It was recently reported that Aaron Vallett has been charged with fraud. According to information available on the U.S. Department of Justice website Vallett “was a financial advisor who owned his own firm in Brentwood, Tennessee and offered various financial services, including investment advice and 401(k) management.” They allege that through his business Vallet “defrauded numerous clients of approximately $5 million dollars.  Much of the loss came from investor-clients who placed money in one of Vallett’s investment “Funds.” Instead of investing that money as promised, Vallett kept it in his company’s operating account and spent it on various personal and business expenses.” The Justice Department further reported that he is alleged to have transferred some monies out of investor’s 401(k) accounts and used them for his own expenses. Bizjournals.com reported that Vallett “is accused of operating a ponzi scheme from September 2008 to July 2010.”

According to the Financial Industry Regulatory Authority (FINRA) CRD, Aaron Donald Vallett was registered with FINRA member firms from December 2001 until June of 2010. He was registered with firms in Tennessee from 2004-2010. He was registered with Cambridge Way, Inc. from 02/2004-07/2006, Synergy Investment Group, LLC from 06/2006-06/2008, and Institutional Capital Management, Inc. (ICM) from 11/2008- 06/2010. His report also indicates that he was terminated from his position at Institutional Capital Management (ICM) on 6/11/2010.

When a FINRA affiliated broker conducts business outside of the firm with whom he is registered the activity may be considered “selling away.” If a registered broker “sells away” from his firm, the firm may still be liable for negligent supervision of their broker representative and may be responsible for investment losses in a FINRA dispute resolution claim.

If you invested with Aaron D. Vallett while he was registered with a FINRA member brokerage firm, suffered investment losses and would like to speak to a securities attorney about your potential to recover losses through Financial Industry Regulatory Authority (FINRA) arbitration please call our Chicago office at 312-238-9650.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.

The reports indicate that in December the Certified Financial Planner Board issued an order suspending for 180 days Stevenson’s right to use the registered certification marks that identify him as a Certified Financial Planner. Apparently, the suspension went into effect Dec. 28 and ends June 25.

The suspension followed the board’s investigation of a regulatory action by the Financial Industry Regulatory Authority (FINRA).

FINRA’s investigation involved allegations that Stevenson exercised unauthorized discretion in client accounts by failing to confirm clients’ authorization of trades on the dates the trades were executed, and by executing trades without written authorization to exercise discretion and without Stevenson’s firm, Thrivent, accepting the accounts as discretionary.

Thrivent is a faith-based, not-for-profit financial services organization with approximately 2.6 million members.  According to his FINRA Broker-Report, Stevenson is registered with Thrivent Investment Management, Inc., Thrivent’s FINRA registered broker-dealer arm.

The foregoing information was first reported in the Brownsville Herald and is being provided by The White Law Group.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.

The indictment alleges that Gregory Walker created fraudulent distribution forms to have money transferred from client accounts to a bank account belonging to an associate of Walker’s.

The indictment further alleges that the company where Walker worked kept clients’ money at a bank in St. Petersburg, Florida and that clients could request money from their accounts using distribution request forms which required the client’s name, birth date and Social Security number.

The court documents further allege that on February 11, 2011, Walker created such a form with the authorization of the client and had the money transferred by wire to a Fort Wayne bank (Mr. Walker allegedly did it again on February 28 and tried again on March 1 or March 2, using a different client’s information).

He is accused of wire fraud in the transfer of money and the attempted transfer.

The aggravated identity theft count alleges Walker used the identity of another person to commit a felony.

According to the U.S. Securities and Exchange Commission website, Walker was registered as an investment adviser with a Fort Wayne office of Raymond James & Associates until last spring.

According to FINRA reports, Walker was suspended from the securities industry in June after he failed to respond to a request for information and in October, FINRA permanently barred him from such work in any capacity at financial entities under the agency’s domain.

Apparently, in December 2009, Walker was also charged with a misdemeanor charge of check deception in DeKalb County, but that charge was dismissed.

Finally, it appears that Raymond James fired Walker for the misappropriation of client funds.

The White Law Group is currently investigating the liability that Walker’s former employer may have for failure to adequately supervise the actions of its agent. If you invested with Gregory Walker and have questions about your investments, please call The White Law Group’s Chicago office at 312/238-9650.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.

In a statement by the City of Eugene Police Department, it is said that the ex-broker, James Scott McKee, was charged with four counts of aggravated theft in the first degree.

Apparently James Scott McKee’s victims included an 81-year-old retiree and a local church.

In a FINRA regulatory complaint, FINRA has also alleged that in April 2007 Mr. McKee persuaded an LPL client to invest $400,000 in a real estate venture and that Mr. McKee did not notify LPL or get the firm’s approval for the venture (such a practice is calling “selling away” and LPL may still be liable for this transaction as a result of its supervisory responsibilities for its agent).

The FINRA complaint further alleges that after the client had a heart attack, she incurred significant medical expenses and contacted Mr. McKee to get her money back. Additionally, in February 2008, Mr. McKee purportedly received two checks for $200,000 from the real estate development and converted those funds to his own use (even though he told the client the funds were still invested in the real estate development).

The police statement also states that from February 2008 to the present, Mr. McKee “committed aggravated theft by deception and fraud with respect to securities or securities business.”

Based on the reports and complaints filed, it appears that Mr. McKee’s actions included the sale of unregistered securities, the unauthorized liquidation of monies from investment accounts by a financial planner, the unauthorized deposit of those funds into the financial planner’s personal bank account and the subsequent concealment of that liquidation.

Mr. McKee FINRA Broker Report (CRD) indicates that he was affiliated with LPL from November 2002 to September 2008 and with Berthel Fisher from that point until November 2010. He then joined Morgan Stanley, where he worked until this October when he was discharged.

The FINRA complaint also alleges that Mr. McKee’s alleged victims included an owner of a small office supply company and other unsophisticated investors seeking conservative investments. Mr. McKee allegedly promised investors unreasonably high returns not supported by the underlying businesses and hid the precarious financial condition of those businesses.

The White Law Group is currently investigating the liability that Mr. McKee’s employers (LPL, Berthel Fisher, and Morgan Stanley) may have for failure to adequately supervise the actions of its agent. If you invested with Mr. McKee and have questions about your investments, please call The White Law Group’s Chicago office at 312/238-9650.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.

According to the report, Grubb & Ellis listed assets of as much as $500 million and liabilities of up to the same amount in the Chapter 11 filing in U.S. Bankruptcy Court in New York yesterday. The company said it completed about 12,000 sale and lease transactions last year and manages more than 250 million square feet of property.

In a court filing, the Santa Ana, California-based company blamed the downturn in the U.S. real estate market between 2007 and 2009 for losses during the period that it said severely strained its liquidity and hampered its ability to keep operating.

Apparently, BGC Partners, a New York-based broker of financial products, agreed to provide a loan of as much as $4.8 million to Grubb & Ellis to keep it operating during the bankruptcy process.

It is unclear at this time how the bankruptcy will impact the many Grubb & Ellis REITs set up by the company (such as Grubb & Ellis Apartment REIT and Grubb & Ellis Healthcare REIT).

Like Grubb & Ellis Co., Grubb & Ellis REITs have also been impacted by the downtown in the real estate market and investors in these REITs have likely suffered substantial losses.

The foregoing information is being provided by The White Law Group.  The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.  The firm is actively investigating potential FINRA arbitration claims on behalf of Grubb & Ellis REIT investors.

If you have invested in a Grubb & Ellis REIT, you may have a claim against your financial professional or brokerage firm to recover your losses.  To speak with a REIT fraud attorney, please call The White Law Group’s Chicago office at 312/238-9650.

For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.

According to the report, financial adviser David Kinnear and his partner Kathleen Bakas may have to present their computers and cellphones to the Cook County Circuit Court for inspection and “scrubbing” — if UBS gets its way.

On February 15, UBS asked the Cook County Circuit Court for an injunction against the two advisers pending an expedited arbitration hearing by the Financial Industry Regulatory Authority Inc.

Apparently, UBS is asking the court to take a number of actions. The company wants the judge in the case to bar the two advisers from soliciting their UBS clients to join them at Wells Fargo. UBS also is looking to prevent the pair from using or disclosing any information on UBS clients. In addition, the Swiss company wants the court to order the defendants to return any UBS client records or copies of records they currently possess and to destroy any computerized client records they have.

According to the suit filed, UBS alleges that Mr. Kinnear on multiple occasions downloaded confidential client information and is now using it to solicit his former UBS clients. The information, according to the complaint, includes “year-end statements, performance reports of each client’s investments and other personal financial goals for each client.”  It is unclear at this time whether these particular advisors violated the Protocol (as UBS has alleged) or if UBS is simply attempting to send a message to other advisor contemplating a switch to another firm.

Although lawsuits filed against departing advisers were routine prior to 2004 they have become rarer after most firms adopted the Protocol for Broker Recruiting.

Pursuant to the protocol, advisers are allowed to take a client’s name, address, phone number, e-mail address and the title of the account. However, they are “prohibited from taking any other documents or information.”

It is also possible that the suit filed by UBS is an aggressive move to ensure that these advisors pay back their promissory notes with the firm.  Apparently, UBS also contends that Mr. Kinnear owes the firm some of more than $650,000 in loans made to him as part of a UBS incentive program and that he has violated a client non-solicit agreement that was part of the incentive program.

Certainaly, the size and success of a departing advisor or team can dictate how aggressively broker-dealers enforce the rules of the protocol and pursue recovery of unpaid promissory notes.

The foregoing information is being provided by The White Law Group.  The White Law Group represents financial advisors in various types of securities employment disputes, including issues related to solicitation, recruiting of clients, unpaid promissory notes, and employment discrimination.

To speak with a securities employment attorney, please contact the firm’s Chicago office at 312-238-9650.

For more information on The White Law Group’s securities employment practice, please visit http://www.whitesecuritieslaw.com/securities-regulation/.

Broker-dealers have long offered a range of structured securities to institutions and wealthy individuals. Certain structured securities products have been increasingly marketed to retail investors in recent years. Total U.S. sales of SSPs (to both retail and institutional investors) had risen from approximately $32 billion in 2004 to in excess of $100 billion in 2007.

A feature of some structured products is a “principal guarantee” function, which offers protection of principal if held to maturity. It is this feature that most often appeals to investors.  Unfortunately, it is this function that is also most often misrepresented by financial professionals to their clients simply because the financial professional doesn’t fully understand the product and its risks.

(1)   Sale of Structured Products

FINRA Notice to Member 05-59 sets forth the requirements that any broker-dealer must follow in marketing and selling a structured product.  These guidelines include the requirements to: (1) provide balanced disclosure in promotional efforts; (2) ascertain accounts eligible to purchase structured products; (3) deal fairly with customers with regard to derivative products; (4) perform a reasonable-basis suitability determination; (5) perform a customer specific suitability determination; (6) supervise and maintain a supervisory control system; and (7) train associated persons to fully understand the products.

In FINRA Notice to Member 10-09, FINRA reminded broker-dealers of their sales practice obligations with respect to reverse convertible notes (a particularly risky type of structured product).  FINRA reminded firms that sell reverse convertibles to ensure that their promotional materials or communications to the public regarding these products are fair and balanced, and do not understate the risks associated with them.  Firms are also reminded to ensure that their registered representatives understand the risks, terms and costs associated with these products, and that they perform an adequate suitability analysis before recommending them to any customer.

(2)  Brokerage Firm Requirements Prior to Recommending Any Investment

Brokerage firms and financial professionals have certain due diligence responsibilities prior to recommending any investment to a client.  These requirements are particularly significant in the context of complicated structured products, as a broker is required to fully understand any product he/she recommends.

Generally speaking FINRA requires that a broker have a reasonable grounds for believing the recommendation is suitable upon the basis of the facts disclosed by such customer as to his/her other security holdings and as to his/her financial situation and needs.  This is generally called the Know Your Customer Rule.

Securities rules further provide that recommendations violate the Know Your Customer rule if:

-  the agent’s understanding of the investment is insufficient to establish a reasonable basis for making a recommendation;

-  the agent inadequately assesses whether the recommendation is suitable for the specific investor; or

-  the level of trading is excessive in light of the customer’s investment needs and objectives.

FINRA and the SEC have routinely held that a broker is also responsible for investigating the specific characteristics of an investment.  An advisor can be responsible for making an improper recommendation when he/she fails to learn the basic characteristics of an investment and how those characteristics would affect the investment’s risks and liquidity.

Moreover, the test as to whether a broker understood a product sufficiently to recommend the product requires actual objective investigation and knowledge, rather than the rep’s personal subjective belief in the suitability of the investment. See, F.J. Kaufman & Co. of Va., 50 SEC 164, (1989) (“a broker-dealer in his dealings with customers impliedly represents that his opinions and predictions respecting a [security] which he has undertaken to recommend are responsibly made on the basis of actual knowledge and careful consideration. . . . [I]t is not a sufficient excuse that a dealer personally believes the representation for which he has no adequate basis.”);Distribution by Broker-Dealers of Unregistered Securities, Exchange Act Rel. 6721 (February 2, 1962) (“[T]he making of recommendations for the purchase of a security implies that the dealer has a reasonable basis for such recommendations which, in turn, requires that, as a prerequisite, he shall have made a reasonable investigation.”).

Interestingly, the investor’s sophistication is irrelevant when the broker fails to perform the necessary due diligence on an investment and the client relied on the broker.  See, Larry Ira Klein, 52 SEC 1030, 1037, n. 28 (1996); Hanley v. SEC, 415 F.2d, 589, 596 (2d Cir. 1969)(“The fact that [the broker's] customers may be sophisticated and knowledgeable does not warrant a less stringent [investigation] standard.”).

These due diligence requirements will continue to be significant as more and more firms create complicated structured products and then have their advisors (individuals that do not always understand these investments) go out and sell the products to their clients.

 (3)  Structured Products To Monitor

Notwithstanding the principal guarantee function of some structured products, many of these investments have gone under over the last few years.  Investors in these products may be entitled to recover their investment losses through FINRA arbitration.  Some of the structured products that are worth monitoring include:

-           Lehman Brothers 100% Principal Protected Notes

-           Citigroup MAT Fund

-           Citigroup ASTA Fund

-           Reverse Convertible Notes linked to risky equities

-           Bank of America’s Equity Appreciation Growth Linked Securities (“EAGLES”)

-           AMPS (Accelerated Market Participation Securities)

-            ARES (Accelerated Return Equity Securities)

-           ARNs (Accelerated Return Notes)

-            ASTROS (Asset Return Obligation Securities)

(4)  Free Consultation

If you are concerned about a structured product investment recommended to you by your financial professional and would like to speak with an experienced securities attorney for a free consultation, please contact The White Law Group at 312-238-9650.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.

For more information on the risks of certain structured products, visit http://www.finra.org/Investors/ProtectYourself/InvestorAlerts/Bonds/P120883.

Generally non-traded REITs are valued once a year based on the appraised value of the properties the REIT owns (making it difficult to evaluate the current value of your non-traded REIT investment).

(1)   Current KBS Share Valuation

Although KBS REIT I last reset its value to $7.17 in late 2009, investors with whom we have spoken have stated that they are concerned about a further devaluation of the share price in the coming months.

This assumption does seem supported by the facts.  It has been reported that KBS Real Estate Investment Trust has stopped redeeming or been unable to redeem all of the shares submitted for redemption.  Based on what has occurred with other non-traded REITs, like Desert Capital and Apple REIT, the next step after a suspension of a REITs redemption program is often a devaluation of the REIT’s share prices.

(2)   KBS REIT Liquidity

Complicating matters for KBS REIT owners is the difficulty in selling these investments.  There are a few places out there that buy non-traded REITs, like KBS REIT, on the “secondary market.”  These companies include REIT Secondary Exchange, American Partnership Board, and Second Market.  Unfortunately, the “secondary market” is often trolled by buyers seeking to purchase assets at extremely low and depressed prices.  It is unlikely that buyers on the secondary market would be willing to pay anywhere near the announced book value (or “appraised value”).

The alleged suspension of KBS REIT’s redemption program also highlights the valuation and liquidity risk issues faced by investors with unlisted, non-traded REITs.

A potential inability to trade and liquidate shares, coupled with a decreased dividend, places unlisted REIT investors in a dangerous situation and increases the risk of financial ruin.

(3)   Potential Recovery of KBS REIT Losses

The White Law Group has many ongoing FINRA arbitration cases involving a brokerage firms’ improper recommendation of KBS REIT to a client.  In the firm’s experience, brokerage firms often misrepresent the risks of KBS REIT and improperly sell the investment to investors who are either retired or seeking income.

Brokerage firms have a fiduciary duty to research investments prior to recommending them for sale and to insure that each investment recommended is appropriate in light of the client’s age, investment experience, net worth, and investment objectives.  This obligation is commonly referred to as the Know Your Customer Rule.

Unfortunately, due to the relatively high interest or dividend offered by non-traded REITs like KBS REIT, retired investors are often attracted to these products.   Additionally, REITs typically pay a high commission – often as much as 15% (which often explains the stockbroker’s motivation in recommending the REIT investment to an investor who simply should not be in the product).

(4)   Free Consultation

If you are concerned about your KBS REIT investment and would like to speak with an experienced securities attorney for a free consultation, please contact The White Law Group at 312-238-9650.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.

The White Law Group is investigating potential securities fraud claims involving broker-dealers’ improper recommendation that investors purchase risky tenant-in-common (or TIC) investments, including Direct Invest TICs.

TICs typically pay a high commission – often as much as 10% (which often explains the stockbroker’s motivation in recommending the TIC investment to the investor).

The White Law Group has handled many FINRA arbitrations involving TIC investments and have found that in many cases the broker-dealers that recommended these investments failed to perform the necessary due diligence on the investments prior to recommending them for sale to their clients.

TICs can involve high risks and liquidity problems and in many cases brokerage firms misrepresent these risks and instead focus on the income streamed that is promised (and sometimes guaranteed) by these investments.  It is this income stream that often made these TIC investments appealing to retired investors who sought income during retirement, but who also didn’t realize the risks involved with these investments.

If you have questions about a TIC investment you purchased through a financial professional or broker-dealer, please call The White Law Group’s Chicago office at 312/238-9650 for a free consultation.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.

According to the report, the couple bought two tenant-in-common exchanges, one in 2007 and another in 2008, from former LPL broker David Glenn.

The investors asked for damages of $8 million.

The Finra panel issued the award Friday and, as is typical, gave no explanation for its decision. According to the award, the elderly couple made several allegations, including federal securities fraud and elder abuse.

Tenant in common investments (or TICs) are 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 2002 Internal Revenue Service ruling that allowed investors to defer capital gains on real estate transactions involving the exchange of properties.

Unfortunately, after the real estate bubble burst, many TIC investors saw their properties cut dividends and/or fall in to foreclosure.

One of the biggest TIC sponsors, DBSI Inc., declared bankruptcy in 2008, and broker-dealers that sold those deals have faced dozens of arbitration complaints filed with Financial Industry Regulatory Authority Inc.

The White Law Group has handled many FINRA arbitrations involving TIC investments and have found that in many cases the broker-dealers that recommended these investments failed to perform the necessary due diligence on the investments prior to recommending them for sale to their clients.

TICs can involve high risks and liquidity problems and in many cases brokerage firms misrepresent these risks and instead focus on the income streamed that is promised (and sometimes guaranteed) by these investments.  It is this income stream that often made these TIC investments appealing to retired investors who sought income during retirement, but who also didn’t realize the risks involved with these investments.

If you have questions about a TIC investment you purchased through a financial professional or broker-dealer, please call The White Law Group’s Chicago office at 312/238-9650 for a free consultation.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.