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Blue Sky Precious Metals, Inc. is a Florida corporation allegedly involved in the purchase and sale of precious metals for customer accounts. According to the records of the Florida Department of State, Division of Corporations, Blue Sky Metals, Inc. was administratively dissolved on September 24, 2010. Recently, we have been contacted by investors concerning their investments though this entity, indicating that after they sent their money to the firm, they allegedly never received any monthly statements or any other documents from the firm. Allegedly, they were recently advised that the firm suffered a margin call and all investor funds were lost.Securities America — Medical Capital Holdings, Inc. (MedCap)
Securities America Inc. recently dealt a costly legal blow when a FINRA arbitration panel awarded almost $1.2 million in damages and legal fees to a client who sued the firm and a broker over the sale notes issued by Medical Capital Holdings, Inc., through private placements that regulators such as the Securities and Exchange Commission and the Commonwealth of Massachusetts Securities Division have alleged were fraudulent.
The award, from three Financial Industry Regulatory Authority Inc. arbitrators, included compensatory damages of $734,118, punitive damages of $250,000 and attorney and expert witness fees totaling $171,348. The claimant also sued Randall Ray Talbott, a Newport Beach, California-based registered representative, who is jointly liable under the award, jointly and severally, with Securities America, except for the award of punitive damages, which was filed with FINRA December 31. 2010. It is important to remember that punitive damages are uncommon in FINRA arbitration awards.
According to his profile on FINRA’s BrokerCheck system, Mr. Talbott has 11 other pending customer disputes involving the sale of Medical Capital notes, but he is not named as a defendant in many of the arbitration cases.
This arbitration award appears to be the first involving Securities America’s sale of private placements issued by Medical Capital, which the Securities and Exchange Commission charged with fraud in 2009. Dozens of independent broker-dealers sold private Medical Capital notes, which raised $2.2 billion from 2003 to 2008. Securities America was by far the biggest seller of the Medical Capital product, with 400 brokers selling almost $700 million of notes.
As is common in FINRA arbitration awards, the decision gives no reasoning for the award. However, the arbitrators did offer comments about their decision, a point of great interest to other clients suing Securities America. “The panel’s decision is based on what was actually known by Randall Talbott and Securities America Inc. at the relevant times and is not based on what additional information could or could not have been discovered by respondents regarding the subject investments or the company offering the investments,” according to the award. “The decision is based on what was actually known by Randall Talbott and Securities America Inc. at the relevant times.”J.P. Morgan Chase
J.P. Morgan Chase agreed to pay Florida $25 million to settle allegations it sold unregistered securities to a state-run municipal money market fund that suffered a run on deposits because it held defaulted debt.
Participants in Florida’s $6.9 billion Local Government Investment Pool, now known as Florida Prime, will get $23 million of the settlement to reimburse them for losses in 2007 on asset-backed securities, some of which were sold by J.P. Morgan to the fund’s overseer, the $147 billion Florida State Board of Administration, said Attorney General Bill McCollum in a statement on Wednesday. The rest will pay fines and related costs, he said.
Mr. McCollum said the bank’s J.P. Morgan Securities unit had violated Florida law by selling unregistered bonds to the fund.
Assets in what was once the largest U.S. manager of municipal cash plunged from $27 billion in November 2007 after it said that it held defaulted mortgage-backed bonds. A rush by municipalities to pull out money forced the fund to freeze withdrawals, leaving some communities without cash to pay workers and other costs.
Florida Prime was reorganized to segregate the defaulted securities under a plan from BlackRock. The best-quality securities were set aside as Fund A and resumed paying withdrawals.
About $2 billion of illiquid and defaulted debt was put into Fund B and closed to transactions. As Fund B securities paid interest and matured, proceeds were deposited into Fund A. About $1.65 billion has been distributed from Fund B, or about 82 percent of the original principal, the state board said in a statement about the proceeds of the J.P. Morgan agreement.Pension Financial Services
A court-appointed receiver in a Utah Ponzi case has sued Pension Financial Services, Inc., claiming that the firm was complicit in perpetuating the scheme for a clearing client.
The receiver alleges in a suit filed last Friday in a Utah state court, that Pension ignored its own procedures in allowing Ascendus Capital Management LLC (Ascendus) to steal client assets by using forged letters of authorization.
The receiver represents the estate of Ascendus, whose manager, Roger Taylor, and an associate, Richard Smith, allegedly ran the scheme from early 2003 to January 2006. Both men have been charged criminally in the case. The receiver has indicated that about $4 million allegedly was stolen from investors.
The receiver has indicated that he and his staff have found documents that demonstrate Pension’s liability for things that were clearly in the realm of Pension’s control that Pension should not have been doing.
Signatures were copied onto forged documents that were faxed to Pension, the suit claims, even though Pension’s policy forbids faxed, non-notarized transfer forms.
As a result of a 2001 settlement with the state of Nevada, Pension requires original, notarized letters of authorization before transferring assets.
The lawsuit states that notices to customers about asset transfers failed to note that assets were going to third parties.
Pension, the receiver has indicated, should not have been making payments on forged wire transfer requests [or] sending payments to investment advisers from customer accounts.
Pension also knew fees paid to Ascendus were performance-based but that the defrauded investors did not financially qualify for performance-based fees, the lawsuit alleges.
The suit asks for unspecified damages.DBSI, Inc.
It has been recently announced that the bankruptcy trustee for DBSI, Inc. is looking to “claw back” nearly $50M from 96 smaller firms that sold real estate investments known as tenant-in-common exchanges (TICs).
Dubbed a TIC, the vehicle is a form of real estate ownership in which two or more parties have a fractional interest in the property. TICs gained in popularity after a favorable Internal Revenue Service ruling in 2002 that allowed investors to defer capital gains on real estate transactions involving the exchanging of properties.
But one of the decade’s biggest creators and distributors of TICs, DBSI Inc., defaulted on its payments to investors in 2008. The firm filed for bankruptcy protection under Chapter 11 in November of that year.
Now, the trustee for the DBSI bankruptcy, James Zazzali, is looking at the 96 independent broker-dealers that sold the failed product. In a lawsuit from last month, the trustee is seeking to claw back about $49 million from 96 broker-dealers. The suit filed by Mr. Zazzali, a former Chief Justice of the Supreme Court of New Jersey, claims that the TIC from DBSI was actually a $600 million Ponzi scheme.
“At some point in or after 2004, the DBSI enterprise took on the characteristics of Ponzi scheme, in which the guaranteed returns of the old investors could only be satisfied by the flow of funds from the new investors,” the complaint alleges.
According to the lawsuit, the five biggest earners of commissions for selling DBSI, in order, are: Berthel Fisher & Co. Financial Services Inc.; QA3 Financial Corp.; DeWaay Financial Network LLC; The Private Consulting Group, which closed last year; and Questar Capital Corp.
Indeed, many firms named in the suits already face far-ranging legal problems from the fallout of other private-investment deals that tanked. Twenty-two are out of business, while one, Brecek & Young Advisors Inc., merged into Securities America Corp. last year.
The trustee’s lawsuit against the broker-dealers, which was filed Nov. 4 in federal bankruptcy court in Delaware, seeks to recover from the B-Ds “all fraudulent and preferential transfers of properties” in the matter, in this case the commissions generated by the broker-dealers.
Unlike other private investments that imploded before and after the broad market collapse, DBSI has not been charged with fraud by the Securities and Exchange Commission. Two other notable series of private placements, Medical Capital Holdings Inc. and Provident Royalties LLC, were hit with fraud charges by the regulator in July 2009. The receiver for Provident Royalties sued more than 40 broker-dealers this summer seeking a claw-back in principal and commissions from broker-dealers that sold the product.
|Broker-dealers that sold tenant in common exchanges from the now-bankrupt DBSI||Commissions generated|
|Berthel Fisher & Co.||$5,581,000|
|QA3 Financial Corp.||$5,455,000|
|DeWaay Financial Network Inc.||$3,632,000|
|The Private Consulting Group (Closed March 2009)||$3,580,000|
|Questar Capital Corp.||$2,128,000|
|AFA Financial Group Inc. (Closed in April 2010)||$2,000,000|
|G.A. Repple & Co.||$1,525,000|
|Equity Services Inc.||$1,348,000|
|KMS Financial Services Inc.||$1,341,000|
|Alternative Wealth Strategies Inc.||$1,120,000|
|First Montauk Securities Corp. (Closed December 2008)||$1,113,000|
|J.P. Turner Co. LLC||$898,000|
|CapWest Securities Inc.||$774,000|
|Direct Capital Securities Inc. (Closed February 2010)||$734,000|
|LaSalle St. Securities||$685,000|
|GunnAllen Financial Inc. (Shut down March 2010)||$661,000|
|Steven L. Falk & Associates||$581,000|
|American Independent Securities Group||$524,000|
|Capital Financial Services||$481,000|
|National Securities Corp.||$454,000|
|Calton & Associates||$435,000|
|Intermountain Financial Services Inc.||$411,000|
|Advisory Group Equity Services Ltd.||$410,000|
|Brecek & Young Advisors Inc. (Merged into Securities America Corp. in 2009)||$383,000|
|Milestone Financial Services Inc.(Closed in October 2008)||$373,000|
|Capital Analysts Inc.||$339,000|
|Beneficial Investor Services (firm’s status as broker-dealer unclear)||$322,000|
|Fox & Company Investments Inc. (Closed December 2008)||$317,000|
|Private Asset Group Inc. (Closed in April 2010)||$316,000|
|Alliance Affiliated Equity Corp.||$304,000|
|Sigma Financial Corp.||$279,000|
|OMNI Brokerage Inc.||$271,000|
|K-One Investment Co. Inc. (Closed June 2009)||$268,000|
|Empire Securities Corp. (Closed April 2010)||$265,000|
|Burch and Company||$260,000|
|Regent Capital Group Inc.||$252,000|
|J.W. Cole Financial Inc.||$244,000|
|Investment Security Corp.||$236,000|
|Professional Asset Management Inc.||$235,000|
|TransAm Securities Inc.||$233,000|
|American Wealth Management Inc.||$225,000|
|MCL Financial Group Inc.||$210,000|
|Girard Securities Inc.||$204,000|
|Philip Oleson (Registered rep affiliated with Independent Financial Group LLC)||$195,000|
|Inlet Securities LLC||$191,000|
|Cullum & Burks Securities Inc. (Shut down in May 2010)||$189,000|
|Sammons Securities Co. LLC||$186,000|
|Empire Financial Group Inc. (Closed November 2008)||$185,000|
|Midpoint Financial Services Inc. (Closed December 2008)||$168,000|
|Cambridge Investment Research Inc.||$149,000|
|Regal Securities Inc.||$135,000|
|Crews & Associates Inc.||$130,000|
|Finance 500 Inc.||$127,000|
|Ogilvie Security Advisors Corp.||$123,000|
|NEXT Financial Group Inc.||$121,000|
|Portfolio Advisors Alliance Inc.||$120,000|
|American Portfolios Financial Services Inc.||$116,000|
|Partnervest Securities Inc.||$114,000|
|Partnervest Financial Group LLC (holding company for Partnervest Securities)||$114,000|
|Great Northern Financial Securities Inc. (Closed in March 2006)||$109,000|
|Harrison Douglas Inc.||$108,000|
|The Street Inc.||$105,000|
|Sterling Enterprises Group Inc.||$88,000|
|Nations Financial Group Inc.||$88,000|
|Intervest International Equities Corp.||$79,000|
|Mid Atlantic Capital Corp.||$75,000|
|Resource Horizons Group LLC||$66,000|
|Basic Investors Inc. (Closed in October 2008)||64,000|
|Costa Financial Securities Inc. (Shut down February 2008)||$62,000|
|Sanders Morris Harris Inc.||$61,000|
|MICG Investment Management LLC (Shut down May 2010)||$59,000|
|Merrimac Corporate Securities Inc.||$58,000|
|Dawson James Securities Inc.||$57,000|
|RP Capital LLC||$51,000|
|Brewer Financial Services LLC||$48,000|
|NFP Securities Inc.||$45,000|
|Centaurus Financial Inc.||$44,000|
|Courtlandt Financial Group Inc., securities offered through Courtlandt Securities Corp.||$39,000|
|Independent Financial Group LLC||$36,000|
|Capital Management Securities Inc.||$35,000|
|Morgan Peabody Inc. (Closed October 2008)||$33,000|
|CFD Investments Inc.||$33,000|
|Money Concepts Capital Corp.||$29,000|
|Notman Financial Group (affiliated with Berthel Fisher)||$20,000|
|Capital Quest Securities Inc.||$20,000|
|Charter Pacific Securities LLC (Closed October 2008)||$19,000|
|NewBridge Securities Corp.||$17,000|
|Great American Advisors Inc.||$16,000|
|Okoboji Financial Services (Closed May 2010)||$15,000|
|Miller Johnson Steichen Kinnard Inc. (Closed in January 2008)||$15,000|
|Northland Securities Inc.||$14,000|
|Mcginn Smith & Co. Inc. (Closed in August 2010)||$11,000|
With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, our firm provides all our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.