On June 10, 2009, the Securities and Exchange Commission charged Matthew Weitzman, a New York investment adviser, with defrauding his clients out of $6 million. According to the SEC’s Litigation Release (No. 21078), some of these clients were terminally ill or mentally impaired.
The SEC filed its complaint in the U.S. District Court for the Southern District of New York. The Litigation Release also states that:
The SEC alleges that Matthew D. Weitzman sold securities in clients’ brokerage accounts and illegally funneled their money to a bank account that he secretly controlled. While Weitzman spent the money on a multi-million dollar home, cars, and other luxury items, he provided false account statements to clients often showing inflated account balances and securities holdings. Weitzman also submitted to a broker-dealer phony letters from clients that purported to authorize the money transfers. When clients questioned Weitzman about the transfers they did not authorize, he misrepresented that he was withdrawing their funds to make legitimate investments.
Mr. Weitzman is the co-founder and a principal of AFW Wealth Advisors, which is an alternative name for AFW Asset Management, Inc., a registered investment advisor located in Puchase, New York. According to the SEC’s release, Mr. Weitzman was also the Compliance Officer for AFW.
This is another example in a long line of instances just this year where an investment adviser has been alleged to have abused the trust and confidence placed in them by their clients. Fortunately, securities regulators are taking a more active role in finding, investigating, and, where appropriate, prosecuting offenders. Unfortunately, clients are suffering millions, if not billions of dollars in losses.
The Kueser Law Firm represents investors that have been the victims of securities fraud, investment fraud, as well as other forms of stockbroker and financial adviser misconduct. In addition, the firm represents consumers that have been defrauded. If you would like to contact the firm for a free consultation, please call 816.374.5865 or visit our website, www.jmkesquire.com, for more information.
The Securities Investor Protection Corporation (SIPC) has announced that it has committed more than $61 million to victims of Bernard L. Madoff Investment Securities LLC. The SIPC has mailed letters to 125 claimants in the SIPA liquidation proceedings. In total, there have been 8,848 customer claims filed.
The SIPC has also announced that it anticipates it will have more than $100 million by Memorial Day. The news release also stated the following recent developments:
- Identification and recovery to date of a total of $1 billion in Madoff-related assets. Related proceeds will be available as “customer property” to make payments to eligible BLMIS customers.
- The filing of lawsuits to recover $10.1 billion in fictitious profits paid out by BLMIS. These funds also would be made available as customer property in order to satisfy valid BLMIS customer claims. That total includes lawsuits filed this week naming various trust funds and partnerships run by investor Jeffry M. Picower and the Harley International hedge fund.
- Expansion of the SIPC Fund. SIPC is committed to advancing funds immediately upon the trustee’s request. Harbeck assured claimants that SIPC will have sufficient funds to carry out this mission. The SIPC Board of Directors has authorized the reinstitution of revenue-based assessments on members of the Securities Investor Protection Corporation; and
- The creation of a “hardship case” process. Instituted in recent days by the Trustee, this process is intended to expedite the handling of claims from individuals in financial or other distress.
For the first time, FINRA has publicly stated that it “makes sense” that broker-dealers who provide investment advice should be held to the same fiduciary standard that applies to Registered Investment Advisers.
This is a significant development because broker-dealers and their representatives have relied upon an exemption in the Investment Advisers Act of 1940 to escape these duties. The Investment Advisers Act exempts “any broker or dealer whose performance of such services is solely incidental to the conduct of his business as a broker or dealer and who receives no special compensation therefor” from its coverage.
Broker-dealers consistently take the position that their compensation is “solely incidental” to their broker-dealer business. However, virtually every broker-dealer has shifted their business model from that of the traditional “stock broker” to that of an investment adviser. These firms now call their representatives “investment advisers,” “financial advisers,” “wealth managers,” and other titles that reflect that their representatives provide broad advisory and/or management services.
While FINRA does not feel that it is necessary to change its suitability rules, extending fiduciary duties to broker-dealers is a significant step to increasing the rights and protection afforded to investors.
Darren Barbee of the Fort Worth Star-Telegram has written a good article that outlines various ways investors can reduce the risk of being defrauded by a financial or investment adviser.
This is a “must read” article that anyone who is dealing with an investment adviser. In addition, The Kueser Law Firm’s website contains an Investor Resource Center that provides helpful links to several sources that investors can utilize to do a background check on their financial or investment adviser (Investment Adviser Public Disclosure) and stock broker (BrokerCheck), as well as insurance agents that are registered to sell variable insurance products (BrokerCheck). In these uncertain times, it is imperative that investors know everything they can about the professionals they entrust with their future.
On April 9, 2009, Stifel Nicolaus & Co. announced that they had planned to repurchase their clients’ auction rate securities (ARS). Unfortunately, for their customers, the repurchase will not be completed for more than three years. Furthermore, the settlement does not require Stifel to repurchase any ARS for more than 14 months. The terms of the settlement, if accepted, provides that Stifel will repurchase its customers’ ARS on the following schedule:
- The greater of 10% or $25,000 to be completed by June 30, 2010;
- The greater of 10% or $25,000 to be completed by June 30, 2011;
- The balance of outstanding ARS to be repurchased by June 30, 2012.
Stifel Nicolaus is a defendant in a class action lawsuit related to its sale of ARS to customers. In addition, the Missouri Secretary of State and Attorney General filed a civil action against Stifel for its sale of ARS to customers.
If you were sold ARS by Stifel Nicolaus, you should contact an attorney to discuss how this settlement, and the pending lawsuits impact your rights. The Kueser Law Firm represents investors who have been defrauded by financial advisors, stockbrokers, banks, and other investment professionals.
Because of the significant impact this settlement may have on your financial situation, if you do not contact The Kueser Law Firm, you should contact an attorney to discuss your rights.
