Next Financial Group, Inc., a subsidiary of the Next Financial Holdings, Inc., is an independent broker-dealer headquartered in Houston, Texas and reportedly has over 900 registered representatives across the United States operating in one or two person offices. Its branch offices are largely comprised of small producers earning commissions at higher pay out rates than the major full-service brokerage firms, a recipe for disaster when it comes to protecting investors from churning and unsuitable investments and unsuitable investment strategies!
Churning is a violation of Federal and state securities statutes, industry rules and regulations and a breach of fiduciary duty to investors under common law. Churning can occur if a Next Financial Group broker exercises control over the investment decisions in your account and purchases stocks or recommends that you purchase and sell stocks for his benefit, i.e., commissions not yours! These trades rarely, if ever, make the investor any money. In fact, the additional commissions raise the break-even point for the investor to the level where the stock must perform at an extremely high level in order for the investor to make any money.
In every broker-investor relationship, the broker must assess what the investor's goals are as well as his or her risk tolerance. This assessment is based on a number of key factors, including the investor's stated objectives, risk tolerance, financial condition and tax status. It is the broker's responsibility to only pursue investments suitable for that investor based on these factors. A stockbroker is obligated to only recommend suitable investments and investment strategies. If a Next Financial Group broker recommends unsuitable investments and unsuitable investment strategies, it can leave you vulnerable to unnecessary risk and losses.
Independent broker-dealers are notorious for their lax supervisory practices and procedures. The business model of these operations is to open many offices nationwide for steady growth of fixed monthly revenues without the costs attendant to a full-service branch office with on-site manager, compliance officer and operation personnel. The registered representatives of these independent broker-dealers generally operate as separately incorporated businesses. They are not employees of the broker-dealer and therefore not controlled in the same manner as full-service brokerage firm representatives. The registered representatives control their structure and costs to maximize profits and often leave the protection of investors' rights and interests as their lowest priority.
The typical supervisory organization of independent broker-dealer operations is to have other independent contractors operate Offices of Supervisory Jurisdiction (OSJs) to monitor the registered representatives from geographically remote offices and then report to the main franchisor's compliance office at national headquarters. The supervisors at the OSJs are not employees of the franchisor and often run their own brokerage, insurance and other businesses. They are not devoted full-time supervisors of the smaller branch offices. Consequently, OSJ managers cannot and do not supervise the day-to-day operations of the registered representatives of these independent broker-dealers.
There is no immediate review of new accounts opened, securities transactions, business records, cash or securities receipts and deliveries, correspondence and business activities unrelated to the securities brokerage operation at these independent brokerage firms. The lax supervision leaves investors who have transferred their accounts to the smaller independent broker-dealer vulnerable to excessive purchases and sales of securities and securities that have not been reviewed or authorized by anyone other than the sales representative earning a commission. Generally, no manager is onsite to detect the placement of inaccurate information about a client's investment objectives and financial condition to document the suitability of a particular investment recommendation. There is no daily review of sales literature and client correspondence to protect against misrepresentations and misleading statements being made to investors. In fact, there may be only one compliance audit visit per year at many of these offices. These independent brokerage business operations are worrisome to the North American Securities Administrators Association (NASAA), which has documented more instances of sales abuse and consequently investor losses at these firms.
Have you suffered losses in your Next Financial Group brokerage account? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against Next Financial Group stockbrokers who engaged in churning, recommended unsuitable investments and unsuitable investment strategies that caused investors losses.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Showing posts with label NEXT Financial Group. Show all posts
Showing posts with label NEXT Financial Group. Show all posts
Wednesday, October 16, 2013
Monday, December 31, 2012
FINRA ORDERS NEXT FINANCIAL GROUP TO PAY RESTITUTION TO INVESTORS NATIONWIDE FOR PROVIDENT ROYALTIES SALES
NEXT Financial Group has been fined by the Financial Industry Regulatory Authority (FINRA) for failing to conduct adequate due diligence on private placement offerings by Provident Royalties. NEXT was responsible for selling tens of millions in Provident, which caused its investors to lose hundreds of millions of dollars. NEXT will pay a $50,000 fine and $2 million in restitution to clients. Also, the Securities and Exchange Commission (SEC) has accused Provident of committing fraud, and at least one Provident broker has admitted to such allegations.
Due diligence requires a reasonable investigation of all material facts before entering into an agreement or transaction with another person or entity. It is a measure taken to prevent unnecessary harm to an innocent party. The measure would require an entity offering and selling a security to analyze the legitimacy, nature, and risks associated with the product.
According to FINRA, NEXT did not perform adequate due diligence prior to the offering. However, NEXT did receive a fee for purportedly reviewing the private placement memorandum for the offering. This shortcoming clearly fell below FINRA's due diligence requirements. In fact, NEXT did not see any financial figures or any other information that was not contained in the private placement memorandum.
Securities regulators have fined NEXT for committing violations in the past. Some examples include failure to report customer complaints, disclosing private customer information, failure to supervise and detect churning, and excessive trading activity.
Were you a NEXT Financial Group client who suffered losses in Provident Royalties? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Due diligence requires a reasonable investigation of all material facts before entering into an agreement or transaction with another person or entity. It is a measure taken to prevent unnecessary harm to an innocent party. The measure would require an entity offering and selling a security to analyze the legitimacy, nature, and risks associated with the product.
According to FINRA, NEXT did not perform adequate due diligence prior to the offering. However, NEXT did receive a fee for purportedly reviewing the private placement memorandum for the offering. This shortcoming clearly fell below FINRA's due diligence requirements. In fact, NEXT did not see any financial figures or any other information that was not contained in the private placement memorandum.
Securities regulators have fined NEXT for committing violations in the past. Some examples include failure to report customer complaints, disclosing private customer information, failure to supervise and detect churning, and excessive trading activity.
Were you a NEXT Financial Group client who suffered losses in Provident Royalties? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Saturday, December 29, 2012
FINRA SANCTIONS EIGHT FIRMS AND TEN INDIVIDUALS NATIONWIDE FOR SELLING INTERESTS IN PROVIDENT ROYALTIES
After previously announcing that it sanctioned two firms and seven individuals for selling interests in private placements, the Financial Industry Regulatory Authority (FINRA) has added eight more firms and 10 more individuals to its investigation. The firms and individuals sold interests in high-risk private placements such as Provident Royalties without conducting a reasonable investigation, therefore having no reasonable basis to recommend the investments. FINRA has ordered the firms to pay $3.2 million in restitution due to significant investor losses.
Between September 2006 and January 2009, Provident Asset Management, LLC, marketed and sold preferred stock and limited partnership interests in a series of 23 private placements offered by its affiliate, Provident Royalties. The Provident offerings were sold to customers through more than 50 retail broker-dealers nationwide and raised approximately $485 million from over 7,700 investors. Although a portion of the proceeds of Provident Royalties' offerings was used for the acquisition and development of oil and gas exploration and development activities, millions of dollars of investors' money was transferred from the later offerings' bank accounts to the Provident operating account in the form of undisclosed and undocumented loans, and were used to pay dividends and returns of capital to investors in the earlier offerings, without informing investors of such activities. In July 2009, the SEC filed a civil injunctive action in the Northern District of Texas naming Provident and others for violations of the federal securities laws. While the SEC action was pending, FINRA announced that it had expelled Provident Asset Management, LLC, a Dallas based broker-dealer, for marketing a series of fraudulent private placements offered by its affiliate, Provident Royalties.
FINRA's findings revealed that the broker-dealers did not have adequate supervisory systems in place to identify and understand the inherent risks of the offerings and, as a result, many of the firms failed to conduct adequate due diligence of the offerings. Also, many firms did not have reasonable grounds to believe that the private placements were suitable for their customers. Furthermore, the sanctioned principals did not have reasonable grounds to permit the firms' registered representatives to continue selling the offerings, regardless of the numerous red flags or signals that existed regarding the private placement. The following firms have been sanctioned by FINRA for failing to conduct a reasonable investigation or for failing to enforce procedures with respect to the sale of private placements offered by Provident Royalties: NEXT Financial Group, Investors Capital Corporation, Capital Financial Services, National Securities Corporation, Securities America, and Meadowbrook Securities.
FINRA has vowed to continue to look closely at sales of private placements to determine whether the selling firms are fulfilling their responsibilities to customers. These efforts reinforce that any firm or person who fails to conduct reasonable investigations of offerings, especially when there are multiple red flags, will not be permitted to shift all the responsibility to the issuers of fraudulent private placement investments.
Have you suffered losses in Provident Royalties? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Between September 2006 and January 2009, Provident Asset Management, LLC, marketed and sold preferred stock and limited partnership interests in a series of 23 private placements offered by its affiliate, Provident Royalties. The Provident offerings were sold to customers through more than 50 retail broker-dealers nationwide and raised approximately $485 million from over 7,700 investors. Although a portion of the proceeds of Provident Royalties' offerings was used for the acquisition and development of oil and gas exploration and development activities, millions of dollars of investors' money was transferred from the later offerings' bank accounts to the Provident operating account in the form of undisclosed and undocumented loans, and were used to pay dividends and returns of capital to investors in the earlier offerings, without informing investors of such activities. In July 2009, the SEC filed a civil injunctive action in the Northern District of Texas naming Provident and others for violations of the federal securities laws. While the SEC action was pending, FINRA announced that it had expelled Provident Asset Management, LLC, a Dallas based broker-dealer, for marketing a series of fraudulent private placements offered by its affiliate, Provident Royalties.
FINRA's findings revealed that the broker-dealers did not have adequate supervisory systems in place to identify and understand the inherent risks of the offerings and, as a result, many of the firms failed to conduct adequate due diligence of the offerings. Also, many firms did not have reasonable grounds to believe that the private placements were suitable for their customers. Furthermore, the sanctioned principals did not have reasonable grounds to permit the firms' registered representatives to continue selling the offerings, regardless of the numerous red flags or signals that existed regarding the private placement. The following firms have been sanctioned by FINRA for failing to conduct a reasonable investigation or for failing to enforce procedures with respect to the sale of private placements offered by Provident Royalties: NEXT Financial Group, Investors Capital Corporation, Capital Financial Services, National Securities Corporation, Securities America, and Meadowbrook Securities.
FINRA has vowed to continue to look closely at sales of private placements to determine whether the selling firms are fulfilling their responsibilities to customers. These efforts reinforce that any firm or person who fails to conduct reasonable investigations of offerings, especially when there are multiple red flags, will not be permitted to shift all the responsibility to the issuers of fraudulent private placement investments.
Have you suffered losses in Provident Royalties? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
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