosures than all but thirty-one other brokerage firms in the country. In 2021 alone, at least seven Aegis Capital registered representatives, or former representatives, were subject to regulatory discipline by FINRA for alleged misconduct and rules violations while employed by Aegis Capital.

Financial institutions like Aegis Capital Corp. must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

See Also:

Iorio Altamirano LLP Files GPB Automotive Claim Against Aegis Capital Corp

Aegis Capital Corp. Ordered to Pay Nearly $2.7 Million for Supervisory Failures Related to Rampant Excessive and Unsuitable Trading

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in L Bonds offered by GWG Holdings through Aegis Capital Corp., contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

Additionally, the FINRA AWC alleged from July 2014 to June 2019, Aegis Capital failed to establish, maintain, and enforce a supervisory system, including WSPs, reasonably designed to achieve compliance with the suitability requirements of FINRA Rule 2111 when selling leveraged, inverse, and inverse-leveraged Exchange-Traded Funds (Non-Traditional ETFs) to retail customers. As a result, Aegis Capital failed to identify customers who purchased and held Non-Traditional ETFs for extended periods of time or whose purchase was inconsistent with their recorded investment objective, risk tolerance, or finances.

Customers of Aegis Capital, including customers that have been notified that they may be receiving restitution, should consult with a securities arbitration law firm. If you or a loved one were a customer of Aegis Capital, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of your legal rights.

Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as Aegis Capital Corp.

FINRA Letter of Acceptance, Waiver, and Consent No. 201605174305

FINRA and Aegis Capital entered into a Letter of Acceptance, Waiver, and Consent No. 201605174305on November 8, 2021, after FINRA alleged that between July 2014 through December 2018, Aegis Capital failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures (WSPs), reasonably designed to achieve compliance with the suitability requirements of FINRA Rule 2111 as it pertains to excessive trading.

Excessive Trading

Specifically, with regard to excessive trading, FINRA alleged the following:

• Between 2014 and 2018, Aegis Capital employed on average more than 350 registered representatives across more than 20 branch offices, with the majority working in the firm’s Melville, 40 Wall Street, and Seventh Avenue branches.
• More than 10% of the firm’s registered representatives disclosed personal financial issues, such as outstanding liens, judgments, or bankruptcies on FINRA’s Central Registration Depository.
• During the relevant period, Aegis Capital used boilerplate WSPs prepared by an outside vendor for supervision of registered representatives’ trading in customer accounts.
• Aegis Capital’s WSPs instructed its branch managers to monitor trading for suitability issues during their daily review of Aegis Capital’s trade blotters but did not explain how the firm’s supervisors should conduct the daily trade review or use the trade blotters and other available customer information to identify potentially unsuitable or excessive trading in Aegis Capital’s customers’ accounts.
• The WSPs also did not define or require supervisors to calculate or consider, turnover rate, or cost-to-equity ratio.
• Additionally, Aegis Capital did not provide its branch and assistant branch managers training to compensate for the lack of guidance in the WSPs.
• Aegis Capital’s trade blotters were not designed to flag excessive trading activity, as they did not show the trading history in an account or the holding period between buys and sells in the same security. The blotters also did not include cost-to-equity or turnover, or information regarding the use of margin, even though many of the firm’s registered representatives recommended the use of margin to their customers.
• Aegis Capital’s WSPs also required branch managers to conduct monthly and semi-annual reviews of customer account activity to monitor for suitability and churning, and the firm’s chief compliance officer or their designee to review “active accounts” (defined as accounts with more than 20 transactions per month and $5,000 in commissions), to determine if the type, size, and frequency of trades were consistent with the customer’s investment objectives. However, these reviews were not performed for most of the relevant period.
• Aegis Capital had access to additional supervisory tools to monitor and identify excessive trading. Aegis Capital received exception reports from its clearing firm specifically designed to identify accounts with turnover rates and commission-to-equity ratios indicative of excessive and unsuitable trading. The exception reports were triggered when the annualized cost-to-equity ratio in accounts with an aggressive or speculative investment objective exceeded 5% or 6%, respectively, for three or more consecutive days, or the turnover exceeded 500% for five or more consecutive days.
• From July 2014 to December 2018, the active, in-and-out trading conducted by Aegis Capital’s registered representatives generated thousands of exception reports identifying customer accounts with potentially unsuitable turnover rates and commission-to-equity ratios. Approximately one-third of the exception reports related to trading in accounts held by senior investors, and more than 900 identified potentially unsuitable trading by eight registered representatives who worked in Aegis Capital’s Melville and Wall Street branches (the Representatives).
• These exception reports were active and viewable in the trade review system that Aegis Capital’s supervisors used to conduct their daily trade reviews. However, for most of the relevant period, Aegis Capital’s WSPs did not reference the exception reports or require its supervisors to review and address them.
• Aegis Capital also received more than 50 complaints from customers alleging excessive, unsuitable, or unauthorized trading in their firm accounts, including at least 13 complaints from customers whose accounts were managed by the Representatives.
• Aegis Capital failed to take reasonable steps to investigate these numerous red flags of potentially excessive and unsuitable trading by its registered representatives. Instead, Aegis Capital and its supervisors sent disclosure letters designed to document a customer’s general acknowledgement of the trading in their accounts and the trading costs they incurred. However, the letters did not include the actual costs of the trading, the costs incurred due to the use of margin, or explain what trades (or series of trades) prompted Aegis to issue the letter.
• During the relevant period, Aegis Capital’s compliance department prepared reports documenting the “key compliance issues” identified during its review and testing of Aegis Capital’s supervisory systems, procedures, and controls. Aegis Capital’s annual testing reported that:
• Aegis Capital lacked specific procedures to monitor turnover and commission-to-equity ratios in customers’ accounts.
• Aegis Capital should use exception reports that monitor commission activity and trading velocity (or turnover) to ensure “adequate” commission-to-equity ratios in its customers’ accounts.
• Aegis Capital was not utilizing specific alerts provided by its clearing firm that would ensure adequate commission-to-equity ratios.
• Aegis Capital’s WSPs did not identify which clearing firm exception reports that it would use to conduct supervisory trading reviews or the principals responsible for reviewing them.
• Aegis Capital needed additional compliance personnel to keep pace with Aegis Capital’s rapid hiring and growth.
• Although many of these findings carried over from year-to-year, Aegis Capital did not immediately address the deficiencies identified by its annual testing. Aegis Capital did not supplement its daily trade reviews with systems, surveillance, or reviews specifically designed to monitor or calculate commission-to-equity ratios or turnover rates in customer accounts or require its supervisors to review the exception reports provided by its clearing firm. Aegis Capital also did not update the daily trade blotters to include information that would enable its supervisors to identify patterns of trading, commissions, or accumulated losses in customer accounts.
• In 2018, Aegis Capital retained a third-party vendor to provide new automated trade surveillance and alerts. In 2019 and again in 2020, Aegis Capital also retained independent consultants to conduct comprehensive reviews of its WSPs and supervisory controls, and its remediation is ongoing.
• Even so, during the Relevant Period, Aegis Capital failed to identify potentially excessive and unsuitable trading in hundreds of customer accounts. Aegis Capital’s unreasonable supervisory system, combined with the failure to respond to the red flags discussed above, also allowed the Representatives to make unsuitable recommendations and excessively trade the accounts of 31 customers. The trading by the Representatives in the accounts of those 31 customers resulted in annualized turnover rates ranging from 4.2 to 199.8 and cost-to-equity ratios ranging from 21.2% to 164.6%, and more than $2.9 million in costs and $4.6 million in losses.
• Accordingly, Aegis Capital violated NASD Rule 3010 and FINRA Rules 3110 and 2010.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

There are two primary indicators used to evaluate whether a financial advisor excessively traded an account. The first is turnover rate, which represents the number of times a portfolio of investments is replaced for another portfolio of investments. Generally, a turnover rate of six suggests excessive trading, but a turnover rate below four can be excessive in some cases. According to FINRA, the accounts at issue had a turnover rate between 4.2 and 199.8.

The second indicator used to assess whether trading is excessive in an investment account is its cost-to-equity ratio. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break even. A cost-to-equity ratio of 20% generally indicates excessive trading has occurred. According to FINRA, the accounts at issue had cost-to-equity ratios between 21.2% and 164.6%.

The practice of excessively trading customers’ accounts is unethical and illegal. Such conduct is also a violation of securities rules and regulations and can cause enormous harm to customers.

Non-Traditional ETFs

The FINRA AWC also alleged from July 2014 to June 2019, Aegis Capital failed to establish, maintain, and enforce a supervisory system, including WSPs, reasonably designed to achieve compliance with the suitability requirements of FINRA Rule 2111 when selling leveraged, inverse, and inverse-leveraged Exchange-Traded Funds (Non-Traditional ETFs) to retail customers.

Specifically, with regard to Non-Traditional ETFs, FINRA alleged the following:

• Exchange-Traded Funds (ETFs) are typically registered unit investment trusts or open-end investment companies whose shares represent an interest in a portfolio of securities that track an underlying benchmark or index. Shares of ETFs often are listed on national securities exchanges and traded throughout the day at prices established by the market.
• Leveraged ETFs seek to return a multiple of the performance of the index or benchmark they track. Some Non-Traditional ETFs are “inverse” or “short” funds, meaning they seek to deliver the opposite of the performance of the index or benchmark they track. Some funds are both inverse and leveraged, meaning that they seek to achieve a return that is a multiple of the inverse performance of the underlying index or benchmark. Most Non-Traditional ETFs reset daily, meaning they are designed to achieve their stated objectives only over the course of one trading session – usually a single day.
• In June 2009, FINRA issued Regulatory Notice 09-31. Regulatory Notice 09-31 reminded member firms that the performance of Non-Traditional ETFs over periods of time longer than a single trading session “can differ significantly from the performance … of their underlying index or benchmark during the same period of time.” Because of these risks and the complexity of these products, the notice further advised that “[w]hile the customer-specific suitability analysis depends on the investor’s particular circumstances, inverse and leveraged ETFs are not suitable for retail investors who plan to hold them for more than one trading session, particularly in volatile markets.”
• In January 2012, FINRA issued Regulatory Notice 12-03. Regulatory Notice 12-03 reminded member firms that Non-Traditional ETFs that reset daily are complex products that require heightened supervision. The notice explained that member firms should have: (i) a well-designed system of internal controls; (ii) adequate training, so its registered representatives understand how Non-Traditional ETFs are expected to perform in normal market conditions and the risks associated with them; and (iii) monitoring systems or procedures reasonably designed to determine that Non-Traditional ETFs are recommended and sold only to customers who understand their essential features and for whom the product is suitable.
• From July 1, 2014, to June 1, 2019, Aegis Capital’s registered representatives executed more than 3,000 transactions, with a total principal value of more than $400 million, in Non-Traditional ETFs that reset daily. The transactions were executed in 524 retail customer accounts and generated approximately $422,000 in sales compensation for Aegis Capital and its registered representatives.
• Consistent with Regulatory Notice 12-03, Aegis Capital’s WSPs designated Non-Traditional ETFs as a complex product requiring heightened supervision. For example, Aegis Capital’s WSPs required the firm to provide its registered representatives with mandatory training on the features and risks of Non-Traditional ETFs and clear instructions regarding the types of customers for whom Non-Traditional ETFs were suitable. Aegis Capital’s WSPs also required the firm to appoint a product manager responsible for determining the type of investor for whom the purchase or sale of Non-Traditional ETFs was suitable and tasked the firm’s branch managers with reviewing each Non-Traditional ETF transaction for customer-specific suitability.
• Aegis Capital failed to conduct the heightened supervision its WSPs required. Aegis Capital did not designate an individual to act as the product manager or require its branch managers to perform the heightened suitability review its WSPs mandated for sales of Non-Traditional ETFs. Aegis Capital did not provide its registered representatives with any training on Non-Traditional ETFs until November 2018 or establish guidance regarding the types of customers for whom the purchase of Non-Traditional ETFs was suitable until June 2019.
• Aegis Capital’s supervisory systems were also not reasonably designed to detect potentially unsuitable transactions involving Non-Traditional ETFs. As discussed in Regulatory Notice 09-31, a primary risk associated with Non-Traditional ETFs is that their performance over longer periods of time can differ significantly from the performance of their underlying index or benchmark, particularly in volatile markets. Aegis Capital relied on its daily trade review to monitor how long customers who purchased Non-Traditional ETFs held the security before selling it. However, the trade blotter did not include information that allowed the branch managers to identify whether a customer held a Non-Traditional ETF for more than one day, and Aegis Capital did not track the holding periods of Non-Traditional ETF positions.
• As a result, Aegis Capital failed to identify customers who purchased and held Non-Traditional ETFs for extended periods of time up to and including a year or longer and customers whose purchase was inconsistent with their recorded investment objective, risk tolerance, or finances. Fifteen of those customers – including seniors and individuals with conservative or moderate risk tolerances – incurred total realized losses of $132,463.
• Accordingly, Aegis Capital violated NASD Rule 3010 and FINRA Rules 3110 and 2010.

Sanctions

Aegis Capital consented to the imposition of the following sanctions: a censure, a fine of $1,050,000, and restitution of $1,692,256.44.

Aegis Capital Corp: 2021 Disciplinary Actions

This blog has repeatedly written about Aegis Capital and its brokers’ propensity to engage in excessive and unsuitable trading in customers’ accounts.

The following chart summaries disciplinary actions that have been taken against Aegis Capital and its brokers in 2021 and also includes links to previous blog posts:

Unfortunately, Aegis Capital’s misconduct is not new. Aegis Capital Corp has a long history of allegations of wrongdoing.

In 2017, Aegis was included in a Reuters study that analyzed FINRA data and identified 48 firms whose brokers have been flagged for serious incidents. The Reuters’ analysis showed that Aegis Capital had 39% of its brokers with at least one of the most serious red flags, per the study, on their public disclosure reports.

The alleged conduct by the brokers that have been sanctioned this year, such as excessive trading, churning, and unauthorized trading, are common practices for “boiler room” broker-dealers.

Aegis Capital Corp. – A Duty to Supervise

Financial institutions like Aegis Capital Corp. must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as annuity switches, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

Iorio Altamirano LLP Investigates Aegis Capital Over GPB Funds

According to publicly available records filed with the SEC, Aegis Capital likely received sales compensation for selling the private offerings by GPB Capital to retail investors.

Iorio Altamirano LLP is investigating claims on behalf of defrauded investors who were victims in the GPB funds scheme. The GPB funds were marketed to independent broker-dealers and investment advisers who would, in turn, sell the GPB funds to their retail investors.

If you lost money investing in private offerings by GPB Capital with Aegis Capital Corp, including GPB Automotive, you might have a claim.

The SEC has charged GPB Capital, Ascendant Capital, and Ascendant Alternative Strategies with running a Ponzi-like scheme that raised roughly $1.8 billion from securities issued by GPB Capital. The SEC believes that as many as 17,000 retail investors nationwide have been defrauded.

Nearly $1.7 billion of that total was invested in GPB Capital’s four flagship funds:

• GPB Holdings, LP / GPB Holdings Qualified, LP (“Holdings Qualified”) (collectively, “Holdings I”), launched in March 2013;
• GPB Automotive Portfolio, LP (“Automotive Portfolio”), launched in May 2013;
• GPB Holdings II, LP (“Holdings II”), launched in April 2015; and
• GPB Waste Management, LP (“Waste Management”), launched in August 2016.

See Also: Iorio Altamirano LLP Files GPB Automotive Claim Against Aegis Capital Corp

If you invested in the GPB funds with Aegis Capital, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account. We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

Related actions have also been initiated all over the country. The New York State Attorney General filed a complaint against GPB Capital. According to the complaint, as of June 2019, GPB Capital estimated the fair market value of its funds’ portfolio assets at approximately $1 billion – representing a more than 40% loss on investors’ initial capital contributions. The exact portfolio asset values are unknown, as the funds have not issued audited financials since 2016.

In addition to the State of New York, Massachusetts, Georgia, Illinois, Missouri, South Carolina, and Alabama have initiated similar legal proceedings.

You can read more about our firm’s investigation into the GPB funds and the SEC action here.

How to Recover Financial Losses or Obtain a Free Consultation

If you have suffered investment losses with Aegis Capital Corp. or suspect other inappropriate activity occurred in your investment or retirement account, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential review of your legal rights.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

Mr. May was registered as a broker with Joseph Stone Capital L.L.C. from July 2015 to June 2020 and again from March 2021 to October 2021. He is currently registered with VCS Venture Securities in New York, NY.

Iorio Altamirano LLP is investigating potential legal claims on behalf of customers of Michael May and Joseph Stone Capital related to investment recommendations and account activity made by Mr. May.

Customers who have suffered investment losses or suspect other misconduct by Mr. May or Joseph Stone Capital in their investment, brokerage, or retirement accounts, should contact securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and to review their legal rights.

Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as Joseph Stone Capital.

Joseph Stone Capital L.L.C.

According to a 2017 investigation by Reuters, out of all of the brokerage firms in the country, Joseph Stone Capital hired the second most brokers with a history of significant disclosures. In 2021, Iorio Altamirano LLP set out to update that analysis.

The investigation revealed that seventy-six percent (76%) of Joseph Stone Capital’s brokers and supervisors have significant red flag public disclosures. Significant red flag disclosures include:

• regulatory sanctions,
• terminations of employment after allegations of misconduct,
• customer disputes that result in an award or settlement, and
• prior association with a firm that FINRA has expelled.

You can read the full investigative report here: Investigative Report: Iorio Altamirano LLP Investigation into Joseph Stone Capital L.L.C. Reveals Troubling Pasts for Owners, Executives, and Brokers

Mr. May was one of the brokers who had serious incidents reported on his BrokerCheck report.

FINRA Letter of Acceptance, Waiver, and Consent No. 2019063821603

FINRA and Mr. May entered into a Letter of Acceptance, Waiver, and Consent No. 2019063821603 on November 3, 2021, after FINRA alleged that between June 2017 and May 2018, while associated with Joseph Stone Capital, Mr. May excessively and unsuitable traded a customer’s account, in violation of FINRA Rules 2111 and 2010. Specifically, FINRA alleged:

• Between June 2017 and May 2018, while registered through Joseph Stone Capital, Mr. May engaged in excessive and unsuitable trading, including the use of margin in a customer’s account.
• During the relevant period, Mr. May recommended that his customer place 21 trades in his account, and the customer accepted Mr. May’s recommendations.
• Although the customer’s account had an average month-end equity of approximately $25,331, Mr. May recommended trades with a total principal value of more than $265,044, which resulted in an annualized turnover rate of more than 10.
• Collectively, the trades that Mr. May recommended caused his customer to pay $10,349 in commissions, trading costs, and margin interest, which resulted in an annualized cost-to-equity ratio in excess of 40 percent – meaning that the customer’s account would have to grow by more than 40 percent annually just to break even.
• May’s recommended securities transactions in the account of his customer were excessive and unsuitable.
• Accordingly, Mr. May violated FINRA Rules 21111 and 2010.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

There are two primary indicators used to evaluate whether a financial advisor excessively traded an account. The first is turnover rate, which represents the number of times a portfolio of investments is replaced for another portfolio of investments. Generally, a turnover rate of six suggests excessive trading, but a turnover rate below four can be excessive in some cases. According to FINRA, the account at issue had an annual turnover rate of more than ten.

The second indicator used to assess whether trading is excessive in an investment account is its cost-to-equity ratio. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break even. A cost-to-equity ratio of 20% generally indicates excessive trading has occurred. According to FINRA, the account at issue had a cost-to-equity ratio of more than 40%.

Excessive trading is an unethical and illegal practice. It is also a violation of securities rules and regulations and can cause enormous harm to customers.

Financial Advisor Michael James May (CRD No. 4712287)

Michael May has 17 years of experience in the securities industry and has been associated with seven different firms, including two firms that have been expelled from the industry by FINRA.

According to his public disclosure report, in 2016, Mr. May was the subject of a customer complaint. A customer filed a securities arbitration claim alleging $180,000 in damages as a result of unsuitable and unauthorized transactions. Mr. May settled the dispute with his customer.

FINRA’s BrokerCheck tool can be used to obtain Mr. May’s complete and updated disclosure report.

Joseph Stone Capital – A Duty to Supervise

Financial institutions like Joseph Stone Capital must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

How to Recover Losses or Obtain a Free Consultation

When an investor suffers investment losses due to misconduct by a financial advisor or broker-dealer, the investor can file a securities arbitration claim against their financial advisor and/or broker-dealer in an effort to be compensated.

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

If you have lost money with Mr. May or Joseph Stone Capital, contact FINRA arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com or toll-free at (646) 330-4624 for a free and confidential evaluation of your account.

Iorio Altamirano LLP is a bilingual law firm, fluent in both English and Spanish.

Mr. Yurovsky has been registered as a broker with Joseph Stone Capital L.L.C. in Mineola, New York, since April 2016.

Iorio Altamirano LLP is investigating potential legal claims on behalf of customers of Lenny Yurovsky and Joseph Stone Capital related to investment recommendations and account activity made by Mr. Yurovsky.

Customers who have suffered investment losses or suspect other misconduct by Mr. Yurovsky or Joseph Stone Capital in their investment, brokerage, or retirement accounts, should contact securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and to review their legal rights.

Joseph Stone Capital L.L.C.

According to a 2017 investigation by Reuters, out of all of the brokerage firms in the country, Joseph Stone Capital hired the second most brokers with a history of significant disclosures. In 2021, Iorio Altamirano LLP set out to update that analysis.

The investigation revealed that seventy-six percent (76%) of Joseph Stone Capital’s brokers and supervisors have significant red flag public disclosures. Significant red flag disclosures include:

• regulatory sanctions,
• terminations of employment after allegations of misconduct,
• customer disputes that result in an award or settlement, and
• prior association with a firm that FINRA has expelled.

You can read the full investigative report here: Investigative Report: Iorio Altamirano LLP Investigation into Joseph Stone Capital L.L.C. Reveals Troubling Pasts for Owners, Executives, and Brokers

Mr. Yurovsky was one of the brokers who had serious incidents reported on his BrokerCheck report.

Financial Advisor Leonid Yurovsky (CRD No. 4554905)

Leonid Yurovsky has 18 years of experience in the securities industry and has been associated with 14 different firms, including one firm that has been expelled from the industry by FINRA.

In 2014, Mr. Yurovsky was ordered to pay $55,000 in restitution to a customer by the securities regulators in Arkansas, who alleged that he excessively traded the customer’s account.

FINRA’s BrokerCheck tool can be used to obtain Mr. Yurovsky’s complete and updated disclosure reports.

Joseph Stone Capital – A Duty to Supervise

Financial institutions like Joseph Stone Capital must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

How to Recover Losses or Obtain a Free Consultation

When an investor suffers investment losses due to misconduct by a financial advisor or broker-dealer, the investor can file a securities arbitration claim against their financial advisor and/or broker-dealer in an effort to be compensated.

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

If you have lost money with Mr. Yurovsky or Joseph Stone Capital, contact FINRA arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com or toll-free at (646) 330-4624 for a free and confidential evaluation of your account.

Iorio Altamirano LLP is a bilingual law firm, fluent in both English and Spanish.

Customers of Mr. Lianzo, Laidlaw & Company (UK) LTD, or SW Financial should consult with a securities arbitration law firm. If you or a loved one were a customer of Joseph Lianzo, Laidlaw & Company (UK) LTD, or SW Financial LLC, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of your legal rights.

Iorio Altamirano LLP represents investors nationwide that have disputes with their financial advisors or brokerage firms, such as Laidlaw & Company (UK) Ltd or SW Financial.

FINRA Letter of Acceptance, Waiver, and Consent No. 2018058278601

FINRA and Mr. Lianzo entered into a Letter of Acceptance, Waiver, and Consent on August 31, 2021, after FINRA alleged that between March 2016 and November 2019, Mr. Lianzo excessively traded four customers’ accounts in violation of FINRA Rules 2111 and 2010. FINRA also alleged that Mr. Lianzo placed 13 unauthorized transactions in accounts of two of those four customers, in violation of FINRA Rule 2010. Specifically, FINRA alleged:

• Lianzo engaged in quantitatively unsuitable trading in the account of one customer at Laidlaw, Customer A, and in the accounts of three customers at SW Financial, Customers B, C, and D.
• Lianzo recommended the trading in the accounts for the four customers, and they routinely followed his recommendations.
• As a result, Mr. Lianzo exercised de facto control over the four customers’ accounts. Lianzo’s trading of the accounts resulted in high turnover rates and cost-to-equity ratios, as well as significant losses.
• Specifically, Mr. Lianzo engaged in quantitatively unsuitable trading in Customer A’s account. Between March 2016 and March 2017, Customer A’s account exhibited an annualized turnover rate of 35 and an annualized cost-to-equity ratio of 145%. Customer A’s account incurred losses of $42,487 and paid $15,169 in commissions.
• During the period October 2017 through November 2019, Mr. Lianzo also engaged in quantitatively unsuitable trading in the accounts of Customers B, C, and D.
• Customer B’s account exhibited an annualized turnover rate of 15 and an annualized cost-to-equity ratio of 65%. Customer B’s account incurred losses of $95,570 and paid $22,975 in commissions.
• Customer C’s account exhibited an annualized turnover rate of 18 and an annualized cost-to-equity ratio of 78%. Customer C’s account incurred losses of $112,173 and paid $51,781 in commissions.
• Customer D’s account exhibited an annualized turnover rate of 15 and an annualized cost-to-equity ratio of 72%. Customer D’s account incurred losses of $43,078 and paid $37,581 in commissions.
• Lianzo’s trading in his four customers’ accounts was excessive and unsuitable given the customers’ investment profiles.
• Therefore, Lianzo violated FINRA Rules 2111 and 2010.
• Additionally, between February 14, 2017, and March 16, 2017, while registered through Laidlaw, Mr. Lianzo placed seven trades in Customer A’s account without Customer A’s authorization, knowledge, or consent.
• Between August 9, 2018, and October 31, 2018, while registered through SW Financial, Mr. Lianzo placed six trades in Customer B’s account without Customer B’s authorization, knowledge, or consent.
• Therefore, Lianzo violated FINRA Rule 2010.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

Churning is a more egregious variation of excessive trading. Churning refers to a situation where the broker executed an excessive number of trades and did so with the intent to defraud or reckless disregard for the customer’s interest.

Unauthorized trading often occurs in non-discretionary accounts, where a customer retains discretion. In non-discretionary accounts, brokers must obtain a customer’s permission every time before placing a trade.

Excessive trading, churning, and unauthorized trading are unethical and illegal practices. They are all also violations of securities rules and regulations and can cause enormous harm to customers.

There are two primary indicators used to evaluate whether a financial advisor excessively traded an account. The first is turnover rate, which represents the number of times a portfolio of investments is replaced for another portfolio of investments. Generally, a turnover rate of six suggests excessive trading, but a turnover rate below four can be excessive in some cases. According to FINRA, the accounts at issue had an annual turnover rate between 15 and 35.

The second indicator used to assess whether trading is excessive in an investment account is its cost-to-equity ratio. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break even. A cost-to-equity ratio of 20% generally indicates excessive trading has occurred. According to FINRA, the accounts at issue had cost-to-equity ratios between 65% and 145%.

Financial Advisor Joseph Augustien Lianzo (CRD No. 4516842)

Joeseph Augustien Lianzo, who had only 19 years of experience in the securities industry, has a history of customer complaints and associations with disreputable firms.

Mr. Lianzo has been affiliated with nine different brokerage firms, including two which have been expelled from the industry by FINRA:

• SW Financial, from September 2017 to the present.
• Arive Capital Markets, from March 2017 to October 2017.
• Laidlaw & Company (UK) Ltd., from September 2015 to August 2017.
• Cape Securities Inc., from August 2014 to September 2015.
• Salomon Whitney LLC, from October 2012 to August 2014.
• P. Turner & Company, L.L.C., from December 2004 to October 2012.
• New Castle Financial Group, Inc. (expelled by FINRA), from August 2004 to December 2004.
• Newbridge Securities Corporation, from April 2003 to August 2004.
• Harrison Securities, Inc. (expelled by FINRA), from April 2003 to May 2003.
• Milestone Financial Services, Inc., from April 2002 to March 2003.

Mr. Lianzo has been the subject of 2 customer complaints and securities arbitrations relating to allegations of suitability, excessive trading, churning, and unauthorized trading. Both cases resulted in monetary compensation to the harmed customer(s).

FINRA’s BrokerCheck tool can be used to obtain Mr. Lianzo’s complete and updated disclosure reports.

SW Financial and Laidlaw & Company (UK) Ltd – A Duty to Supervise

Financial institutions like SW Financial and Laidlaw & Company (UK) Ltd must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

How to Recover Financial Losses or Obtain a Free Consultation

If you have suffered investment losses with Joseph Lianzo, SW Financial, or Laidlaw & Company (UK) Ltd or suspect other inappropriate activity occurred in your investment or retirement account, contact securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential review of your legal rights.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

Customers of Mr. Fowler or Worden Capital Management LLC should consult with a securities arbitration law firm. If you or a loved one were a customer of Donald Fowler or Worden Capital Management LLC, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of your legal rights.

Iorio Altamirano LLP represents investors nationwide that have disputes with their financial advisors or brokerage firms, such as Worden Capital Management LLC.

Worden Capital Management

According to a 2017 investigation by Reuters, Worden Capital Management hired more brokers with a history of significant disclosures than all but twenty-three other firms in the country. In 2021, Iorio Altamirano LLP set out to update that analysis.

The investigation revealed that fifty-four percent (54%) of Worden Capital Management’s brokers and supervisors have significant “red flag” public disclosures. Significant red flag disclosures include:

• regulatory sanctions,
• terminations of employment after allegations of misconduct,
• customer disputes that result in an award or settlement, and
• prior association with a firm that FINRA has expelled.

You can read the full investigative report here: Investigative Report: Worden Capital Management LLC’s Owners, Executives, and Brokers Have Concerning Red Flag Disclosures

FINRA Letter of Acceptance, Waiver, and Consent No. 2017056432606

FINRA and Mr. Fowler entered into a Letter of Acceptance, Waiver, and Consent on August 25, 2021, after FINRA alleged that from December 2014 through December 2018, while associated with Worden Capital Management LLC, Mr. Fowler churned and excessively traded four customers’ accounts. While exercising de facto control over these customers’ accounts, Mr. Fowler recommended excessive activity, and his customers routinely followed his recommendations. Specifically, FINRA alleged:

• Fowler’s trading in the four customers’ accounts was excessive and, with reckless disregard for the customers’ interests, conducted to maximize his commissions. Mr. Fowler employed an investment strategy that entailed short-term in-and-out trades, and Mr. Fowler used margin as a means to increase the buying power in his customers’ accounts.
• Fowler’s trading of the four accounts resulted in high turnover rates and cost-to-equity ratios.
• From December 2014 to May 2016, Mr. Fowler effected 1,419 trades in Customer 1’s account, resulting in an annualized turnover rate of 114.47 and an annualized cost-to-equity ratio of 77.75%. Mr. Fowler’s trading in Customer 1’s account generated total trading costs of $766,256, including $664,797 in commissions and $74,488 in margin interest, and caused $755,727 in realized losses.
• From September 2015 to January 2017, Mr. Fowler effected 53 trades in Customer 2’s account, resulting in an annualized turnover rate of 29.23 and an annualized cost-to-equity ratio of 71.19%. Mr. Fowler’s trading in Customer 2’s account generated total trading costs of $60,824, including $53,440 in commissions and $5,898 in margin interest, and caused $29,736 in realized losses.
• From June 2016 to March 2017, Mr. Fowler effected 65 trades in Customer 3’s account, resulting in a turnover rate of 27.25 (equivalent to an annualized turnover rate of 32.70) and a cost-to-equity ratio of 61.02% (equivalent to an annualized cost-to-equity ratio of 73.22%). Fowler’s trading in Customer 3’s account generated total trading costs of $41,609, including $35,365 in commissions and $4,473 in margin interest, and caused $118,137 in realized losses.
• From April 2015 to December 2018, Mr. Fowler effected 193 trades in Customer 4’s account, resulting in an annualized turnover rate of 16.68 and an annualized cost-to-equity ratio of 43.90%. Mr. Fowler’s trading in Customer 4’s account generated total trading costs of $271,930, including $195,754 in commissions and $70,836 in margin interest, and caused $192,178 in realized losses.
• Fowler’s trading in these customers’ accounts was excessive and unsuitable. Moreover, Mr. Fowler effected short-term in-and-out trading with reckless disregard for these four customers’ interests.
• Therefore, Mr. Fowler willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and violated FINRA Rules 2111, 2020 and 201

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

Churning is a more egregious variation of excessive trading. Churning refers to a situation where the broker executed an excessive number of trades and did so with the intent to defraud or reckless disregard for the customer’s interest.

There are two primary indicators used to evaluate whether a financial advisor excessively traded an account. The first is turnover rate, which represents the number of times a portfolio of investments is replaced for another portfolio of investments. Generally, a turnover rate of six suggests excessive trading, but a turnover rate below four can be excessive in some cases. According to FINRA, the accounts at issue had an annual turnover rate between 16.68 and 114.47.

The second indicator used to assess whether trading is excessive in an investment account is its cost-to-equity ratio. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break even. A cost-to-equity ratio of 20% generally indicates excessive trading has occurred. According to FINRA, the accounts at issue had cost-to-equity ratios between 43.90% and 77.75%.

Financial Advisor Donald Joseph Fowler (CRD No. 4989632)

Donald Joseph Fowler, who had only 13 years of experience in the securities industry, has a history of customer complaints and regulatory discipline.

Mr. Fowler has been affiliated with the following firms in New York:

• Worden Capital Management LLC, from November 2014 to August 2019.
• D. Nicholas & Associates, Inc., from January 2007 to November 2014.
• American Capital Partners, LLC, from September 2005 to February 2007

Mr. Fowler has been the subject of 14 customer complaints and securities arbitrations, several relating to allegations of excessive trading, churning, and unauthorized trading. Twelve of the disputes were resolved by paying a settlement to the harmed customer(s).

Excessive trading, churning, and unauthorized trading are unethical and illegal. They are all also violations of securities rules and regulations and can cause enormous harm to customers.

FINRA’s BrokerCheck tool can be used to obtain Mr. Fowler’s complete and updated disclosure reports.

Worden Capital Management – A Duty to Supervise

Financial institutions like Worden Capital Management must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

How to Recover Financial Losses or Obtain a Free Consultation

If you have suffered investment losses with Donald Fowler or Worden Capital Management or suspect other inappropriate activity occurred in your investment or retirement account, contact securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential review of your legal rights.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

Earlier this year, FINRA has barred Christopher Orlando from the securities industry for excessively trading his customers’ accounts. In December 2020, Worden Capital Management LLC was sanctioned more than $1.5 million by FINRA for, among other things, failing to establish, maintain and enforce a supervisory system, including written supervisory procedures, reasonably designed to achieve compliance with FINRA’s suitability rule as it pertains to excessive trading.

Mr. Bones, who was associated with Worden Capital Management LLC from November 2016 to December 2019, has a history of associations with firms that have been expelled by FINRA. He is currently registered with SW Financial in New York, NY.

If you have lost money with Worden Capital Management, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential consultation and review of your legal rights.

Worden Capital Management

According to a 2017 investigation by Reuters, Worden Capital Management hired more brokers with a history of significant disclosures than all but twenty-three other firms in the country. In 2021, Iorio Altamirano LLP set out to update that analysis.

The investigation revealed that fifty-four percent (54%) of Worden Capital Management’s brokers and supervisors have significant “red flag” public disclosures. Significant red flag disclosures include:

• regulatory sanctions,
• terminations of employment after allegations of misconduct,
• customer disputes that result in an award or settlement, and
• prior association with a firm that FINRA has expelled.

You can read the full investigative report here: Investigative Report: Worden Capital Management LLC’s Owners, Executives, and Brokers Have Concerning Red Flag Disclosures

FINRA Letter of Acceptance, Waiver, and Consent No. 2017056432604

FINRA and Mr. Bones entered into a Letter of Acceptance, Waiver, and Consent on August 10, 2021, after FINRA alleged that between November 2016 and December 2018, Mr. Bonds, as a manager of a Worden Capital Management branch office, failed to reasonably supervise a former broker, Mr. Orlando, who excessively traded ten customers accounts. The ten accounts incurred realized losses of $415,626 while paying $423,987 in commissions.

Mr. Bones was aware of multiple red flags of excessive trading, including high cost-to-equity rations and high turnover ratios in Mr. Orlando’s customer accounts. According to FINRA, Mr. Bones did not reasonably investigate those red flags or otherwise take meaningful action to stop the misconduct. As a result, Mr. Bons violated FINRA rules 3110 and 2010.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

Excessive trading is unethical and illegal. It is also a violation of securities rules and regulations and can cause enormous harm to customers.

How to Recover Financial Losses or Obtain a Free Consultation

If you or a loved one were a customer of Worden Capital Management LLC and either sustained financial losses or suspect that your broker did not have your best interest in mind when recommending investments or making account transactions, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential evaluation of your account.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

Customers of Aegis Capital, including customers that have been notified that they may be receiving restitution, should consult with a securities arbitration law firm. If you or a loved one were a customer of Aegis Capital, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of your legal rights.

Original Post:

Another Aegis Capital Corp. Broker (Douglas Szempruch) Suspended for Excessive Trading and Unauthorized Trading

The Financial Industry Regulatory Authority (“FINRA”) has suspended former Aegis Capital Corp. financial advisor Douglas Szempruch from the securities industry for 12 months. Mr. Szempruch consented to the suspension after FINRA alleged that between August 2014 and June 2017, while associated with Aegis Capital Corp., he (1) recommended and executed excessive and unsuitable trades in six customer accounts; (2) exercised discretionary authority without prior written authorization to effect trade in seven accounts; and (3) sent email communications containing misleading statements about an investment opportunity from his firm-approved email account. FINRA also ordered Mr. Szempruch to pay nearly $100,00 in restitution to customers. However, it is unclear whether Mr. Szempruch will be able to satisfy the restitution order.

Mr. Szempruch, who was associated with Aegis Capital Corp. (“Aegis Capital”) from June 2011 to June 2021, is the sixth Aegis broker, or former broker, to be disciplined by FINRA this year. Separately, in March 2021, the firm itself was sanctioned by FINRA and ordered to pay restitution to customers.

Customers of Mr. Szempruch or Aegis Capital, including customers that have been notified that they may be receiving restitution, should consult with a securities arbitration law firm. If you or a loved one were a customer of Douglas Szempruch or Aegis Capital, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of your legal rights.

Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as Aegis Capital Corp.

FINRA Letter of Acceptance, Waiver, and Consent No. 2017054317401

FINRA and Mr. Szempruch entered into a Letter of Acceptance, Waiver, and Consent No. 2017054317401 on July 9, 2021, after FINRA alleged that between August 2014 and June 2017, while associated with Aegis Capital Corp., he (1) recommended and executed excessive and unsuitable trades in six customer accounts; (2) exercised discretionary authority without prior written authorization to effect trade in seven accounts; and (3) sent email communications containing misleading statements about an investment opportunity from his firm-approved email account.

Specifically, with regard to excessive trading, FINRA alleged the following:

• Between August 2014 and September 2016, Mr. Szempruch engaged in quantitatively unsuitable trading in six customer accounts.
• Each customer had an investment objective of growth (five customers) or balanced growth (one customer) and a risk tolerance of moderate.
• Szempruch recommended the trading in the six customers’ accounts, and the customers routinely followed his recommendations.
• Additionally, Mr. Szempruch exercised discretion when executing trades in the six customers’ accounts. As a result, Mr. Szempruch exercised de facto control over the customers’ accounts.
• Szempruch’s trading in the six customers’ accounts was excessive and unsuitable given the customers’ investment profiles.

Accordingly, Mr. Szempruch violated FINRA Rules 2111 and 2010.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

There are two primary indicators used to evaluate whether a financial advisor excessively traded an account. The first is turnover rate, which represents the number of times a portfolio of investments is replaced for another portfolio of investments. Generally, a turnover rate of six suggests excessive trading, but a turnover rate below four can be excessive in some cases. According to FINRA, the accounts at issue had a turnover rate between 7.69 and 48.08.

The second indicator used to assess whether trading is excessive in an investment account is its cost-to-equity ratio. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break even. A cost-to-equity ratio of 20% generally indicates excessive trading has occurred. According to FINRA, the accounts at issue had cost-to-equity ratios between 34.3% and 109.14%.

Specifically, with regard to exercising discretion without authorization, FINRA alleged the following:

• Between August 2014 and October 2016, Mr. Szempruch exercised discretion to execute 578 trades in seven customers’ accounts without prior written authorization.
• Six of the seven customer accounts were also excessively traded by Mr. Szempruch.
• None of the seven customers provided written authorization for Mr. Szempruch to exercise discretion in their accounts, and Aegis Capital did not accept any of the seven accounts as discretionary accounts.

Accordingly, Mr. Szempruch violated NASD Rule 2510(b) and FINRA Rule 2010.

Unauthorized trading often occurs in non-discretionary accounts, where a customer retains discretion. In non-discretionary accounts, brokers must obtain a customer’s permission every time before placing a trade.

The practices of excessive trading customers’ accounts and placing unauthorized trade are unethical and illegal. Such conduct is also a violation of securities rules and regulations and can cause enormous harm to customers.

Finally, with regard to sending misleading statements by email, FINRA alleged:

• Between May 2017 and June 2017, Mr. Szempruch sent the same or similar email to 34 prospective customers, making misleading statements concerning investments in a certain company.
• Szempruch inaccurately represented that he: (1) had visited the company’s production facility: (2) had met with and was in direct communication with the company’s management; (3) was participating in weekly calls with the company’s management, and (4) had first-hand information about the company.
• Although Szempruch was invited to visit the company’s facilities, he did not attend and was instead briefed later by colleagues who did make the trip. He also did not directly communicate with the company’s management but instead closely followed the company. Although Mr. Szempruch understood that his Aegis colleagues (as opposed to Mr. Szempruch himself) had begun conducting periodic status conferences with the company’s management, the company’s management ceased participating in the conferences shortly after executing a March 2017 agreement with Aegis. Mr. Szempruch thus did not have direct or first-hand information about the company and misleadingly described his relationship and interactions with the company and its management.

Accordingly, Mr. Szempruch violated FINRA Rule 2210(d)(1)B) and 2010.

Aegis Capital Corp: 2021 Disciplinary Actions

Mr. Szempruch worked out of the firm’s branch office in Melville, New York, just like brokers Corey Johnson (suspended in March 2021 for engaging in discretionary trading without written authorization) and Steven Luftschein (barred from the securities industry in January 2021 for churning and excessively trading customers’ accounts).

In January 2021, FINRA also suspended former Aegis Capital Corp. broker Anthony (Tony) Tricarico from the securities industry for six months for excessively and unsuitably trading three clients’ accounts registered with Aegis.

In March 2021, FINRA also suspended former Aegis Capital Corp. broker Edmund Zack for excessive trading and using discretion without prior authorization.

A sixth broker, Kishan (Sean) Parikh, was suspended by FINRA earlier this month for both excessive and unauthorized trading.

Separately, the firm itself was sanctioned by FINRA and ordered to pay restitution to customers for a series of violations.

Unfortunately, this is not new. Aegis Capital Corp has a long history of allegations of wrongdoing.

In 2017, Aegis was included in a Reuters study that analyzed FINRA data and identified 48 firms whose brokers have been flagged for serious incidents. The Reuters’ analysis showed that Aegis Capital had 39% of its brokers with at least one of the most serious red flags, per the study, on their public disclosure reports.

The alleged conduct by the brokers that have been sanctioned this year, such as excessive trading, churning, and unauthorized trading, are common practices for “boiler room” broker-dealers.

Aegis Capital Corp. – A Duty to Supervise

Financial institutions like Aegis Capital Corp. must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as annuity switches, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

Financial Advisor Douglas Edward Szempruch (CRD No. 4159318)

Douglas Edward Szempruch has 21 years of experience in the securities industry and has been associated with six different firms, including three firms that have been expelled from the industry by FINRA.

His public disclosure report also discloses two customer disputes:

• Customer Dispute (February 2018): A customer alleged that Mr. Szempruch made unsuitable recommendations. The dispute was settled by Szempruch for $30,000. Szempruch stated that the dispute arose as a result of “an unfortunate miscommunication between [himself] and the client.”
• Customer Dispute (May 2004): A customer alleged that Mr. Szempruch made unauthorized trades. Szempruch denied wrongdoing but settled the matter with the customer.

How to Recover Financial Losses or Obtain a Free Consultation

If you have suffered investment losses with Douglas Szempruch or Aegis Capital Corp. or suspect other inappropriate activity occurred in your investment or retirement account, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential review of your legal rights.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

See Also: Iorio Altamirano LLP Files GPB Automotive Claim Against Aegis Capital Corp

Customers of Aegis Capital, including customers that have been notified that they may be receiving restitution, should consult with a securities arbitration law firm. If you or a loved one were a customer of Aegis Capital, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of your legal rights.

Original Post:

Update: Former Aegis Capital Corp Broker, Kishan (Sean) Parikh, SUSPENDED by FINRA for Excessive Trading and Unauthorized Trading

The Financial Industry Regulatory Authority’s Office of Hearing Officers has suspended stockbroker Kishan (Sean) Parikh for excessive trading and unauthorized trading. Mr. Parikh, formerly of Aegis Capital Corp. (“Aegis Capital”), was suspended for 18 months and fined $5,000 for excessive trading. He was also suspended for six months and fined $5,000 for unauthorized trades. The suspensions will be served consecutively. He was also ordered to pay restitution to two customers in the total amount of $40,919. However, it is unclear whether he will be able to satisfy the restation order and repay customers.

Customers of Mr. Parikh, including customers that have been notified that they may be receiving restitution, should consult with a securities arbitration law firm. If you or a loved one were a customer of Sean Parikh, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of your legal rights.

To read our previous blog post about Mr. Parikh, please click on the following link: Former Aegis Capital Corp Broker, Kishan (Sean) Parikh, Facing Disciplinary Charges by FINRA for Unsuitable Investment Recommendations and Excessive Trading.

Aegis Capital Corp.

In March 2021, Aegis Capital was fined $80,000 and censured by FINRA over multiple FINRA and MSRB Rules violations. The firm was also ordered to pay restitution of $43,912 to customers.

The firm has a long history of sanctions. In 2017, Aegis was included in a Reuters study that analyzed FINRA data and identified 48 firms whose brokers have been flagged for serious incidents. The Reuters’ analysis showed that Aegis Capital had 39% of its brokers with at least one of the most serious red flags, per the study, on their public disclosure.

Brokerage firms like Aegis Capital must properly supervise financial advisors and customer accounts. Brokerage firms must also establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to sufficiently supervise their financial advisors or the investment account activity, they may be liable for investment losses sustained by customers.

How to Recover Financial Losses or Obtain a Free Consultation

If you were a customer of Kishan Parikh or Aegis Capital and either sustained financial losses or suspect that Mr. Parkh did not have your best interest in mind when recommending investments or making account transactions, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential evaluation of your account.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

See also:
Another Day, Another Disciplinary Action Against Aegis Capital Corp.

Aegis Capital Fined and Censured by FINRA

Steven Robert Luftschein, Formerly with Aegis Capital Corp, Barred by FINRA

Financial Advisor Anthony Tricarico Suspended by FINRA for Excessive Trading While Employed at Aegis Capital Corp. – New York, NY

Iorio Altamirano LLP Files GPB Automotive Claim Against Aegis Capital Corp

As part of the settlement terms with FINRA, Mr. Orlando consented to a bar from associating with any FINRA member brokerage firm in any capacity.

If you have suffered financial losses investing with Christopher Orlando or Worden Capital Management LLC, or suspect that Mr. Orlando did not have your best interest in mind when recommending investments or making account transactions, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential review of your legal rights.

Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as Worden Capital Management.

Worden Capital Management

According to a 2017 investigation by Reuters, Worden Capital Management hired more brokers with a history of significant disclosures than all but twenty-three other firms in the country. In 2021, Iorio Altamirano LLP set out to update that analysis.

The investigation revealed that fifty-four percent (54%) of Worden Capital Management’s brokers and supervisors have significant “red flag” public disclosures. Significant red flag disclosures include:

• regulatory sanctions,
• terminations of employment after allegations of misconduct,
• customer disputes that result in an award or settlement, and
• prior association with a firm that FINRA has expelled.

You can read the full investigative report here: Investigative Report: Worden Capital Management LLC’s Owners, Executives, and Brokers Have Concerning Red Flag Disclosures

FINRA Letter of Acceptance, Waiver, and Consent No. 2017056432603

FINRA and Mr. Orlando entered into a Letter of Acceptance, Waiver, and Consent No. 2017056432603 on July 1, 2021, after FINRA alleged that between October 2015 and December 2018, Mr. Orlando excessively traded 13 accounts of 12 customers in violation of Rules 2111 and Rule 2010. Specifically, FINRA alleged:

• During the relevant period, Mr. Orlando engaged in quantitatively unsuitable trading in 13 customer accounts held by a total of 12 customers (one customer held two accounts).
• Orlando recommended high-frequency trading in the 13 customer accounts, and he often recommended the sale of one security and the simultaneous investment of the sale proceeds into a new security within short time periods.
• Orlando’s customers routinely followed his recommendations, and as a result, Mr. Orlando exercised de facto control over the customers’ accounts.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

There are two primary indicators used to evaluate whether a financial advisor excessively traded an account. The first is turnover rate, which represents the number of times a portfolio of investments is replaced for another portfolio of investments. Generally, a turnover rate of six suggests excessive trading, but a turnover rate below four can be excessive in some cases. According to FINRA, the accounts at issue had annualized turnover rates of between 6.15 and 56.39.

The second indicator used to assess whether trading is excessive in an investment account is its cost-to-equity ratio. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break even. A cost-to-equity ratio of 20% generally indicates excessive trading has occurred. According to FINRA, the accounts at issue had annualized cost-to-equity ratios of between 26.12% and 215.61%.

Excessive trading is an unethical and illegal practice. It is also a violation of securities rules and regulations and can cause enormous harm to customers.

Mr. Orlando’s trading of the 13 accounts resulted in high turnover rates and cost-to equity ratios, as well as significant losses, as set forth below:

• From November 2016 to September 2017, while associated with Worden Capital Management LLC, Mr. Orlando effected 313 trades in Customer 1’s account, resulting in a turnover rate of 23.04 (equivalent to an annualized turnover rate of 25.13) and a cost-to-equity ratio of 94.57% (equivalent to an annualized cost-to-equity ratio of 103.17%). Mr. Orlando’s trading in Customer 1’s account generated total trading costs of $236,735, including $205,557 in commissions and $22,601 in margin interest, and caused $118,490 in realized losses.
• From October 2017 to August 2018, while associated with Worden Capital Management LLC, Mr. Orlando effected 29 trades in Customer 2’s account, resulting in a turnover rate of 34.57 (equivalent to an annualized turnover rate of 37.72) and a cost-to-equity ratio of 164.65% (equivalent to an annualized cost-to-equity ratio of 179.62%). Mr. Orlando’s trading in Customer 2’s account generated total trading costs of $14,293, including $10,175 in commissions and $429 in margin interest, and caused $34,983 in realized losses.
• From February 2016 to November 2016, while associated with Legend Securities, Inc., Mr. Orlando effected 50 trades in Customer 3’s account, resulting in a turnover rate of 46.99 (equivalent to an annualized turnover rate of 56.39) and a cost-to-equity ratio of 179.67% (equivalent to an annualized cost-to-equity ratio of 215.61%). Orlando’s trading in Customer 3’s account generated total trading costs of $16,345, including $13,565 in commissions and $320 in margin interest, and caused $12,799 in realized losses.
• From January 2016 to November 2016, while associated with Legend Securities, Inc., Mr. Orlando effected 42 trades in Customer 4’s account, resulting in a turnover rate of 43.04 (equivalent to an annualized turnover rate of 46.95) and a cost-to-equity ratio of 170.59% (equivalent to an annualized cost-to-equity ratio of 186.10%). Orlando’s trading in Customer 4’s account generated total trading costs of $14,524, including $12,055 in commissions and $403 in margin interest, and caused $14,816 in realized losses.
• From October 2016 to November 2018, while associated with Legend Securities, Inc. and then Worden Capital Management LLC, Mr. Orlando effected 84 trades in Customer 5’s account, resulting in an annualized turnover rate of 27.46 and an annualized cost-to-equity ratio of 125.67%. Orlando’s trading in Customer 5’s account generated total trading costs of $53,118, including $45,767 in commissions and $3,590 in margin interest, and caused $34,216 in realized losses.
• From January 2017 through December 2018, while associated with Worden Capital Management LLC, Orlando effected 95 trades in Customer 6’s account, resulting in an annualized turnover rate of 30.10 and an annualized cost-to-equity ratio of 139.85%. Orlando’s trading in Customer 6’s account generated total trading costs of $64,647, including $57,052 in commissions, and caused $32,335 in realized losses.
• From April 2016 to December 2018, while associated with Legend Securities, Inc. and then Worden Capital Management LLC, Mr. Orlando effected 76 trades in Customer 7’s account, resulting in an annualized turnover rate of 6.15 and an annualized cost-to-equity ratio of 26.12%. Mr. Orlando’s trading in Customer 7’s account generated total trading costs of $35,954, including $30,576 in commissions, and caused $47,377 in realized losses.
• From February 2016 to February 2017, while associated with Legend Securities, Inc. and then Worden Capital Management LLC, Mr. Orlando effected 76 trades in Customer 8’s account, resulting in an annualized turnover rate of 55.80 and an annualized cost-to-equity ratio of 202.11%. Mr. Orlando’s trading in Customer 8’s account generated total trading costs of $34,935, including $30,200 in commissions and $990 in margin interest, and caused $16,370 in realized losses.
• From July 2017 to February 2018, while associated with Worden Capital Management LLC, Mr. Orlando effected 27 trades in Customer 9’s account, resulting in a turnover rate of 53.22 (equivalent to an annualized turnover rate of 79.83) and a cost-to-equity ratio of 249.80% (equivalent to an annualized cost-to-equity ratio of 374.70%). Orlando’s trading in Customer 9’s account generated total trading costs of $13,390, including $10,330 in commissions and $225 in margin interest, and caused $15,777 in realized losses.
• From September 2016 through January 2018, while associated with Legend Securities, Inc. and then Worden Capital Management LLC, Mr. Orlando effected 61 trades in Customer 10’s account, resulting in an annualized turnover rate of 35.32 and an annualized cost-to-equity ratio of 165.57%. Mr. Orlando’s trading in Customer 10’s account generated total trading costs of $30,641, including $26,866 in commissions and $1,304 in margin interest, and caused $28,018 in realized losses.
• From October 2015 to February 2018, while associated with Legend Securities, Inc. and then Worden Capital Management LLC, Mr. Orlando effected 66 trades in Customer 11’s Account A, resulting in an annualized turnover rate of 21.82 and an annualized cost-to-equity ratio of 105.72%. Mr. Orlando’s trading in Customer 11’s Account A generated total trading costs of $20,344, including $16,978 in commissions and $654 in margin interest, and caused $15,378 in realized losses.
• From August 2016 to December 2017, while associated with Legend Securities, Inc. and then Worden Capital Management LLC, Mr. Orlando effected 63 trades in Customer 11’s Account B, resulting in an annualized turnover rate of 9.89 and an annualized cost-to-equity ratio of 43.62%. Mr. Orlando’s trading in Customer 11’s Account B generated total trading costs of $29,523, including $26,381 in commissions, and caused $49,708 in realized losses.
• From January 2017 to December 2018, while associated with Worden Capital Management LLC, Mr. Orlando effected 41 trades in Customer 12’s account, resulting in an annualized turnover rate of 18.63 and an annualized cost-to-equity ratio of 85.54%. Mr. Orlando’s trading in Customer 12’s account generated total trading costs of $16,767, including $11,370 in commissions and $964 in margin interest, and caused $63,413 in realized losses.

Mr. Orlando’s trading in these customers’ accounts was excessive and unsuitable given the customers’ investment profiles. As a result of Mr. Orlando’s excessive trading, the customers suffered collectively realized losses of $483,680 while paying total trading costs of $581,216, including commissions of $496,872.

Financial Advisor Christopher George Orlando (CRD No. 4136262)

Martin Christopher Orlando had 18 years of experience in the securities industry and has been associated with ten different broker-dealers, including two firms that FINRA has expelled:

• Spartan Capital Securities, LLC, from July 2020 to May 2021.
• Bernard Financial Services, Inc., from December 2019 to January 2020.
• Worden Capital Management LLC, from November 2016 to December 2019.
• Legend Securities, Inc. (expelled by FINRA), from July 2015 to November 2016.
• National Securities Corporation, from December 2013 to July 2015.
• Joseph Gunnar & Co. LLC, from June 2012 to December 2013.
• Brookstone Securities, Inc. (expelled by FINRA), from October 2009 to June 2012.
• P. Turner & Company, L.L.C., from August 2006 to November 2009.
• Gunnallen Financial, Inc., from August 2005 to August 2006.
• Joseph Stevens & Company, Inc., from December 2002 to August 2005.

FINRA’s BrokerCheck tool can be used to obtain Mr. Orlando’s complete and updated disclosure reports.

Worden Capital Management LLC – A Duty to Supervise

Financial institutions like Worden Capital Management LLC must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

How to Recover Financial Losses or Obtain a Free Consultation

If you have suffered investment losses with Christopher George Orlando or Worden Capital Management LLC or suspect other inappropriate activity occurred in your investment or retirement account, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential review of your legal rights.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

FINRA previously suspended the broker in 2019 after FINRA alleged that he exercised discretion in customers’ accounts without prior authorization from the customers and without seeking or obtaining approval from his firm.

If you have suffered financial losses investing with Joseph Stone Capital L.L.C., or suspect that Joseph Stone Capital L.L.C. did not have your best interest in mind when recommending investments or making account transactions, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential review of your legal rights.

Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as Joseph Stone Capital.

Joseph Stone Capital L.L.C.

According to a 2017 investigation by Reuters, out of all of the brokerage firms in the country, Joseph Stone Capital hired the second most brokers with a history of significant disclosures. In 2021, Iorio Altamirano LLP set out to update that analysis.

The investigation revealed that seventy-six percent (76%) of Joseph Stone Capital’s brokers and supervisors have significant red flag public disclosures. Significant red flag disclosures include:

• regulatory sanctions,
• terminations of employment after allegations of misconduct,
• customer disputes that result in an award or settlement, and
• prior association with a firm that FINRA has expelled.

You can read the full investigative report here: Investigative Report: Iorio Altamirano LLP Investigation into Joseph Stone Capital L.L.C. Reveals Troubling Pasts for Owners, Executives, and Brokers

The suspended broker was one of the brokers who had serious incidents reported on his BrokerCheck report.

FINRA Letter of Acceptance, Waiver, and Consent No. 2020066888001

FINRA and the Joseph Stone Capital broker entered into a Letter of Acceptance, Waiver, and Consent No. 2020066888001 on June 29, 2021, after FINRA alleged that between May 2018 and March 2019, the financial advisor excessively and unsuitably traded a customer’s account in violation of FINRA Rules 2111 and 2010. Specifically, FINRA alleged:

• Between May 2018 and March 2019, while he was registered through Joseph Stone Capital, the broker engaged in excessive and unsuitable trading in a customer’s account.
• During the relevant period, the broker recommended that the customer place 33 trades in his account, and the customer accepted the broker’s recommendations.
• Although the customer’s account had average monthly equity of approximately $33,600, the broker recommended trades with a total principal value of more than $588,000, which resulted in an annualized turnover rate of more than 15.
• Collectively, the trades that the broker recommended caused the customer to pay $7,653.21 in commissions and other trading costs, which resulted in an annualized cost-to-equity ratio in excess of 20 percent—meaning that the customer’s account would have had to grow by more than 20 percent annually just to break even.
• The broker’s recommended securities transactions in the customer’s account were excessive and unsuitable. Therefore, the broker violated FINRA Rules 2111 and 2010.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

There are two primary indicators used to evaluate whether a financial advisor excessively traded an account. The first is turnover rate, which represents the number of times a portfolio of investments is replaced for another portfolio of investments. Generally, a turnover rate of six suggests excessive trading, but a turnover rate below four can be excessive in some cases. According to FINRA, the account at issue had a turnover rate of 15.

The second indicator used to assess whether trading is excessive in an investment account is its cost-to-equity ratio. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break even. A cost-to-equity ratio of 20% generally indicates excessive trading has occurred. According to FINRA, the account at issue had a cost-to-equity ratio of 20%.

Excessive trading is an unethical and illegal practice. It is also a violation of securities rules and regulations and can cause enormous harm to customers.

Joseph Stone Capital – A Duty to Supervise

Financial institutions like Joseph Stone Capital must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

How to Recover Financial Losses or Obtain a Free Consultation

If you have suffered investment losses with Joseph Stone Capital or suspect other inappropriate activity occurred in your investment or retirement account, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential review of your legal rights.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.