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Fort Lauderdale Securities Law Blog

Russell L. Forkey

Boca Raton, Florida Corporate and Shareholder Business and Commercial Dispute Litigation and Arbitration Attorney

South Florida (Boca Raton, Florida) Corporate and Shareholder Business Dispute Litigation and Arbitration Attorney:

Florida Minority Shareholder Election Statute:

607.1436 Election to purchase instead of dissolution.

Fla Stat. § 607.1436 gives the court charged with valuing shares in a corporation discretion to determine the most appropriate valuation method by which to arrive at "fair value." A trial court's selection of one valuation method over another does not require reversal. The valuation process is fact specific with an emphasis on the particular circumstances of the case. The factors to be considered in determining 'fair value' are market value, investment value, and net asset value, and the weight to be accorded each factor depends upon the circumstances of the particular case.

A. Consideration of Fair Market Value:

Florida courts have explained that determination of "fair value" for the purposes of the election statute rests on determining what a willing purchaser in an arm's length transaction would offer for an interest in the subject business. This is not to say that "fair value" is synonymous with "fair market value." Most courts have rejected the notion of such synonymity. However, the terms are not mutually exclusive. On one hand, as Florida courts have explained, where "fair market value" would take into account appreciation or depreciation in anticipation of corporate action such as a merger or acquisition, the valuation process under § 607.1436 must exclude both positive and negative effects of any such impending transaction. On the other hand, a court may use fair market value as an estimate of "fair value" when such potentially distorting corporate actions are not at issue.

Accordingly, Florida courts have recognized that valuation proceedings necessarily confront them with a variety of evidence and methods aimed at determining the price of minority interests. In valuing a corporation, a court should consider proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court such as net asset values, market price, earnings, and the like.

B. Definition of "Going Concern" and Normalization of EBITDA:

The "fair value" of a business should be determined based on the value of that business as a going concern. The term "going concern" is generally understood to refer to a commercial enterprise actively engaging in business with the expectation of indefinite continuance. In the valuation context, it is generally used in contradistinction to a business that will be liquidated. Essentially, it requires an appraisal to assume the continued operation of the same type and size of business and to exclude consideration of any merger or liquidation.

C. Compensation for Past Misconduct:

Entry of an order directing the purchase of minority shareholdings pursuant to Fla. Stat. § 607.1436 requires the dismissal of the underlying petition for dissolution pursuant to § 607.1430. § 607.1436(6). However, courts have clarified that "fair value" still ought to take into account any effect thereupon of corporate asset waste or other harm caused by mismanagement.

In a comparable sales analysis, corporate waste would affect the estimation of fair value in that it would result in higher expenses, which would, in turn, yield a lower operating margin. Normalizing the operating margin according to that of comparable businesses for any distortion caused by greater than normal expenses.

D. Prejudgment Interest:

Section 607.1436(5) provides that the valuing court "may" award interest "at the rate and from the date determined by that court to be equitable. The statute further provides that "no interest shall be allowed" when the petitioning shareholder has acted arbitrarily or in bad faith by turning down a purchase price or otherwise lengthening the proceedings. In other words, giving the statutory language its plain and ordinary meaning, the only limit on the court's discretion to award prejudgment interest on the value of shares to be purchased arises when the minority shareholder at issue has acted in bad faith.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder abuse, exploitation and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

Various Types of Investment Risk - South Florida Corporate and Business Attorney

South Florida, including Boca Raton, Delray Beach and West Palm Beach Business and Corporate Attorney:

Risk is defined by Webster's Dictionary as "the chance of injury, risk or loss." In the investment arena risk can be defined in a number of ways:

  • with respect to fluctuating market values of securities and portfolios, risk means the exposure to uncertainty, which is manifest as variability (or, synonymously, volatility), and is measured by standard deviation.
  •  the uncertainty related to the outcome of an investment
  • the variability of returns from an investment
  • in its stricter and narrower sense, risk means the potential for loss of value.

When you are establishing your financial objectives, it is important for you to consider the amount of risk that you would be willing to expose your financial plan to in order to achieve your financial goals. It is for this reason, when you open your brokerage account, the account executive is required to review with you, among other things, your investment objectives, including risk. By way of example, I recently was looking at a new account document, which provided the following risk choices for the client to choose from: (1) safety of principal, (2) growth, (3) aggressive growth and (4) speculation (please note that some of these terms are also associated with the underlying investment objective). Usually these terms are not defined in the new account documents that are signed when your account is opened. Consequently, it is important for you and the account executive to have a meeting of the minds concerning these terms. Clearly, if you have a risk tolerance of growth, you don't want the account executive soliciting your investment in a speculative security.

When discussing risk with your account executive, some of the commonly encountered types of risk that will or should be highlighted are:

  1. Business risk - includes the uncertainty that pertains to a company's sales and earnings, namely, that a company generates poor sales and earnings for a period of time. By their nature, some companies are riskier than others, and the riskier companies usually see greater fluctuation in their sales and earnings.
  2. Management risk - includes the stability of management and the effect that it has had on sales, earnings, and future growth.
  3.  Financial risk - is the inability of a company to meet its financial obligations. One of the ways that financial risk can be measured is by the amount of debt that the company holds in relation to its equity. A company with a high proportion of debt relative to its assets has an increased likelihood that at some in time it may be unable to meet its principal and interest obligations.
  4. Unsystematic risk - is the risk, specific to a company or industry. This risk pertains to a company's business, its operations, and its finances.
  5. Market risk - refers to the movement of securities prices, which tend to move together in reaction to external events, unrelated to a company's fundamentals. Market risk is the risk that market pressures will cause an investment to fluctuate in value. Many investors believe that although you can diversify investments to virtually eliminate business, financial and operating risks, you cannot do the same with market risk. Diversification does not provide a safety net when an external event causes a decline in the stock markets.
  6.  Interest rate risk - is the rise or fall in interest rates that affects the market value of investments. Interest rate risk refers to changes in market rates of interest, which affect all investments.
  7. Inflation risk - is the risk that changes in consumer prices will erode the future purchasing power of returns from investments. If prices in the economy rise (inflation), your future dollars will purchase fewer goods and services than they do today.
  8.  Event risk - is broadly defined as the possibility of the occurrence of an event specific to a company that could affect its bond and stock prices. Event risk can arise from a number of factors such as political upheaval, government intervention, natural disasters etc.
  9. Exchange rate risk - is the risk that the exchange rate of a currency could cause an investment to lose value. An increase in the value of the dollar against a foreign currency could decimate any returns and result in a loss of capital when the foreign securities are sold.
  10.  Liquidity risk - is the risk of not being able to convert an investment into cash quickly without the loss of a significant amount of invested principal. Certain securities are more liquid than others; the greater the liquidity, the easier it is to buy and sell the investment.

A direct correlation exists between risk and return: The greater the risk, the greater is the potential return. However, investing in securities with the greatest return and, therefore, the greatest risk can lead to financial ruin if everything does not go according to plan. It is for this reason that you have agreement between you, as the investor, and your account executive as to the level of risk that you are comfortable with. Also, depending on any number of factors, the risk that you are willing to take may increase or decrease with time or circumstances. In such a case, it is imperative that you communicate this change, in writing, to you account executive.

Please keep in mind that risk is not only related to a particular security or industry segment but also to the overall trading strategy that is employed in your account. If you believe that you have suffered damages as a result of broker fraud or misconduct relating to the degree of risk associated with the operation of your account, please contact the law office of Russell L. Forkey for your initial consultation.

The primary focus of this article relates to the relationship between a customer and his broker.  However, many of the concepts concerning risk apply equally to simply investing directly in a small to large business venture.

FAQ's Preferred Stocks - Boca Raton, Florida Corporate and Business Attorney

Boca Raton, Fort Lauderdate, and West Palm Beach, Florida Preferred and Common Stock Corporate and Business Attorney:

FAQ's Preferred Stocks:

When a corporation is created, the incorporators are required to issue common stock as holders of the common stock own the company and by executing their voting rights control the company through their election of officers and directors.

At the time that a corporation is created, the incorporators in the certificate of incorporation may authorize the company to issue preferred stock. If the initial articles of incorporation do not provide for the issuance of preferred stock, the common stockholders can vote to amend the articles of incorporation, at sometime in the future, to authorize the company to do this.

Most average investors have dealt in or heard only about preferred stock that is traded on an exchange, which is purchased through broker/dealers. However, there is an investment sub-culture that utilizes preferred stock in seeking to raise venture capital for start-up companies. In this latter circumstance, the preferred stock is not registered. Consequently, these shares may only be offered or sold in a transaction, which makes the shares exempt from registration such as Regulation D. However, this article is not designed to discuss this issue.

Even though the articles of incorporation of a company authorized the issuance of preferred stock, the company still has to create a document establishing the terms pursuant to which the preferred stock will be issued. This document is called a "certificate of designations, preferences and rights." A copy of this document can usually be obtained from the corporate department of the state in which the corporation is incorporated.

What is preferred stock? Preferred stock is a hybrid security that combines features of common stocks and bonds. It is equity, not debt, however, and is thus riskier than bonds. Preferred stock pays a fixed dividend and in the event of bankruptcy is senior to the claims of common stock on the earnings and assets of a company. Preferred stock, like common stock, also represents an equity ownership in a company. Equity is defined as capital invested in a company by its owners; debt is capital lent to the corporation, which must be repaid.

Although preferred stock is classified as equity, preferred stockholders do not have an ownership interest in the company. The failure of a company to pay dividends to preferred stockholders does not result in bankruptcy as it would with the default of interest on bonds. Instead, the company does not pay common stockholders and dividends until the preferred stockholders are paid their dividends.

Are there multiple classes of preferred stock?: Most companies have only one class of common stock, but it is quite common to see companies with more than one series of preferred stock. Each class of preferred stock has different features. It is for this reason that, as an investor, you need to make sure that you understand what the exact terms of your series of preferred stock are.

What are cumulative dividends?" Most preferred stock carries a cumulative dividend feature, which is a provision requiring a company to pay any preferred dividends that have not been paid in full before the company can pay dividends to its common stockholders. Also, one series of preferred stock may have dividend preference over another series of preferred stock. A [referred issue that does not have a cumulative feature is called a noncumulative preferred stock. Their dividends do not accumulate if they are not paid.

Does preferred stock have convertible feature?: Some preferred stock issues have a convertible feature that allows holders of preferred stock to exchange their preferred stock for common shares. The conditions of the conversion are set when the preferred stock is first issued. The terms include the conversion ratio, which is the number of common shares the preferred stockholder will get for each preferred share is exchanged, and the conversion price of the common stock.

Some of the factors that must be considered in the decision to exercise the conversion option depend on:

•· The market price of the common stock.

•· The amount of the preferred dividend

•· The amount of the common dividend

What is a call provision?

A preferred stock issue with a call provision entitles the issuing company to repurchase the stock at its option from outstanding preferred stockholders. The call price is generally more than the preferred stock's par value. The call provision is advantageous to the issuing company and not to the holder of the preferred stock. When market rates of interest decline significantly below the dividend rate of the preferred issue, companies are more likely to exercise the call provision by retiring the issue and replacing it with a new preferred stock issued with a lower dividend rate. When a preferred issue is called, the savings to the issuing company represent a loss of income to the preferred stockholders.

Please keep in mind that the above information is being provided for educational purposes only. It is not designed to be complete in all material respects. Thus, it should not be relied upon as legal or investment advice. If you have any questions concerning the contents of this post, you should contact a qualified professional.

Oil and Gas Private Offerings - Risks - What Could Possibly Go Wrong?

Boca Raton, Florida Oil and Gas Private Offering Litigation and Arbitration Attorney:

What could possibly go wrong with an oil and as private offering?

The oil and gas industry is often in the news.  Because of this, some people have used the appeal of "striking it rich" with a gushing well as a basis for fraudulent schemes.  The SEC and the states have brought a number of cases involving "great opportunities" that turned out to be scams. Investors lost some or all of their investments.  Many scams shared the same themes.

Investing to support drilling and completion operations.  The SEC has investigated many oil and gas offerings that claimed they were about to strike oil or gas and they just needed some investment to pay for drilling and completion. The promoter often doesn't tell you, however, that he owns the drilling company or plans to hire a driller at far less than what he's told you the drilling costs will be while pocketing the difference. The promoter makes money from you even if the well comes up dry.

Undisclosed use of proceeds.  In several cases, the SEC alleged misrepresentations about what the invested funds were going to be used for. Misrepresentations and omissions about uses of investors' monies included (i) paying big sales fees to brokers, (ii) the nature and size of compensation to the promoter and employees of the venture, (iii) operating and other expenses for unrelated businesses and (iv) using the money to pay for personal items.

Overinflated or misrepresented prospects and claims.  One common thread among all fraudulent schemes, including those related to oil and gas, are claims that they are about to strike it rich, or that it is likely or even guaranteed that the returns will be too good to pass up. When you hear this sales pitch, you should be very skeptical about high returns with little risk that are just around the corner. Higher returns typically mean higher risks of loss.

Common red flags:

• Sales pitches referring to recent news events like high oil or gas prices.

• "Can't miss" wells and "guaranteed" returns, including claims that major oil and gas companies are drilling nearby.

• Abnormally high rates of return.

• Unsolicited materials.

• Sales tactics that pressure you to decide, like "limited" or "once-in-a-lifetime" opportunity.

• Sales pitches touting new technology, especially if it relates to getting higher production out of low-producing wells (sometimes called "stripper" wells).

• Salesperson claims to be an investor.

• Being asked to sign documents acknowledging that the securities laws do not apply to the investment.

What should You ask?

Analyzing an oil and gas investment may involve highly technical matters, such as geological findings and new drilling technologies, making it difficult for many individual investors to fully understand.  Also, the only information that you have may be coming from the promoter. You may receive a private placement memorandum detailing the venture's management, its drilling prospects and plans, the terms of the venture and investment, and basic financial statements for the usually new venture.  As a start, if you aren't given anything in writing, then you should be very skeptical.

You should ask questions until you are satisfied with the answers.  Don't just accept promises of low risk for high returns.  Remember, it is your money and you shouldn't let anyone pressure you into purchasing an investment that you don't understand.  Here are some things to ask about and consider if you're thinking about investing in an oil and gas venture:

  1. Use of proceeds. What is my money going to be used for? Can you estimate how much of the money you raise will be used for each of your needs, such as drilling operations, administrative overhead and broker sales fees? If sales fees will be paid, how are those fees calculated? It is reasonable to expect the company raising the money to have plans for it, particularly if the persons involved have prior industry experience. Otherwise, why are they raising that specific offering amount? If broker sales fees are being paid, you should know that registered brokers are subject to rules and regulations including the amount of sales fees they can charge.
  2. Related parties. Are you hiring another company to drill or do any other work? Is there any relationship between these companies and the promoters and principals in the venture? How much is the promoter going to make even if we drill a dry hole? Remember that the persons involved in the offering can do quite well for themselves when the investment funds are used, for example, to pay themselves or to hire a company they own to do the drilling. They get paid even if the well is dry. Remember too that a promoter who makes his money on the front-end of a deal-that is, from selling the investment to you and benefiting from the proceeds-rather than on the fortunes of the venture-namely the actual production from the well-does not have the same interest as investors like you whose only hope to gain is from a successful well. You should be wary of any oil and gas investment where the promoter's interests are not aligned with yours.
  3. Prior experience. What is your track record in the oil and gas industry? Have you had experience with this particular well location? In some cases brought by the SEC involving oil and gas offerings, the promoters have claimed extensive prior experience and success in the industry. These claims were made to stop investors like you from asking questions. Instead, you should try to independently verify any claims. Ask for references.
  4. Well history. Is there a prior history of drilling where you are drilling? If someone drilled there before, how much did they get out and what makes you think you can get any more out? If the area proved dry before or has not been drilled, why do you think there's something there? A lot of new oil and gas is found in the United States today because of improved ways of drilling, such as hydraulic fracturing (i.e., fracking) and horizontal drilling. These improvements often require specialized expertise and may cost a lot.
  5. Third-party report. Did you get a third-party engineering report for the site? Can I see the report? Some operators may employ the expertise of independent third-party engineers and geologists to decide whether it makes sense to drill in an area. If the promoter says there is a report, but doesn't allow you to see it, you may want to consider it a red flag. You should also consider whether the engineer or geologist is truly independent. Promoters sometimes use reports prepared by the same engineers that sold them the project or by engineers they employ or use repeatedly.
  6. Reserves.  If the offering materials discuss reserves, what types of reserves are being estimated? Who determined these reserve estimates? Were they audited or reviewed by an independent third party? Can you review the audit? The use of terms such as "reserves" makes it sound like a sure thing. However, reserves in the oil and gas industry are not so certain and can vary a lot. Reserves can be "proved," "probable" or "possible." Proved reserves are relatively certain. Probable and possible reserves can mean, in short, a 50% to 10% chance of extracting the estimated amount. Though not required, some oil and gas ventures do have their reserve estimates audited.

Keep in mind that if the investment opportunity is an outright fraud, the written materials may look legitimate and every question you have about the opportunity may be answered to your satisfaction, but that doesn't make any of it true. It is important to conduct your own independent research. One good way to do that may be to engage an investment professional specializing in oil and gas.

Please keep in mind that the above is being provided for educational purposes only.  It is not designed to be complete in all material respects.  If after reading this post you have any questions, you should contact a qualified professional.

Sale of Unregistered Securities - Boca Raton, Florida Investment and Securities Litigation and Arbitration Attorney

Boca Raton, Florida Sale of Unregistered Securities Litigation and Arbitration Attorney:

Securities and Exchange Commission v. Caledonian Bank Ltd., et al., Civil Action No. 15-CV-00894

The Securities and Exchange Commission has charged five offshore entities with offering and selling unregistered penny stocks into the public markets.

According to the SEC's complaint filed on February 6, 2015, Cayman Islands-based, Caledonian Bank Ltd. and Caledonian Securities Ltd., Belize-based, Clear Water Securities, Inc. and Legacy Global Markets S.A., and Panama-based, Verdmont Capital S.A. (collectively, the "Defendants") conducted unregistered sales of securities, reaping over $75 million in illegal sales proceeds. Simultaneous with filing its complaint, the SEC obtained an emergency court order freezing assets of the Defendants located in the United States.

The SEC alleges that the Defendants sold penny stocks in unregistered distributions from their U.S. brokerage accounts of four shell company issuers, namely, Swingplane Ventures, Inc., Goff Corp., Norstra Energy Inc. and Xumanii, Inc. Each of the unregistered distributions took place through virtually the same scheme. The issuers first filed with the Commission bogus Forms S-1 that purported to register sales of securities to public investors when, in fact, no bona fide sales occurred because the securities purportedly sold remained in the control of the issuers and their affiliates. In the sham offerings, the issuers pretended to sell securities to investors residing in such places as Serbia, Mexico, Ireland, Norway, Panama, and Jamaica, while the issuers or their affiliates maintained control and possession of the stock certificates in a scheme where: (1) restricted stock was passed off as "free trading" unrestricted stock; (2) the share certificates issued were subsequently transferred, without restrictive legends, to the Defendants; and (3) the Defendants deposited the shares into their U.S. brokerage accounts and sold the shares to the public.

The complaint further alleges that the issuers or their affiliates directed the transfers of restricted securities to the Defendants, often through various offshore nominee entities intended to conceal beneficial ownership of the securities. Once the shares, which were controlled throughout by the issuers or its affiliates, were held in names of the Defendants, the shell company issuers announced a reverse-merger or business combination with a purportedly operating enterprise. The Defendants then offered and sold into the public markets hundreds of millions of shares of the four issuers in unregistered distributions simultaneously with aggressive and extensive promotion campaigns. Each of the four stocks lost virtually all of their market value within months of the unregistered sales. In doing so, the complaint alleges that the Defendants operated as affiliates, dealers, sales outlets and underwriters by offering and selling the penny stocks from brokerage accounts in the United States.

The SEC's complaint, which was filed in the U.S. District Court for the Southern District of New York, seeks, among other things, to permanently enjoin the Defendants from violating Section 5(a) and 5(c) of the Securities Act of 1933, prohibiting the Defendants from participating in an offering of penny stock, the disgorgement of all proceeds obtained in the unregistered distributions, and civil penalties.

Following the SEC's complaint, the Cayman Islands Monetary Authority issued a public notice on February 10, 2015 advising that it appointed two Controllers to assume control of the affairs of Caledonian Securities Limited and Caledonian Bank Limited. That same day, Caledonian Bank's shareholders voted to place the bank into voluntary liquidation.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder abuse, exploitation and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

Boca Raton, Florida Senior, Retirement and Elder Financial Abuse and Financial Exploitation Attorney

Boca Raton, Florida Senior, Retirement and Elder Financial Abuse and Financial Exploitation Attorney:

Social Media and Investing - Tips for Seniors:

More and more older Americans are using social media every day, including to help guide investment decisions. Whether it is to research particular stocks, to find background information on financial professionals, to gather up-to-date news, or to discuss the markets with others, social media - web-based platforms that allow interactive communication, such as Facebook, YouTube, Twitter, LinkedIn, bulletin boards, and chat rooms - has become an important investing tool. While social media can provide many benefits, it also presents opportunities for fraudsters targeting older Americans. As a result, seniors need to proceed with caution when using social media as part of their investment process. The following tips can help.

Tips to Help Avoid Investment Fraud Online:

The key to avoiding investment scams on the Internet is to be an educated investor. Below are five tips to help seniors avoid securities fraud:

1. Look out for "Red Flags":

Wherever you come across a recommendation for an investment on the Internet, the following "red flags" should cause you to use caution in making an investment decision:

It sounds too good to be true. Any investment that sounds too good to be true probably is. Be extremely wary of claims on the Internet that an investment will make "INCREDIBLE GAINS" or is a "BREAKOUT STOCK PICK." Claims like these are hallmarks of extreme risk or outright fraud.

The promise of "guaranteed" returns with little or no risk. Every investment entails some level of risk, which is reflected in the rate of return you can expect to receive. Most fraudsters spend a lot of time trying to convince investors that extremely high returns are "guaranteed" or that the investment "can't miss." Don't believe it.

Offers to invest outside the United States. You should carefully examine any unsolicited offer to invest outside of the United States. Many fraudsters set up operations outside the United States to make it more difficult for regulators to stop their fraudulent activity and recover their victims' money. This is especially true in today's investment environment. By way of example, land fraud in foreign countries is on the rise.

Pressure to buy RIGHT NOW. Don't be pressured or rushed into buying an investment before you have a chance to think about - and investigate - the "opportunity." Be especially skeptical of investments that are pitched as "once-in-a-lifetime" opportunities.

2. Be Wary of Unsolicited Offers:

Investment fraud criminals look for victims, including seniors, on the Internet. If you see a new post on your wall, a tweet mentioning you, a direct message, an e-mail, or any other unsolicited - meaning you didn't ask for it and don't know the sender - communication regarding a so-called investment opportunity, you should exercise extreme caution. An unsolicited sales pitch may be part of a fraudulent investment scheme

3. Look out for "Affinity Fraud":

An investment pitch made through an online group of which you are a member, or on a chat room or bulletin board catering to an interest you have, may be an affinity fraud. Affinity fraud refers to investment scams that prey upon members of identifiable groups, often seniors, religious or ethnic communities, professional groups, or combinations of those groups. Even if you know the person making the investment offer, be sure to check out everything - no matter how trustworthy the person seems who brings the investment to your attention. Remember, the person making you the offer may not know that the investment is a scam.

4. Be Thoughtful About Privacy and Security Settings:

Seniors who use social media as a tool for investing should be mindful of the various features on these websites that can help protect privacy. Understand that unless you guard personal information, it may be available not only to your friends, but for anyone with access to the Internet - including fraudsters.

5. Ask Questions and Check Out the Answers:

Be skeptical. Never judge a person's integrity, or the merits of an investment, without doing thorough research on both the person selling the investment and the investment itself. Investigate the investment thoroughly and check the truth of every statement you are told about the investment. You can check out many investments using the SEC's EDGAR filing system or through your state's securities regulator. You can check out registered brokers at the Financial Industry Regulatory Authority's (FINRA) BrokerCheck website and registered investment advisers at the SEC's Investment Adviser Public Disclosure website. Finally a simple internet search might be all that you need to do.

6. A Few Common Investment Scams Using Social Media and the Internet:

While fraudsters are constantly changing the way they approach victims on the Internet, there are a number of common scams of which you should be aware. Here are a few examples of the types of schemes you should be on the lookout for when using social media:

"Pump-and-Dumps" and Market Manipulations:

"Pump-and-dump" schemes involve the promoting of a company's stock (typically small, so-called "microcap" companies) through false and misleading statements to the marketplace, in order to sell the cheaply purchased stock at a higher price. These false claims could be made on social media such as Facebook and Twitter, as well as on bulletin boards and chat rooms.

Fraud Using "Research Opinions," Online Investment Newsletters, and Spam Blasts:

While legitimate online newsletters may contain useful information about investing, others are merely tools for fraud. Some companies pay online newsletters to "tout" or recommend their stocks. Touting isn't illegal as long as the newsletters disclose who paid them, how much they're getting paid, and the form of the payment, usually cash or stock. But fraudsters often lie about the payments they receive and their track records in recommending stocks.

High Yield Investment Programs:

The Internet is awash in so-called "high-yield investment programs" or "HYIPs." These are unregistered investments typically run by unlicensed individuals - and they are often frauds. The hallmark of an HYIP scam is the promise of incredible returns (30 or 40 percent - or more) at little or no risk to the investor.

Internet-Based Offerings:

Offering frauds come in many different forms. Generally speaking, an offering fraud involves a security of some sort that is offered to the public, where the terms of the offer, such as the likelihood of a return, are materially misrepresented.

What Seniors Should Know About Professional Designations:

Some financial professionals use social media to attract new clients. These financial professionals may use designations such as "senior specialist" or "retirement advisor" to imply that they are experts at helping seniors with financial issues. Seniors should be aware that some of these titles require little or no training or education.

In some cases, a financial professional may need to study and pass several rigorous exams-after working in a designated field for several years-to receive a particular designation. In other cases, it may be relatively easy in terms of time and effort to receive a "senior" designation, even for an individual with no relevant experience. We encourage you to always look beyond a financial professional's designation and determine whether he or she can provide the type of financial services or product you need. You should thoroughly evaluate the background of anyone with whom you intend to do business-before you hand over your hard-earned cash.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder abuse, exploitation and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

Typical Precious Metals Telemarketing Sales Script - Boca Raton, Florida Investment Fraud and Securities Misrepresentation Attorney

South Florida, including Boca Raton, West Palm Beach and Fort Lauderdale, Precious Metals and Securities Fraud and Misrepresentation Attorney:

The below script gives the reader a flavor of what might be said in a typical unsolicited call from a precious metals telemarketer. However, please keep in mind that this is a generic example. Many varaiations of this exist as do materials which have been prepared to assist the telemarkerter in over comming any objection or negitative question that you might have.

TYPICAL TELEMARKETING PRECIOUS METALS SCRIPT

Hello _________________, my name is ________________ and I'm a Senior

Account Executive with _____________________________, our license number is TC __________________, my TP license number is _________________

(insert salesperson's license number). I'm glad I was able to reach you.

The reason for the call is that I'm in the process of sending you a special marketing report on the gold/silver/palladium/cooper/platinum market. Now ________________, have you ever invested in precious metals before?

Do this: grab a pen and paper, jot down my name and you can contact me toll free (888) __________. Let me know when you're ready. (Give name and phone number).

Right now, my company believes that silver/gold/palladium/cooper/platinum is poised to rise in price over the next 6 months. Now follow me closely on this.

First-you still have that pen, right? (Excellent). Draw a dollar sign, and beside it draw an arrow pointing down. Got it? (Great).

Now, the U.S. dollar has fallen in value over the past few years and, as a result, silver/gold/palladium/cooper/platinum has risen to multi-year highs....and because of their relationship, as the dollar loses value, these metals gain value. Do you follow me? Additionally, top analysts round the globe feel that we are entering a time similar to the seventies when paper assets fell out of favor in place of hard assets. With the twin deficits growing to historic proportions, it's been anticipated that in the next few years, we will experience a massive slide in the value of the U.S. Dollar. So what do you think is going to happen to the price of metal as the U.S. dollar continues to take its blows? Absolutely! In fact, most of the leading analysts are calling for $__/oz. Silver/gold/palladium/cooper/platinum by years end!

Second, there is a major supply and demand imbalance in silver/gold/palladium/cooper/platinum. With countries like China and India growing at the fastest rate in history, the demand in metals continues to increase, what do you think will happen to the price? Exactly! It is just that simple.

Third, we also look at global mishaps. We have war continuing in the Middle East, we have the threat of nuclear capability from Iran and Korea, and ongoing worries concerning Al-Qaeda's next strike....All of these factors have created a frenzy of investors seeking a safe haven to invest in, and for thousands of years that safe haven has always been precious metals. _______________, if everyone is afraid of global political tensions and continuing to stockpile precious metals, how do you think this will affect the price? Absolutely! Does that make sense to you/

Now let me show you how our program works.....we use a (3) step approach. Follow me closely.

First, it takes advantage of long-term trends as well as short-term movements in the market. You want a firm that isn't married to the market. If we find additional opportunities in the other markets we want to remain flexible so you, as our customer, can capitalize on those situations.

Second, it gives you the flexibility of utilizing fundamental and technical analysis.

Last, and most important, the commission is only 15% of the total metal value and paid only once for the lifetime of the account, meaning the metal you purchase can be bought and sold as many times as you choose with no additional commission. You will not be charged a fee until your agreement for services is returned signed and until your first investment is made. Now, we provide all of the research for you. Our job is to guide you through the market.

Now, ____________, of course I can't guarantee you profits. So, ___________, because investments like these aren't for everyone, let me ask you again....can you truly afford and risk and investment of $_____________, without changing your lifestyle? (Wait for answer, and re-qualify if necessary for suitability, interest, age, occupation, income, experience, etc.....) That's great! Do you have any other questions right now about our Precious Metals Program?

Being what the mail is these days, you can assume that it will take two to three days to receive our information. What address do you want it sent to? My firm requires me to provide full disclosure to all considering parties. Will anyone else be involved in the decision making process? (Wait for answer).

After you review the program and materials, and I've answered all of your questions to your satisfaction and you truly understand how the program works, can you see yourself getting involved? That's good enough for me! And don't forget, write down any questions that you have and get back to me on my toll-free number (888) __________.

Now, I've explained the reasons but it's important that I also explain exactly who we are because it's important to know exactly whom you are dealing with, right? Besides, I wouldn't take you aboard as a customer unless you knew the answer to that question. The firm I represent is _____________. We specialize in finding fundamental and technical situations throughout the precious metals markets. We don't trade options or risky futures contracts. We deal only with tangible, physical assets- in this case, bars, bullion and coins. Do you understand me so far?

Great! My secretary is going to send you research material, news articles and some risk disclosures so you can fully understand the market we're going into. Do you follow me?

Now, based on this information and potential opportunities that exist within this market- it made sense to you-what dollar amount could you work with?

Please jot down a couple of facts to correlate with the package I'm sending you. I want you to make a decision based on the facts and not emotion; does that make sense to you? Excellent!

One of the greatest advantages of trading in precious metals is the ability to use leverage. Are you currently utilizing leverage in the stock market, or do you typically buy and hold on a one to one basis? Follow me closely on this. THIS IS THE KEY!

We are discussing an investment of $______________- jot that down. Now with metal at $___ an ounce, on a one to one basis, you would only be able to purchase _______ounces.

However, with leverage factor of 2 ½ times, we have the ability to leverage _________ ounces of your metal. So you would be leveraging $________ in bullion. And that's the beauty of it; we have the potential to make money on what we leverage, not the amount we invest. Do you follow me? Now, every time your metal moves $1 dollar, you make $_______ minus commission and fees. Does this make sense to you? Write that down. Great!

Some quick math....write down$25; below it write $18... what's the difference? Exactly! It's simple math.

What is $7 x _____(=# of ounces)? What do we get? Yes! A gross potential profit minus commission and fees. Any questions?

And once again, there are no guarantees, which is why we only recommend risk capital for this purchase. Is that clear? Great!

Pursuant to Florida Statutes, you may cancel the Agreement we have you sign within three (3) business days upon receipt of confirmation. Please understand that no purchases will be made, or any markets invested into, until the required 3 business days have passed.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder abuse, exploitation and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

South Florida Investment Fraud and Misrepresentation Litigation and Arbitration Attorney

South Florida Investment Fraud and Misrepresentation Litigation and Arbitration Attorney:

SEC Charges Oppenheimer With Securities Law Violations Related to Improper Penny Stock Sales

The Securities and Exchange Commission recently charged Oppenheimer & Co. with violating federal securities laws while improperly selling penny stocks in unregistered offerings on behalf of customers.

Oppenheimer agreed to admit wrongdoing and pay $10 million to settle the SEC's charges. Oppenheimer will pay an additional $10 million to settle a parallel action by the Treasury Department's Financial Crimes Enforcement Network (FinCEN).

According to the SEC's order instituting a settled administrative proceeding, Oppenheimer engaged in two courses of misconduct. The first involved aiding and abetting illegal activity by a customer and ignoring red flags that business was being conducted without an applicable exemption from the broker-dealer registration requirements of the federal securities laws. The customer was Gibraltar Global Securities, a brokerage firm in the Bahamas that is not registered to do business in the U.S. Oppenheimer executed sales of billions of shares of penny stocks for a supposed proprietary account in Gibraltar's name while knowing or being reckless in not knowing that Gibraltar was actually executing transactions and providing brokerage services for its underlying customers, including many in the U.S. The SEC separately charged Gibraltar in 2013 for its alleged misconduct.

The SEC's order finds that Oppenheimer failed to file Suspicious Activity Reports (SARs) as required under the Bank Secrecy Act to report potential misconduct by Gibraltar and its customers, and the firm failed to properly report, withhold, and remit more than $3 million in backup withholding taxes from sales proceeds in Gibraltar's account. Oppenheimer also failed to recognize the resulting liabilities and expenses in violation of the books-and-records requirements, and improperly recorded transactions for Gibraltar's customers in Oppenheimer's books and records.

According to the SEC's order, the second course of misconduct involved Oppenheimer again engaging on behalf of another customer in unregistered sales of billions of shares of penny stocks. The SEC's investigation, which is continuing, found that the sales generated approximately $12 million in profits of which Oppenheimer was paid $588,400 in commissions. The firm's liability stems from its failure to respond to red flags and conduct a searching inquiry into whether the sales were exempt from registration requirements of the federal securities laws, and its failure reasonably to supervise with a view toward detecting and preventing violations of the registration provisions.

The SEC's order requires Oppenheimer to cease and desist from committing or causing any violations and any future violations of Section 15(a) and 17(a) of the Securities Exchange Act of 1934 and Rules 17a-3 and 17a-8, and of Section 5 of the Securities Act of 1933. In addition to the monetary remedies, Oppenheimer agreed to be censured and undertake such remedial measures as retaining an independent consultant to review its policies and procedures over a five-year period.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder abuse, exploitation and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

Frederic Elm and Elm Tree Investment Advisors - Boca Raton, Florida Securities and Investment Fund Fraud and Misrepresentation Attorney

Boca Raton, Florida Securities and Investment Fund Fraud and Misrepresentation Litigation and Arbitration Attorney:

Securities and Exchange Commission v. Frederic Elm f/k/a Frederic Elmaleh, et al., Case No. 15-cv-60082-DIMITROULEAS/SNOW

SEC Charges Investment Adviser and Manager in South Florida-Based Fraud

The Securities and Exchange Commission recently announced fraud charges and an asset freeze against a Fort Lauderdale, Florida-based investment adviser, its manager, and three related funds with defrauding investors in a scheme that raised more than $17 million since November 2013.

The SEC's complaint, filed in federal court in the Southern District of Florida on January 15, 2015, charged Elm Tree Investment Advisors LLC, its founder and manager, Frederic Elm, and three funds, Elm Tree Investment Fund LP, Elm Tree "e"Conomy Fund LP, and Elm Tree Motion Opportunity LP.  According to the complaint, Elm, formerly known as Frederic Elmaleh, his unregistered investment advisory firm, and three funds misled investors and used most of the money raised to make Ponzi-like payments to the investors.  The complaint also alleges that Elm treated the funds as his personal piggy bank, tapping them to buy a $1.75 million home, luxury automobiles, jewelry, and cover daily living expenses. Elm's wife, Amanda Elm, formerly Elmaleh, is named as a relief defendant based on her receipt of investor monies.

The SEC's complaint charges Elm, his advisory firm and the Elm Tree funds with violating Section 17(a) of the Securities Act of 1933 as well as Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint also charges Elm and ETIA with violations of Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8.  The SEC is seeking relief for investors, including return of allegedly ill-gotten gains, with interest, and financial penalties.

The Honorable William Dimitrouleas on January 16 granted the SEC's request for a temporary restraining order and temporary asset freeze against Elm, his firm, and the three Elm Tree funds. The judge ordered a temporary asset freeze against Amanda Elm and required her and the other defendants to provide accountings. Judge Dimitrouleas also entered an order appointing Grisel Alonso as receiver for Elm Tree Investment Advisors and the Elm Tree funds. A court hearing has been scheduled for January 29.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder abuse, exploitation and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

Shawn Peter Bishop - Stockbroker and Account Executive Theft Fort Lauderdale, Florida FINRA Arbitration Attorney

Shawn Peter Bishop - Stockbroker and Account Executive Theft Fort Lauderdale, Florida FINRA Arbitration Attorney:

The Financial Industry Regulatory Authority, Inc. (FINRA) is a self-regulatory authority assigned the responsibility, by the Securities and Exchange Commission, to license, regulate and discipline securities broker/dealers and their employees, including account executives. In the event that FINRA elects to institute an enforcement action, firms and licensed individuals have the responsibility to reflect such action on their U-4 and/or U-5 filings, which can be viewed on the FINRA website under the broker-check section of the site or by viewing the monthly disciplinary information also provided on the FINRA site.

The monthly disciplinary information is referenced on the FINRA site generally in alphabetical order. This post relates to the following company or individuals. If the reader would like to review the entire FINRA release or the broker-check information concerning this matter, you can follow these highlighted links:

December 2014 Disciplinary and Other FINRA Actions:

http://www.finra.org/web/groups/industry/@ip/@enf/@da/documents/disciplinaryactions/p602080.pdf

Broker Check: http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/

Shawn Peter Bishop (CRD #6262968, Crown Point, Indiana) submitted an AWC in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Bishop consented to the sanction and to the entry of findings that he converted funds totaling $2,000 from his teller drawer at his member firm's affiliate bank and used the funds for his personal benefit. The findings stated that Bishop returned some of the funds to his teller drawer without the bank's detection. Bishop did not have permission or authority from the bank to use the teller drawer funds for his personal benefit. (FINRA Case #2014042331701)

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder abuse, exploitation and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

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Russell L. Forkey, P.A.

1075 Broken Sound Parkway NW, Suite 103

Boca Raton, FL 33487

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Fax: 561-406-4633

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