5 Noteworthy Investment Fraud Charges of 2019
Below is a roundup of some of the most noteworthy enforcement actions the SEC and FINRA brought in 2019. The SEC brought 862 enforcement actions in Fiscal Year 2019, according to a report by the SEC’s Division of Enforcement. FINRA hasn’t released its 2019 data yet.
If you have been a victim to misconduct similar to any of the actions described below, please contact the Business Trial Group at Morgan & Morgan today at 800-816-1031.
Our attorneys regularly fight against brokerage firms, investment advisory firms, and banks to help investors recover their financial losses. We have helped investors recover tens of millions of dollars of investment losses.
Merrill Lynch & Raymond James Firms to Pay $12M for Supervisory Failures Involving 529 Plan Share Classes
In November, FINRA ordered Merrill Lynch, Pierce, Fenner & Smith Incorporated, Raymond James & Associates, Inc., and Raymond James Financial Services, Inc. to pay approximately $12 million total in restitution for charging excessive fees on client investments in 529 savings plans. 529 plans, which are tax-advantaged municipal securities, are designed to encourage saving for the future educational expenses of a designated beneficiary. According to FINRA, Merrill Lynch and Raymond James failed to reasonably supervise 529 plan recommendations.
Two BMO Advisors to Pay $37M For Failing to Disclose Conflicts of Interest
According to the SEC, BMO Harris Financial Advisors Inc. (BMO Harris) and BMO Asset Management Corp. (BMO Asset Mgmt) preferred mutual funds managed by BMO Asset Mgmt when they were selecting investments in their retail investment advisory program, known as the Managed Asset Allocation Program (MAAP).
The two advisors invested approximately 50% of MAAP client assets in the BMO Asset Mgmt proprietary funds. This practice resulted in payment of additional management fees to BMO Asset Mgmt. But the SEC’s order found that neither BMO adviser disclosed this practice or the conflicts of interest to clients.
Blockchain Company to Pay $24 Million Penalty for Unregistered ICO
In September, the SEC ordered blockchain technology company Block.one to pay a $24 million penalty for conducting an unregistered initial coin offering (ICO) of digital tokens that raised the equivalent of several billion dollars over one year.
According to the SEC’s order, Block.one conducted an ICO between June 2017 and June 2018. However, Block.one did not register its ICO as a securities offering pursuant to the federal securities laws, nor did it qualify for or seek an exemption from the registration requirements.
Ami Forte and Charles Lawrence Barred for Roles in Churning Accounts of Elderly Client with Dementia
In October, FINRA barred Ami Forte and Charles Lawrence of Florida for their respective roles in churning accounts belonging to a 79-year-old customer who suffered from severe cognitive impairment.
Forte first met the customer in the late 1990s, at which time the two developed a romantic and business relationship. Forte, who maintained near daily contact with the client, used her position of trust and confidence to exploit the client and generate excessive commissions.
According to FINRA, the Forte Group – which Forte established in 2001 and Lawrence joined at its inception – effected more than 2,800 trades in the customer’s accounts from September 2011 through June 2012, generating approximately $9 million in commissions. FINRA alleged that over half of these transactions involved short-term trading in long-maturity bonds, which usually are intended for customers with long-term investment horizons.
Court Ordered $1 Billion Judgment Against Operators of Woodbridge Ponzi Scheme
At the start of this year, a federal court in Florida ordered Woodbridge Group of Companies LLC and its former owner to pay $1 billion in penalties and disgorgement for operating a Ponzi scheme that targeted retail investors.
In December 2017, the SEC filed an emergency action charging the company and other defendants with operating a massive $1.2 billion Ponzi scheme that allegedly defrauded 8,400 retail investors nationwide, many of them seniors who had invested retirement funds. The SEC’s complaint alleged that former owner and CEO Robert H. Shapiro made Ponzi payments to investors and used a web of shell companies to conceal the scheme.