Mr. Michael Lincoln is probably regretting his decision to avoid reporting the outside business activity (OBA) of a financial advisor he was supposed to be supervising, according to settlement documents he signed with the Financial Industry Regulatory Authority (FINRA).
While at LPL Financial, Mr. Lincoln supervised a financial advisor who developed a real estate property in Hawaii. Mr. Lincoln even invested $850,000 of his own money in his subordinate’s business venture.
Emiliano Rocha Jr., formerly employed with LPL Financial and Invest Financial Corporation, has been suspended for seven months and fined $10,000. Rocha borrowed $19,700 from an investor, failed to pay the investor back, and lied to his brokerage firm about borrowing the funds.
When Rocha was working for LPL Financial, an investor opened an account with the firm. Rocha and the investor executed a loan agreement in which the investor agreed to loan Rocha $17,000, if Rocha paid him back without interest by a certain date. A few months later, Rocha borrowed an additional $2,700 from the investor. However, he did not ask the investor’s permission or execute a loan agreement.
Benjamin Doyle Maleche of LPL Financial was recently fined and suspended for failing to tell his member firm—JP Morgan at the time—that he was recommending his clients buy into a risky pre-IPO investment fund.
Tamara Lynne Collins of LPL Financial was recently fined and suspended for tampering with annuity documents. Specifically, she added her client’s initials to documents, and changed the date on documents related to annuity purchases after a client had already signed them.
If you’re reading this article, there is a good chance you invested in or through an entity that is now in receivership, and you probably have a lot of questions! The purpose of this article is to give you a general overview of how receiverships work so you know what to expect. Every receivership is different, but every receivership goes through four overlapping stages: 1) stabilization; 2) investigation; 3) litigation; and 4) distribution.
These four stages all support the overarching goal of every receivership—the orderly winding down of a business in a manner that maximizes value for investors.
We will come back to these four stages in a minute, but first it is important to understand the background context that gives rise to a receivership.
Some investor claims are easy to see, such as when money is simply missing from an account or a financial advisor has been arrested for securities fraud. In other cases, a financial advisor has been negligent. The financial advisor did not commit fraud, but he did make mistakes that caused investment losses. These cases are more difficult for an investor to spot. Here are the three things we see in most of the investor claims we file against financial advisors for malpractice or negligence.
Financial advisors love to sell variable annuities. The reason is simple—commissions of up to 8%. If a financial advisor can sell you a $200,000 variable annuity, that means commissions of up to $16,000. Not bad for a day’s work!
Unfortunately, commissions are just about the only thing that is simple about variable annuities.
The one reason why variable annuities are almost always a bad idea is that they are too complicated for ordinary investors (and normal people in general) to understand. Seriously, have you ever tried to read a variable annuity policy? Here is just one example from an actual policy. Try to stay awake through this, because there is a lot more you urgently need to know about variable annuities:
If your financial advisor has caused investment losses, you may want to sue your financial advisor. For better or for worse, you may instead be forced out of court and into a FINRA arbitration. This post explains why securities litigation frequently ends up in FINRA arbitration, and what you can expect from the FINRA arbitration process.