FSC Securities Corp. has been assessed $1.28 million by a FINRA arbitration panel for losses sustained by several investors who were swindled by con man Aubrey Lee Price, who was featured as one of the rogues on the famous “American Greed” segments. Price, who faked his death in 2012 to escape investigation, had sold his bogus investments through FSC Securities Corp and a number of FSC unnamed brokers. According to attorneys involved in the case, Price worked with two former FSC brokers to induce FSC customers to invest in the Ponzi scheme. Price had been an FSC broker between 2006 and 2008 but left the firm in 2009.
Prior to working at FSC, Price had worked at Banc of America Investment Services and Citigroup Global Markets. While at FSC, he was based in the firm’s Atlanta branch. In 2014 a federal judge sentenced Price to 30 years in prison for bank fraud.
The FSC customers who brought the FINRA arbitration alleged, and proved, that FSC did a poor job of supervising its brokers and the firm essentially was “asleep at the wheel”. They argued that FSC should have and could have discovered the Ponzi scheme and stopped it but was negligent in failing to do so.
In 2012, Price faked his suicide on a boat in Key West, Florida. He eventually returned to Florida, where he sold and grew marijuana and sometimes worked as a bodyguard for prostitutes, according to the FBI. He was arrested on New Year’s Eve in 2013 following a routine traffic stop in Georgia.
Shustak Reynolds & Partners, P.C. has extensive expertise and experience in the areas of securities, financial services and business law. For more information contact Erwin J. Shustak, Esq,, at 619.696.9500 or via email at [email protected].
Citigroup, Inc. has agreed to pay $180 million to settle charges brought by the SEC which alleged the firm improperly marketed and sold through private bankers and Smith Barney brokers prior to the financial crisis. The SEC alleged that the two funds- The Falcon Strategies Fund and the ASTA/MAT Funds, were low risk, safe bond alternatives, despite the fact the actual offering materials stated they specifically should not be used as bond substitutes. From 2002 to 2007, Citigroup’s Smith Barney raised almost $3 billion from 4,000 investors, which resulted in billions of dollars in losses when the funds collapsed during the financial melt-down in 2008.
The Smith Barney unit was acquired by Morgan Stanley Wealth Management in 2009 as part of a joint venture. The SEC placed a significant amount of blame and liability on Citigroup’s Alternative Investment Unit, which acted as the manger for both funds, and was responsible for almost all of the promotional activities and sales pitches to investors. The SEC alleged the firm disseminate incorrect and misleading information about the funds without sufficient review or oversight to ensure information given to investors was accurate and not misleading.
Shares in the funds were marketed to high net worth, conservative investors looking for safe bond alternative investments and were sold in $500,000.00 blocks, marketed and sold by some of the top brokers at Smith Barney.
Shustak Reynolds & Partners, P.C. has extensive expertise and experience in the areas of securities, financial services and business law. For more information contact Erwin J. Shustak, Esq,, at 619.696.9500 or via email at [email protected].
Edward Jones, which has over 14,000 brokers and more than 7 million customers, agreed to pay $20 million to settle SEC charges that it overcharged its retail clients on new municipal bonds sales.
According to the SEC charges, Edward Jones overcharged clients more than $4.6 million on new municipal bond issues by charging clients a higher mark-up than permitted by securities laws. Instead of selling the bonds to its customers at prices negotiated with the issuers of those bonds, the firm, instead, bought the bonds for its own inventory and then illegally marked-up the bonds and sold them at inflated prices to its customers. The SEC charged Edward Jones with being “at least negligent” in regard to these overcharges.
The firm neither admitted nor denied the allegations, a standard form of settling SEC charges, but did agree to pay at $20 million fine to settle the alleged charges. The $20 million includes over $5 million of disgorgement for clients who were overcharged, including accrued interest.
“Edward Jones undermined the integrity of the bond underwriting process by overcharging retail customers by at least $4.6 million and by misleading municipal issuers,” Andrew J. Ceresney, director of the SEC’s Enforcement Division, said in a statement. “This enforcement action, which is the first of its kind, reflects our commitment to addressing abuses in all areas of the municipal bond market.”
The SEC said the firm did not have a supervisory system in place to make sure the markups it charged customers on certain transactions were reasonable.
Shustak Reynolds & Partners, P.C. has extensive expertise and experience in the areas of securities, financial services and business law. For more information contact Erwin J. Shustak, Esq, Managing Partner, at 619.696.9500 or via email at [email protected].
On Monday, Texas Attorney General Ken Paxton surrendered at the Collin County Jail and was charged with two first-degree felonies for securities fraud and a third-degree felony for failing to register with the state to sell securities. Paxton joins several other high-ranking Texas politicians who were indicated while in office, including Tom DeLay (former House majority leader) and former Governor and current presidential candidate, Rick Perry.
Paxton’s third-degree felony charge for acting as an investment adviser representative without being registered with the state securities board stems from Paxton referring clients to investment adviser Fritz Mowery, Paxton’s friend and campaign donor, without telling them Paxton would be getting sizeable commissions for the referrals. During his campaign, Paxton admitted to soliciting clients without the proper license and paid a $1,000 fine to the Texas State Securities Board. Paxton then referred to his wrongdoing as an “administrative oversight.”
This admission may now come back to haunt Paxton as the potential damages have been enhanced from a civil fine to a criminal prosecution that carries a maximum sentence of 10 years in prison. The irony is the offense Paxton was charged with was added to the Texas Securities Act in 2003–Paxton’s first session in the Texas House. In recent years, FINRA, the SEC and other state securities regulators have been cracking down on the practice of sharing commissions with unlicensed individuals.
The securities fraud indictments are related to Servergy Inc., a Dallas-area tech firm that has been under investigation by the Securities and Exchange Commission for allegedly making misleading statements about the company to induce investors to buy Servergy stock. Paxton’s two first-degree felonies allege that he defrauded two individuals of more than $100,000. The alleged fraudulent conduct occurred when Paxton was serving in the state Legislature. State filings show Paxton owns at least 10,000 shares of Servergy.
The first-degree securities fraud indictments carry a potential penalty of up to 99 years in prison. If convicted, Paxton would lose his law license and would have to step down as Attorney General. Paxton will continue to act as Texas Attorney General while defending the charges. He is represented by Joe Kendall, a former Federal District Trial Court judge.
Shustak Reynolds & Partners, P.C.’s FINRA and SEC defense attorneys routinely represent individuals and corporations in SEC, FINRA and other securities regulatory proceedings. Contact us today for a confidential analysis of your situation.
