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Russell L. Forkey

Concealing Poor Performance of Fund Assets - South Florida Securities and Investment Mismanagement Attorney

Concealing Poor Performance of Fund Assets - South Florida Securities and Investment Mismanagement Attorney

SEC Announces Fraud Charges Against Investment Adviser Accused of Concealing Poor Performance of Fund Assets From Investors

The Securities and Exchange Commission recently announced fraud charges against an investment adviser and her New York-based firms accused of hiding the poor performance of loan assets in three collateralized loan obligation (CLO) funds they manage.

The SEC's Enforcement Division alleges that Lynn Tilton and her Patriarch Partners firms have breached their fiduciary duties and defrauded clients by failing to value assets using the methodology described to investors in offering documents for the CLO funds, which have portfolios comprised of loans to distressed companies. Instead, nearly all valuations of loan assets have been reported to investors as unchanged from the time they were acquired despite many of the companies making partial or no interest payments to the funds for several years. Investors have not only been misled to believe that objective valuation analyses were being performed, but Tilton and her firms allegedly have avoided significantly reduced management fees because the valuation methodology described in fund documents would have given investors greater fund management control and earlier principal repayments if collateral loans weren't performing to a particular standard. Tilton and her firms also consequently have misled investors about asset valuations in fund financial statements.

According to the SEC's order instituting an administrative proceeding, CLO funds raise capital by issuing secured notes and using proceeds to purchase a portfolio of collateral typically comprised of commercial loans. Investors are paid based on cash flows and other proceeds from the collateral. The three CLO funds managed by Tilton and the Patriarch Partners firms are collectively known as the Zohar funds, and more than $2.5 billion has been raised from investors. Tilton's investment strategy for the Zohar funds has been to improve the operations of the distressed portfolio companies so they can pay off their debt, increase in value, and eventually be sold for a profit.

The SEC's Enforcement Division alleges that under the contractual terms of the deals, Tilton and her firms are required to categorize the value of each loan asset in monthly reports by using a specific method set forth in deal documents. To be assigned the highest category, a loan has to be current in its interest payments to the Zohar funds. The category of each asset impacts the calculation of a fund's "overcollateralization" ratio, which reflects the likelihood that investors will receive a return on their principal. If the overcollateralization ratio falls below a specific threshold, Tilton and her firms are not entitled to receive certain management fees and may be required to cede more control of fund management to investors.

The SEC's Enforcement Division alleges that rather than following the required methodology for valuing these loan assets, Tilton and her firms have maintained their control over the funds and preserved their management fees by not lowering an asset's category until she decides to cease financial support of the distressed company. Thus the valuation of an asset simply reflects Tilton's subjective assessment of the company's future. Absent an actual overcollateralization ratio test, investors aren't getting a true assessment of the actual values of their investments, which in reality have declined substantially.

The SEC's Enforcement Division further alleges that Tilton and her firms were responsible for misstatements in the quarterly financial statements of the Zohar funds. When preparing these financial statements, they failed to conduct a required impairment analysis on the assets of the Zohar funds despite disclosures stating that such analysis had occurred. They also falsely stated that assets of the Zohar funds were reported at fair value. Tilton repeatedly and falsely certified that the financial statements were prepared in accordance with Generally Accepted Accounting Principles (GAAP).

The SEC's Enforcement Division alleges that Tilton, Patriarch Partners LLC, Patriarch Partners VIII LLC, Patriarch Partners XIV LLC, and Patriarch Partners XV LLC violated Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206-4(8). Patriarch Partners LLC also is charged with aiding and abetting violations by the others. The matter will be scheduled for a public hearing before an administrative law judge for proceedings to adjudicate the Enforcement Division's allegations and determine what, if any, remedial actions are appropriate.

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.

Underwriter Due Diligence - Fact or Fiction - Boca Raton, Florida Fraudulent Underwriting Attorney

Underwriter Due Diligence - Fact or Fiction - Boca Raton, Florida Fraudulent Underwriting Attorney

Securities and Exchange Commission v. Macquarie Capital (USA) Inc. et al., Civil Action No. 15-CV-02304

SEC Charges New York-Based Brokerage Firm with Faulty Underwriting of Public Offering by China-Based Company

The Securities and Exchange Commission recently announced charges against a New York-based brokerage firm responsible for underwriting a public offering despite obtaining a due diligence report indicating that the China-based company's offering materials contained false information.

Macquarie Capital (USA) Inc., a wholly owned subsidiary of global financial services firm Macquarie Group Limited, has agreed to settle the SEC's charges by paying $15 million and separately covering the costs of setting up a Fair Fund to compensate investors who suffered losses after purchasing shares in the public offering by Puda Coal. The SEC previously charged the Puda Coal executives behind the offering fraud at the company, which is no longer in business.

The SEC also charged former Macquarie Capital managing director Aaron Black and former investment banker William Fang for failing to exercise appropriate care in their due diligence review. Black agreed to pay $212,711 and Fang agreed to pay $35,000 to settle the charges.

According to the SEC's complaint filed in federal court in Manhattan, Macquarie Capital was the lead underwriter on a secondary public stock offering in 2010 by Puda Coal, which traded on the New York Stock Exchange at the time and purported to own a coal company in the Peopleâ€TMs Republic of China (PRC). In the offering documents, Puda Coal falsely told investors that it held a 90-percent ownership stake in the Chinese coal company. Macquarie Capital repeated those statements in its marketing materials for the offering despite obtaining a report from Kroll Associates showing that Puda Coal did not own any part of the coal company. According to corporate registry filings in the PRC that Kroll accessed in its due diligence review, Puda Coal's chairman had transferred ownership of the coal company to himself and then sold nearly half of his interest to the largest state-owned investment firm in the PRC. As a result, Puda Coal no longer had any ownership stake or source of revenue.

According to the SEC's complaint, Kroll provided its report to Fang, who read it but failed to act on the information revealing that Puda Coal no longer owned the coal company. Instead, Fang circulated the report to other members of the Puda Coal deal team and stated in the e-mail that "no red flags were identified." Black, who served as one of the transaction directors on the Puda Coal deal, received the report from Fang and read portions stating that Puda Coal's chairman owned 50 percent of the coal company of which Puda Coal was claiming to own 90 percent. Black likewise failed to act on the information.

The SEC alleges that Macquarie Capital made a net profit of $4.17 million as lead underwriter on the Puda Coal offering, which sold stock to investors at a price of $12 per share. When reports about Puda Coal's false claim appeared on the Internet based on the same PRC filings that Kroll Associates accessed for its report, Puda Coal's stock price plunged as low as pennies per share.

The SEC's complaint charges Macquarie Capital, Black, and Fang with violating Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933. They agreed to settle the charges and accept permanent injunctions without admitting or denying the allegations. The settlement is subject to court approval. In addition to the monetary penalties, Black has agreed to be barred from supervisory positions in the securities industry and Fang has agreed to be barred from the securities industry, both for at least five years.

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.

Risks Associated With Option Trading - Boca Raton, Florida Investment Abuse FINRA Arbitration and Litigation Attorney

Risks Associated With Option Trading - Boca Raton, Florida Investment Abuse FINRA Arbitration and Litigation Attorney

What are some of the risks associated with trading options?

Options like other securities carry no guarantees, and investors should be aware that it is possible to lose all of your initial investment, and sometimes more. For example:

Option holders risk the entire amount of the premium paid to purchase the option. If a holder's option expires "out-of-the-money" the entire premium will be lost.

Option writers may carry an even higher level of risk since certain types of options contracts can expose writers to unlimited potential losses.

Other risks associated with trading options include:

Market Risk - Extreme market volatility near an expiration date could cause price changes that result in the option expiring worthless.

Underlying Asset Risk - Since options derive their value from an underlying asset, which may be a stock or securities index, any risk factors that impact the price of the underlying asset will also indirectly impact the price and value of the option.

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 and West Palm Beach, Florida Option Trading Abuse FINRA Arbitration and Litigation Attorney

Boca Raton and West Palm Beach, Florida Option Trading Abuse FINRA Arbitration and Litigation Attorney:

Options Trading:

Market Participants - There are generally four types of market participants in options trading: (1) buyer of calls; (2) sellers of calls; (3) buyers of puts; and (4) sellers of puts.

Opening a Position - When you buy or write a new options contract, you are establishing an open position. That means that you have established one side of an options contract and will be matched with a buyer or seller on the other side of the contract.

Closing a Position - If you already hold an options contract or have written one, but want to get out of the contract, you can close your position, which means either selling the same option you bought (if you are a holder), or buying the same option contract you sold (if you are a writer).

The following are examples of basic call and put option transactions:

Call Option: On December 1, 2014, ABC Stock is trading at $68 per share. You believe the price of ABC stock will rise soon and decide to purchase an ABC December 70 Call. The premium is $2.20 for the ABC December 70 Call. The expiration date of the option is the third Friday of December and the strike price is $70. The total price of the contract is $2.20 x 100 = $220 (plus commissions which we will not account for in this example).

Since the strike price of the call option is $70, the stock must rise above $70 before the call option is "in-the-money." Additionally, since the contract premium is $2.20 per share, the price of ABC would need to rise to $72.20 in order for you to break even on the transaction.

Two weeks later the stock price has risen to $80. As the value of the underlying stock has increased, the premium on the ABC December 70 Call has also increased to $10.20, making the option contract now worth $10.20 x 100 = $1020. If you sell the option now (closing your position) you would collect the difference between the premium you paid and the current premium $1020-$220 = $800 (minus any commission costs). Alternatively, you could exercise the option and buy the underlying shares from the writer of the call for $70 (the strike price); the writer is obligated to sell the buyer those shares at $70 even though their market value is $80.

Now, suppose you believe the price of the stock will continue rising until the expiration date and you decide to wait to sell or exercise the option. Unfortunately, the stock price drops to $65 on the expiration date. Since this is less than the $70 strike price, the option is out-of-the-money and expires worthless. This means you will have lost the initial $220 premium you paid for the options contract.

Put Option: On December 1, 2014, ABC Stock is trading at $72 per share. You believe the price of ABC stock will fall soon and decide to purchase an ABC December 70 Put. The premium is $2.20 for the ABC December 70 Put. The expiration date of the option is the third Friday of December and the strike price is $70. The total price of the contract is $2.20 x 100 = $220 (plus commissions which we will not account for in this example).

Since the strike price of the put option is $70, the stock must drop below $70 before the put option is "in-the-money." Additionally, since the contract premium is $2.20 per share, the price of ABC would need to drop to $67.80 in order for you to break even on the transaction.

Two weeks later the stock price has dropped to $60. As the value of the underlying stock has decreased, the premium on the ABC December 70 Put has increased to $10.20, making the option contract now worth $10.20 x 100 = $1020. If you sell the option now (closing your position) you would collect the difference between the premium you paid and the current premium $1020-$220 = $800 (minus any commission costs). Alternatively, you could exercise the option and sell the underlying shares to the writer of the put for $70 (the strike price); the writer is obligated to buy those shares at $70 even though their market value is $60.

Now, suppose you believe the price of the stock will continue dropping up until the expiration date and you decide to wait to sell or exercise the option. Unfortunately, the stock price rises to $75 on the expiration date. Since this is more than the $70 strike price, the option is out-of-the-money and expires worthless. This means you will have lost the initial $220 premium you paid for the options contract.

These two examples provide you with a basic idea of how options transactions may operate. Investors should note that these examples are some of the most basic forms of options. Many options contracts and the trading strategies that utilize them are much more complex. Consequently, option trading may not be suitable for a risk adverse investor.

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 a legal or investment advise.  If you have any questions concerning the above, you should contact a qualified professional.

Boca Raton, Florida Business and Construction Dispute Litigation and Arbitration Attorney

South Florida, including Boca Raton, Fort Lauderdale, West Palm Beach and Delray Beach Business and Construction Litigation and Arbitration Attorney:

The Law Office of Russell L. Forkey, P.A. handles all types of contract disputes including business and construction disputes. Business disputes include such things as breach of non-compete agreements, shareholder derivative actions, breach of employment agreements and breach of shareholder agreements. Construction disputes include disagreements between real estate developers, homeowners, general contractors and subcontractors. Construction law can be very complex and we understand those complexities. We offer our knowledge and experience and if needed, the assistance of experts to achieve the best decisions possible.

When a business or individual fails to live up to the terms of a written or an oral agreement, legal action might be necessary. Many times the issues involved are complex. It is in your best interest to choose an experienced business dispute attorney. It will be beneficial to you to find a business dispute attorney that has an established reputation and is recognized for integrity. We have been providing such services in the South Florida area for over 35 years. Our years of experience and dedication have allowed our business dispute attorneys to achieve tremendous success in the resolution of business disputes.

Whether you are an individual or a corporation, contracts are involved in many aspects of your daily activities. Businesses use contracts to create certainty in their dealing with their employees, suppliers and end-users. Individuals use contracts to also create certainty in their dealings with third parties. It is for this reason that all parties take the negotiation, drafting and execution of the contract very seriously.

Negotiation is generally defined as discussing a matter with a view towards reaching an agreement. In this process, the initial consideration that needs to be made is whether you are sufficiently competent, in the subject matter of the negotiation, to complete the process yourself or, if you are a business, with members of your staff. If you have any doubt about your ability or that of your staff or if you are dealing with complex and/or technical issues, especially if the other party is represented by an attorney or has involved other technical experts, it is strongly recommended that you retain appropriate professionals to assist you. One of the biggest mistakes that we have seen, at this stage of a business transaction, is being penny wise and pound foolish. In other words, by trying to save a few dollars at this stage of a transaction could result in unnecessary litigation expenses in the future.

Once you have your team in place and have completed the preliminary discussions concerning the agreement. The next step in the process is to have one of the parties to the transaction prepare the initial draft of the agreement. During this phase of the process, the negotiation process usually continues as the parties attempt to make sure that the agreement contains all necessary and appropriate provisions. This includes attempting to provide for both anticipated and unanticipated issues that might arise during the performance stage of the contract.

Unfortunately, once the contract has been entered into, numerous circumstances arise when one party to the agreement does not live up to all of its obligations. Sometimes these failures can be resolved by further negotiation and a written modification to the agreement. If this does not work, the aggrieved is left with no option but to file an action either seeking specific performance of the contract terms or for damages that were suffered as a result of the breach.

We represent local, regional and national clients in obtaining legal solutions in complex commercial litigation. We offer sound guidance in breach of contract disputes and other commercial disputes involving:

  • Breach of written and oral contracts
  • Partnership disputes
  • Shareholder disputes and business management agreement disputes
  • Employment contract disputes, including breach of noncompete agreements
  • Business dissolutions
  • UCC issues
  • Transaction disputes
  • Purchase order disputes
  • Commercial lease disputes
  • Unfair business and trade practices
  • Business fraud
  • Misappropriation of trade secrets
  • Lending disputes
  • Business defamation
  • Other commercial disputes

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.

Retirement Plan Fiduciary Issues for Employers - Fort Lauderdale, Boca Raton, and West Palm Beach, Florida Breach of Fiduciary Duty Litigation Attorney

Retirement Plan Fiduciary Issues for Employers - Fort Lauderdale, Boca Raton, and West Palm Beach, Florida Breach of Fiduciary Duty Litigation Attorney:

Retirement Plan Fiduciary Issues For Employers:

Even if employers hire third-party service providers or use internal administrative committees to manage the plan, there are still certain functions that can make an employer a fiduciary.

Employee Contributions:

If a plan provides for salary reductions from employees' paychecks for contribution to the plan (such as in a 401(k) plan), then the employer must deposit the contributions in a timely manner. The law requires that participant contributions be deposited in the plan as soon as it is reasonably possible to segregate them from the company's assets, but no later than the 15th business day of the month following the payday. If employers can reasonably make the deposits sooner, they need to do so.

For plans with fewer than 100 participants, salary reduction contributions deposited with the plan no later than the 7th business day following withholding by the employer will be considered contributed in compliance with the law.

For all contributions, employee and employer (if any), the plan must designate a fiduciary, typically the trustee, to make sure that contributions due to the plan are collected. If the plan and other documents are silent or ambiguous, the trustee generally has this responsibility.

Hiring A Service Provider:

Hiring a service provider in and of itself is a fiduciary function. When considering prospective service providers, provide each of them with complete and identical information about the plan and what services you are looking for so that you can make a meaningful comparison.

For a service contract or arrangement to be reasonable, service providers must provide certain information to you about the services they will provide to your plan and all of the compensation they will receive. This information will assist you in understanding the services, assessing the reasonableness of the compensation (direct and indirect), and determining any conflicts of interest that may impact the service provider's performance.

Some additional items a fiduciary needs to consider when selecting a service provider include:

  • Information about the firm itself: financial condition and experience with retirement plans of similar size and complexity;
  • Information about the quality of the firm's services: the identity, experience, and qualifications of professionals who will be handling the plan's account; any recent litigation or enforcement action that has been taken against the firm; and the firm's experience or performance record;
  • A description of business practices: how plan assets will be invested if the firm will manage plan investments or how participant investment directions will be handled; and whether the firm has fiduciary liability insurance.

An employer should document its selection (and monitoring) process, and, when using an internal administrative committee, should educate committee members on their roles and responsibilities.

Fees:

Fees are just one of several factors fiduciaries need to consider in deciding on service providers and plan investments. When the fees for services are paid out of plan assets, fiduciaries will want to understand the fees and expenses charged and the services provided. While the law does not specify a permissible level of fees, it does require that fees charged to a plan be "reasonable."  After careful evaluation during the initial selection, the plan's fees and expenses should be monitored to determine whether they continue to be reasonable.

In comparing estimates from prospective service providers, ask which services are covered for the estimated fees and which are not. Some providers offer a number of services for one fee, sometimes referred to as a "bundled" services arrangement. Others charge separately for individual services. Compare all services to be provided with the total cost for each provider. Consider whether the estimate includes services you did not specify or want. Remember, all services have costs.

Some service providers may receive additional fees from investment vehicles, such as mutual funds, that may be offered under an employer's plan. For example, mutual funds often charge fees to pay brokers and other salespersons for promoting the fund and providing other services. There also may be sales and other related charges for investments offered by a service provider. The information provided by service providers noted above should include a description of all compensation related to the services to be provided that the service providers expect to receive directly from the plan as well as the compensation they expect to receive from other sources.

Who pays the fees? Plan expenses may be paid by the employer, the plan, or both. In addition, for expenses paid by the plan, they may be allocated to participants' accounts in a variety of ways. In any case, the plan document should specify how fees are paid.

Monitoring A Service Provider:

An employer should establish and follow a formal review process at reasonable intervals to decide if it wants to continue using the current service providers or look for replacements. When monitoring service providers, actions to ensure they are performing the agreed-upon services include:

  • Evaluating any notices received from the service provider about possible changes to their compensation and the other information they provided when hired (or when the contract or arrangement was renewed);
  • Reviewing the service providers' performance;
  • Reading any reports they provide;
  • Checking actual fees charged;
  • Asking about policies and practices (such as trading, investment turnover, and proxy voting); and
  • Following up on participant complaints.

Providing Information in Participant-Directed Plans:

When plans allow participants to direct their investments, fiduciaries need to take steps to regularly make participants aware of their rights and responsibilities under the plan related to directing their investments. This includes providing plan and investment-related information, including information about fees and expenses, that participants need to make informed decisions about the management of their individual accounts. Participants must receive the information before they can first direct their investment in the plan and annually thereafter. The investment-related information needs to be presented in a format, such as a chart, that allows for a comparison among the plan's investment options. A model chart is available on this website. If you use information provided by a service provider that you rely on reasonably and in good faith, you will be protected from liability for the completeness and accuracy of the information.

Investment Advice And Education

More and more employers are offering participants help so they can make informed investment decisions.  Employers may decide to hire an investment adviser offering specific investment advice to participants. These advisers are fiduciaries and have a responsibility to the plan participants. On the other hand, an employer may hire a service provider to provide general financial and investment education, interactive investment materials, and information based on asset allocation models. As long as the material is general in nature, providers of investment education are not fiduciaries. However, the decision to select an investment adviser or a provider offering investment education is a fiduciary action and must be carried out in the same manner as hiring any plan service provider.

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

Advertising Unregistered Securities Offerings - Boca Raton, Florida Fraud and Misrepresentation in the Advertising of Unregistered Securities Offerings

Advertising Unregistered Securities Offerings - Boca Raton and West Palm Beach, Florida Fraud and Misrepresentation in the Advertising of Unregistered Securities Offerings Attorney:

Newly announced rules regarding advertising of unregistered securities offerings.

General advertising is permitted in certain offerings as a result of rules adopted by the SEC as required by the Jumpstart Our Business Startups (JOBS) Act. You may begin to see advertising and announcements for opportunities to invest in certain securities offerings, sometimes called private placements. These offerings may be for shares in a company or interests in a private fund, such as a hedge fund or venture capital fund. The advertising may be through a number of different means, including the Internet, social media, seminars, print, or radio or television broadcast. The rules permitting this general advertising took effect on September 23, 2013.

What is a private placement? A securities offering exempt from registration with the SEC is sometimes referred to as a private placement. Under the federal securities laws, a company or private fund may not offer or sell securities unless the offering has been registered with the SEC or an exemption, from registration, is available. Private and public companies engage in private placements to raise funds from investors. Private funds, such as hedge funds, also raise investment capital through private placements. Private placements are not subject to some of the laws and regulations that are designed to protect investors, such as disclosure requirements that apply to registered offerings. As noted above, the SEC recently adopted rules to permit general solicitation or advertising for certain securities offerings that are exempt from registration. As described below, these offerings, referred to here as Rule 506(c) offerings, must comply with a number of requirements.

Am I qualified to invest in a Rule 506(c) offering? Only accredited investors may invest in a Rule 506(c) offering. This limitation exists because these offerings do not have the same investor protections as, and have unique risks when compared to, offerings that are registered with the SEC. An accredited investor, in the context of an individual investor, is a person who: had income in excess of $200,000 (or $300,000 with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR has a net worth over $1 million, either alone or with a spouse (excluding the value of the person's primary residence or any loans secured by the residence up to the value of the residence). How will the company or private fund know whether you are an accredited investor? In a rule 506(c) offering, the company or private fund is required to take reasonable steps to verify your accredited investor status, which could include reviewing documentation, such as W-2s, tax returns, bank and brokerage statements, credit reports and the like. Depending on the circumstances, the company or private fund may rely on a written confirmation from a third party to verify your accredited investor status. The SEC does not require any specific verification method or process for companies or private funds for these offerings.

Types of third-party verification. If the company or private fund accepts a written confirmation from a third party to verify whether you are an accredited investor, the third party may be a registered broker/dealer, SEC registered investment adviser, licensed attorney or certified public accountant. The third party could be engaged by the company or private fund, or could be retained by you (e.g., your personal broker-dealer, investment adviser, attorney or certified public accountant). You can obtain information about a registered broker by visiting FINRA's BrokerCheck website. You can obtain information about an investment adviser by visiting the SEC's Investment adviser Public Disclosure (IAPD) website. You can obtain information about a licensed attorney or certified public accountant by contacting the appropriate state bar or board of accountancy.

You do not have to provide any information if you do not feel comfortable doing so. If you do not provide all of the requested information, you should not be able to invest in the particular offering if the company or private fund is unable to verify that you are an accredited investor. If the company or private fund offering the securities does not take steps to verify your accredited investor status or allows you to participate in the offering even though you do not meet the income or net worth criteria discussed above, this may be a warning sign that the company or private fund is not complying with the federal securities laws and is something to consider before investing in the offering. Investor Assistance (800) 732-0330 www.investor.gov

What should I consider when investing in private placements?

Investing in securities, including through private placements, involves risk. You can lose your entire investment.

You will not be able to sell the securities you invest in as easily as you would a publicly traded stock. You may have to hold your investment indefinitely.

You will likely be provided with less information about your investment than would be required to be disclosed to you if the securities were sold to you in an offering registered with the SEC. Companies and private funds engaging in private placements have more discretion in what information to disclose to you.

If the company or private fund does not regularly file reports with the SEC, there will likely be less information available about your investment on an ongoing basis. You should read and understand all the information that is provided to you regarding the investment, including any offering memorandum or private placement memorandum that describes the investment. Pay particular attention to any risk factors that are described to you. In addition, you should carefully consider the terms of any subscription agreement or other agreements you have to enter into for the investment. Companies and private funds engaging in a private placement generally must file a notice of sales with the SEC for each new offering by making a notice filing on what is called a Form D. These filings are required no later than 15 calendar days after the first sale of securities in the offering and contain some basic information about the company or private fund and the securities offering. Forms D are publicly available through the SEC's Edgar website.

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.

Liability of Retirement Plan Fiduciaries - South Florida Retirement Plan Attorney

South Florida Retirement Plan Attorney - Liability of Retirement Plan Fiduciaries:

Limiting Liability of Retirement Plan Fiduciaries:

As a retirement plan fiduciary, there is potential liability arising from your duties and responsibilities.  Fiduciaries who do not follow the basic standards of conduct may be personally liable to restore any losses to the plan, or to restore any profits made through improper use of the plan's assets resulting from their actions.

However, fiduciaries can limit their liability in certain situations. One way fiduciaries can demonstrate that they have carried out their responsibilities properly is by documenting the processes used to carry out their fiduciary responsibilities.

There are other ways to reduce possible liability. Some plans, such as most 401(k) and profit sharing plans, can be set up to give participants control over the investments in their accounts and limit a fiduciary's liability for the investment decisions made by the participants. For participants to have control, they must be given the opportunity to choose from a broad range of investment alternatives. Under Labor Department regulations, there must be at least three different investment options so that employees can diversify investments within an investment category, such as through a mutual fund, and diversify among the investment alternatives offered. In addition, participants must be given sufficient information to make informed decisions about the options offered under the plan. Participants also must be allowed to give investment instructions at least once a quarter, and perhaps more often if the investment option is volatile.

Plans that automatically enroll employees can be set up to limit a fiduciary's liability for any plan losses that are a result of automatically investing participant contributions in certain default investments. There are four types of investment alternatives for default investments as described in Labor Department regulations and an initial notice and annual notice must be provided to participants. Also, participants must have the opportunity to direct their investments to a broad range of other options, and be provided materials on these options to help them do so.

However, while a fiduciary may have relief from liability for the specific investment allocations made by participants or automatic investments, the fiduciary retains the responsibility for selecting and monitoring the investment alternatives that are made available under the plan.

A fiduciary can also hire a service provider or providers to handle fiduciary functions, setting up the agreement so that the person or entity then assumes liability for those functions selected. If an employer appoints an investment manager that is a bank, insurance company, or registered investment adviser, the employer is responsible for the selection of the manager, but is not liable for the individual investment decisions of that manager. However, an employer is required to monitor the manager periodically to assure that it is handling the plan's investments prudently and in accordance with the appointment.

Other Plan Fiduciaries:

A fiduciary should be aware of others who serve as fiduciaries to the same plan, because all fiduciaries have potential liability for the actions of their co-fiduciaries. For example, if a fiduciary knowingly participates in another fiduciary's breach of responsibility, conceals the breach, or does not act to correct it, that fiduciary is liable as well.

Bonding:

As an additional protection for plans, those who handle plan funds or other plan property generally must be covered by a fidelity bond. A fidelity bond is a type of insurance that protects the plan against loss resulting from fraudulent or dishonest acts of those covered by the bond.

Significance of Being a Retirement Plan Fiduciary - South Florida Retirement Plan Attorney

What Is The Significance Of Being A Retirement Plan Fiduciary?

Fiduciaries have important responsibilities and are subject to standards of conduct because they act on behalf of participants in a retirement plan and their beneficiaries. These responsibilities include:

  • Acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them;
  • Carrying out their duties prudently;
  • Following the plan documents (unless inconsistent with ERISA);
  • Diversifying plan investments; and
  • Paying only reasonable plan expenses.

The duty to act prudently is one of a fiduciary's central responsibilities under ERISA.  It requires expertise in a variety of areas, such as investments. Lacking that expertise, a fiduciary will want to hire someone with that professional knowledge to carry out the investment and other functions. Prudence focuses on the process for making fiduciary decisions. Therefore, it is wise to document decisions and the basis for those decisions. For instance, in hiring any plan service provider, a fiduciary may want to survey a number of potential providers, asking for the same information and providing the same requirements. By doing so, a fiduciary can document the process and make a meaningful comparison and selection.

Following the terms of the plan document is also an important responsibility. The document serves as the foundation for plan operations. Employers will want to be familiar with their plan document, especially when it is drawn up by a third-party service provider, and periodically review the document to make sure it remains current.  For example, if a plan official named in the document changes, the plan document must be updated to reflect that change.

Diversification - another key fiduciary duty - helps to minimize the risk of large investment losses to the plan. Fiduciaries should consider each plan investment as part of the plan's entire portfolio. Once again, fiduciaries will want to document their evaluation and investment decisions.

Ameriprise Financial Services, Inc. and David Bradley Tysk - Boca Raton, Florida FINRA Investment Suitability and Breach of Fiduciary Duty Arbitration and Litigation Attorney

Ameriprise Financial Services, Inc. and David Bradley Tysk - Boca Raton, Florida FINRA Investment Suitability and Breach of Fiduciary Duty Arbitration and Litigation Attorney:

Ameriprise Financial Services, Inc. (CRD® #6363, Minneapolis, Minnesota) and David Bradley Tysk (CRD #1782289, Eden Prairie, Minnesota). The firm was censured and fined $100,000. Tysk was fined $50,000 and suspended from association with any FINRA® member in any capacity for three months. The sanctions were based on findings that Tysk altered computer notes of customer contacts after the customer complained about the suitability of a recommendation. The findings stated that Tysk knew or should have known the importance of customer-related notes in the event of complaints. Tysk's concealed alterations of his notes did not comply with the clear import of the document-retention policies in the firm›s code of conduct. Tysk failed to inform the firm of the alterations when he provided a copy of the notes to be produced in discovery during an arbitration proceeding. The customer became suspicious of the notes and requested further discovery to determine whether the notes had been altered after he lodged his complaint with the firm. The firm and Tysk opposed the requests. In a meeting to prepare for the arbitration hearing, Tysk finally disclosed to the firm that he had altered the notes. Despite knowing that Tysk had altered the notes, the firm failed to inform the customer that a copy of computer notes of customer contacts produced during discovery had been altered. The firm asked Tysk to search his computer for evidence of the edits, but did not take any additional steps to locate previous versions of the notes. The firm also failed to produce an exception report during discovery as required. Just before the hearing, the firm found an exception report relevant to the customer's claim, which it should have provided months earlier. As soon as it could, the firm turned it over to the customer. At the conclusion of the arbitration hearing, the firm and Tysk were sanctioned for violating arbitration discovery rules. Tysk has appealed this matter to the National Adjudicatory Council (NAC) and the sanctions imposed against him are not in effect pending review. The decision, as it relates to Ameriprise Financial Services, is final. (FINRA Case #2010022977801).

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

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