Authorities Arrest Broker/Advisor for Defrauding Three Investors—But Are There Others?

On September 29, 2017, Richard G. Cody, 43, of Jacksonville, Fla., a former investment advisor, was arrested in Florida on charges of violating the Investment Advisors Act of 1940 and lying to the Securities and Exchange Commission in a court proceeding, according to an article entitled “Former Investment Advisor Indicted for Fraud and Perjury.”  The Financial Industry Regulatory Authority (FINRA) has barred Cody from acting as a broker or otherwise associating with firms that sell securities to the public.

Between May 2005 and August 2016, according to the article, Cody mismanaged the retirement savings of three victims, falsely assuring the victims that their retirement savings were secure, when he knew they were not.  By 2014 the retirement savings of two of the victims had vanished. Cody reportedly concealed the facts by sending the victims fraudulent account statements and tax documents.  In 2013, regulators had suspended Cody from acting as investment advisor, but he failed to disclose that fact to the victims.

Cases like this one often involve just the tip of the iceberg, and one would expect that there are more than three victims of Roger G. Cody.  The brokerage firms that were associated with Cody owed their investor customers a legal duty to supervise Cody and warn them of all the important facts that they learned about Cody.  Cody worked for the following firms over the years:

IFS Securities (2016)

Concorde Investment Services, LLC (2014-2016)

Westminster Financial Securities, Inc. (2010-2013)

Gunnallen Financial, Inc. (2005-2010)

Leerink Swann & Company (2001-2005)

Salomon Smith Barney, Inc. (2000-2001)

Merrill Lynch Pierce Fenner & Smith, Inc. (1997-2000).

If you have had any experience with Richard G. Cody, we would like to speak with you about it.  Contact The Doss Firm, LLC at (770) 578-1314.

SEC Fines UBS for Improper Sales of Reverse Convertible Notes

The Securities and Exchange Commission has announced that UBS Financial Services will pay more than $15 million to settle charges related to unsuitable sales of reverse convertible notes (“RCNs”) to individual (“retail”) investors.  The SEC found that UBS failed to adequately educate and train its sales force in connection with the sale of RCNs as a result of which they had no reasonable basis for recommending them, and could not make proper disclosures to investors.

RCNs are complex securities.  In addition to the risk of default by the issuer, RCNs contain embedded put options giving the issuer the right to not return the investor’s principal at maturity, but instead assign the underlying security (usually a stock) at maturity if the stock price drops to a certain level.  In that case, the investor is left holding a stock that may be worth much less than the price paid for the RCN.

RCNs are alternative investments that typically offer above-market yields.  They are often sold to income-oriented investors who are unable to realize a sufficient return in the persistent low interest rate environment in which we live.  However, most individual investors who purchase RCNs have no idea they can lose money on this investment.

According to the SEC, UBS sold approximately $548 million in RCNs to more than 8,700 relatively inexperienced retail customers.

Investors who have lost money in RCNs should consult with an attorney with experience in representing investors in securities arbitration.  The Doss Firm, LLC has such experience and offers a free initial consultation to investors who may have questions about any of their investments.




Attention Former Customers of Leavitt Freeman Sanders: You May Be Able To Recover Your Investment Losses

Our firm has already filed many individual lawsuits alleging, among other things, investment fraud against Leavitt Sanders and the firms that he traded through.  Those firms include Invest Financial, Triad Advisors, Capital Asset Advisory Services, Sanders Yearian Advisory Group and Leavitt Financial Group. We have developed direct evidence that supports the allegations that these firms are legally responsible to pay back investors for their investment losses.

If you were a victim of this alleged fraudulent scheme, we would be interested in discussing representing your interests with the hope and expectation of recovering some or all of your losses.  We will evaluate your case at no charge.

As background, Mr. Sanders’ CRD reveals over 30 customer complaints for the same type of account mismanagement.  On December 26, 2014, Triad Advisors, Inc. terminated and discharged Mr. Sanders for “mismanagement of RIA related accounts” involving options trading.  (“RIA” means “registered investment advisor.”)

Many of Mr. Sanders’ clients were elderly and retired income-oriented investors.  They have suffered substantial losses.  They entrusted their hard earned retirement savings to Mr. Sanders, who, acting with discretionary trading authority, mismanaged their accounts.  Mr. Sanders breached his fiduciary duty by using a “one size fits all” investment strategy with all of his clients without regard to whether it was prudent or suitable.

Leavitt Sanders of West Point, Georgia, is a former licensed stockbroker and investment adviser who operated in Georgia and Alabama.  Mr. Sanders is no longer in the industry for mismanaging the brokerage accounts of numerous clients by excessive trading in high risk investments, including put and call options, and day-trading huge stock positions on margin.  The options and stocks (or stock indices) included, Amazon, the S&P500 Index, NASDAQ-100 Index.

Mr. Sanders was registered with Financial Network Investment Corporation (“Financial Network”) from November 1998 through October 2008; Invest Financial Corporation (“Invest Financial”) from October 2008 through January 2014; and Triad Advisors, Inc. (“Triad Advisors”) from January 2014 to December 2014.  While still with Invest Financial, Mr. Sanders switched clearing firms from Pershing to TD Ameritrade in May 2013.  Mr. Sanders was also the owner-operator of two investment advisory firms – Sanders Yearian Advisory Group, Inc. and Leavitt Financial Group, Inc. – and was associated with Capital Asset Advisory Services, LLC.

FINRA Charges Southwest Securities With Improper Variable Annuity Sales

The Financial Industry Regulatory Authority (FINRA) has filed a disciplinary action against SWS Financial Services Inc. (SWS) for failing to supervise unsuitable sales of variable annuities to investors, and failing to maintain and implement appropriate supervisory policies, according to a recent InvestmentNews article. FINRA is seeking undisclosed monetary sanctions for violations that occurred during the period from September 2009 to May 2011. During this time, sales of variable annuities made up to 20% of SWS’s total revenue.

With regard to the charge of failure to supervise, FINRA found that variable annuity sales were generated in SWS offices that did not have an on site supervisor to monitor compliance with FINRA rules regarding sales of variable annuities. The variable annuities in question were issued by an insurance company that is affiliated with SWS. More than 70% of these variable annuities were sold to investors without ever having been reviewed by an SWS securities principal to determine whether they were suitable for the investors.

Some of the variable annuity sales involved a practice known as switching in which an existing annuity is sold and replaced with another annuity. Improper switching is a form of churning in which a broker trades excessively for the purpose of generating commissions. Improper switching and failure to properly explain to investors the terms and risks of variable products have been long-term problems in the securities brokerage industry. In particular, brokers often fail to clearly explain the illiquidity and surrender charges, as well as the risks associated with the subaccounts that comprise the investment component of these products.

In one case, a SWS sales person recommended that 29 of his clients switch from MassMutual Life variable annuities into new ones issued by Jackson National Life Insurance Co., which had higher annual expenses, according to the article. In addition to paying higher expenses, some of the investors incurred surrender charges as a result of the switching.

Generally speaking, sales of variable annuities are very lucrative for the selling agent and firm, but are often unsuitable for investors because they are subject to surrender charges, which, as a practical matter, make them illiquid, as well as contract provisions that make them inordinately expensive to own, among other reasons. The major benefit of owning a deferred variable annuity, tax deferral, is lost if the annuity is held in an already tax-deferred account like an IRA.

The Doss Firm, LLC has over thirty years of combined experience representing investors in disputes with brokerage and advisory firms and their representatives. If you have any questions about your investments, please call us for a free consultation.