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The Blotter Report: Legal Legwork Pays Off

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Federal and state prosecutors, as well as several New York law firms, have put the screws to advisors this week. Back in the U.S., a former stockbroker who fled prosecution for a pump-and-dump scheme was hit with a 7-year jail sentence this week, while FINRA and Massachusetts levied multi-million fines against some of the biggest independent broker-dealers. 

 

No More Running 

After spending a few years in Costa Rica drinking up the sunshine and evading U.S. authorities, a former Oklahoma stockbroker faced the music last week as a federal judge sentenced him to seven years in prison.

Prosecutors claimed Joshua Wayne Lankford—a former rep with the FINRA-expelled firm Barron Moore—participated in a $43 million pump-and-dump scheme that involved more than 17,000 victims, according to an unsealed 2009 complaint. But before the case headed to trial, Lankford fled to Costa Rica, living there until extradited to the U.S. in May 2012. 

Once back in the U.S., he pled guilty in December to one count of money laundering. In addition to the seven-year sentence, the judge ordered Lankford to pay $250,000 of his proceeds from the scheme that he admitted to laundering.

 

Lawyer Plays Detective

A Raymond James advisor is facing an investigation launched by a New York law firm last week over past stock recommendations. Firm principle Jake Zamansky says he’s investigating John Pritchard, his current brokerage firm Raymond and his former firm Oppenheimer for potential sales practices violations, according to a statement released last week.

The probe started after Pritchard’s ADV reflected a customer complaint regarding the advisor’s past stock recommendations for Swisher Hygiene and Solazyme. While no formal complaint has been filed, Zamansky claims that the two green-technology" companies represent highly speculative investments that are not suitable for investors with a low-risk tolerance. 

 

Email Errors Cost LPL $9 Million

FINRA hit LPL Financial with a multi-million fine on Tuesday, claiming the industry’s largest independent broker-dealer failed to properly retain email communications and attempted to mislead investigators regarding the extent of the firm’s knowledge.

As part of the settlement, LPL neither admitted, nor denied the charges, but agreed to pay a $7.5 million fine and set up a $1.5 million fund to compensate customers impacted by the firm’s email system failures.

LPL is also facing multiple FINRA arbitration complaints regarding non-traded REITs investment recommendations made by its advisors, according to a New York City law firm handling the cases.

The Gray Firm alleged in a statement Monday that in some cases, LPL advisors lacked a reasonable basis to recommend certain non-traded REITs, including Inland Western REIT, now Retail Properties of America.  

 

Ongoing REITs Repercussions

Massachusetts previously fined LPL for its non-traded REITs, but the state wasn’t done. Secretary of the Commonwealth William Galvin announced Thursday that five additional broker-dealers agreed to collectively pay at least $9.6 million to settle state allegations of improper sales.

Galvin claimed investor complaints that led to investigations targeting Ameriprise Financial Services, Commonwealth Financial Network, Royal Alliance Associates, Securities America and Lincoln Financial Advisors in which the state regulator found "a pattern of impropriety in the sales of these popular, but risky investments.”

Discuss this Blog Entry 1

on Nov 15, 2013

In today’s economic and political climate, it’s not really getting any easier to pay for college. A couple recent news stories, however, offer evidence that there is hope for students and prospective students who are willing to dig deep and exercise some diligence in their search for college funding. Large companies cleaning out virtual storage rooms filled with dusty patents are finding new ways to monetize that old intellectual property and smaller companies are quickly sprouting to help them.

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Compliance, regulatory and legal issues, with a fair amount of cops and robbers for fun.

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