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Walden University Doctoral Student Files National Class Action Against Walden

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On October 5, 2016, Peiffer Rosca Wolf Law Firm and Lambert Law Firm filed a class action in the Southern District of Ohio, Eastern Division, on behalf of doctoral students alleging that Walden University and Laureate International Universities, commonly known as “Walden,” violated doctoral students’ rights by creating a dissertation process that was difficult, if not impossible to timely complete (it they completed it at all).  Thornhill vs Walden University, LLC, et al.

An NBC News article by Anna R. Schecter published yesterday revealed, not surprisingly, that the Minnesota Office of Higher Education has launched a review of online PhD programs at Walden prompted, in part, by increased complaints about the same dissertation process that is the focus of the class action filed against Walden.  Walden U Under Review and Sued in Class Action

Lawyers at the Peiffer Rosca Wolf Firm and the Lambert Law Firm are continuing to investigate this matter and are evaluating further action to seek payment of damages for Walden students who allegedly found themselves stuck in the dissertation process at Walden.  If you wish to obtain additional information about our investigation or would like to discuss this matter or your rights, contact Marnie Lambert toll free at 844-32FRAUD ormlambert@mclinvestlaw.com or Paul Lesko toll free at 888-998-0520 or atplesko@prwlegal.com.

Royal Alliance, SagePoint and FSC Securities Fined $9.5 Million for Selling Customers Higher-Priced Products

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On March 16, 2016, registered FINRA members, Royal Alliance Associates, Inc., SagePoint Financial, Inc. and FSC Securities Corporation (all indirectly owned by American International Group, Inc. (“AIG”)) consented to the entry of an Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Sections 203(e) and 203(k) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order (the “Order” – SEC Order).

The Order was the result of an Offer of Settlement made by Royal Alliance, SagePoint and FSC in anticipation of such proceedings by the SEC. Royal Alliance, SagePoint and FSC had multiple compliance failures and breaches of fiduciary duty related to their registered investment advisory business. From at least 2012 to 2014, Royal Alliance, SagePoint and FSC invested their advisory clients in mutual fund share classes with 12b-1 fees instead of lower-fee share classes of the same funds available without 12b-1 fees. More specifically, the firm’s advisory clients affected by said misconduct were invested in a fee-based advisory service called “Advisor Managed Portfolio” (“AMP”). When a clients was invested in the AMP in a qualified retirement or ERISA account, 12b-1 fees were rebated. Thus, by investing non-qualified advisory clients in the higher-fee share class, Royal Alliance, SagePoint and FSC acted as a broker-dealer and received 12b-1 fees they would not have otherwise collected from the lower-fee share classes. According to the Order, those firms received at least $2 million from this practice. Moreover, they failed to disclose the conflict of interest that existed due to the financial incentive to place non-qualified advisory clients in the higher-fee investments, which also resulted in breaches of their fiduciary duties. Additionally, the Order found compliance deficiencies related to mutual fund share class selection and to the failure to implement compliance policies and procedures to monitor for “reverse churning.” Reverse churning is the practice where a customer is charged a wrap fee to cover all advisory services and trading costs even though the client rarely makes trades. In such circumstances, a wrap fee may not be in the best interest of the customer when compared to a non-wrap fee account or a traditional brokerage account where the trading costs are paid as incurred (i.e., commissions).

Royal Alliance, SagePoint and FSC are all dual-registered broker-dealers and investment advisory firms. What that means is that Royal Alliance, SagePoint and FSC are registered with the SEC (because they manage assets $100 million or greater – otherwise they would only be registered with a State), but they are also registered FINRA members. And, since studies have shown that investors do not understand the difference between a broker-dealer and an investment advisory firm, FINRA has given such firms the authority and the obligation to supervise all investment-related conduct without regard to whether it is the broker-dealer “side” or the investment advisory “side.” As of February 25, 2013, the effective date of revised Rule 8210 (Provision of Information and Testimony and Inspection and Copying of Books), FINRA made it clear that the scope of FINRA’s authority extended to all member firms, associated person and persons subject to FINRA’s jurisdiction. Supplementary Material .01 to Rule 8210 also specifically addresses the fact that the broad scope of books, records and accounts covered by Rule 8210 includes records such as those related to FINRA investigations of outside business activities (“OBA”), private securities transactions, other FINRA rules and federal securities laws. FINRA has specifically explained that all “associated persons” under FINRA rules are not necessarily “registered persons” under state or federal securities laws and yet, Rule 8210 applies equally to both. See FINRA Regulatory Notice 13-06.

Lambert Law Firm, LLC represents investors in the recovery of financial losses caused by investment fraud and misconduct. If you have lost money due to bad conduct by an investment advisor or brokerage firm, contact Marnie C. Lambert at 1-844-32FRAUD for a free consultation regarding your legal rights and options.

United Development Funding REIT Has Just 60 Days to File its Form 10-K for 2015

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Pixelated acronym REIT made from cubes, mosaic pattern

NASDAQ has had to remind publicly-traded real estate trust, United Development Funding (“UDF”), of its obligation to file its Form 10-K for 2015, giving it just 60 days to do so. Based in Dallas, Texas, UDF is the target of an FBI investigation and has now failed to timely file its 2015 10-K. According to the Wall Street Journal, UDF’s largest fund is United Development Funding IV (“UDF IV”), which was originally a non-traded REIT but listed its shares in 2014. Unfortunately, as with many REITs, sales of the non-traded UDF IV REIT were focused on the dividend income to be earned and not on significant risk factors such as excessive costs, lack of liquidity and diversification, and conflicts of interest. Despite professing to have a portfolio that is diversified by submarket and loan types, 99% of UDF IV’s portfolio is made up of loans to Texas borrowers including private Texas-based developer,  Centurion American. Centurion American was also the recipient of the majority of the balance of UDF’s loans.  Having shared borrowers between and among UDF-affiliated investments could lead to adverse consequences and should have been fully disclosed to investors at the point of sale. Additionally, UDF is facing allegations from a Texas hedge fund manager that it used new investor money to repay investors in prior UDF-affiliated investments, which could make it part of a Ponzi scheme. Lambert Law Firm, LLC represents investors in the recovery of financial losses caused by investment fraud and misconduct.  If you invested in UDF IV and lost money, contact Marnie C. Lambert at 1-844-32FRAUD for a free consultation regarding your legal rights and options.

Coffee With the Senator – March 17, 2016

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Sherrod Brown (D-OH) and Investor Protection Attorney Marnie C. Lambert
Sherrod Brown (D-OH) and Investor Protection Attorney, Marnie C. Lambert

Coffee With the Senator on Capitol Hill was a nice opportunity to visit with Ohio Democratic Senator, Sherrod Brown.  Nearly 90 constituents from his home state of Ohio came to meet the Senator on St. Patricks Day.  Senator Brown proudly discussed his introduction, on March 16th, of proposed legislation to protect working families by cracking down on wage theft by employers (Senator Brown’s March 16th Press Release).

Let’s Eliminate Unpaid FINRA Awards in Customer Arbitrations

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The only thing worse than being the victim of broker misconduct is getting an arbitration award against the broker and then not being able to collect.  Today, the Public Investors Arbitration Bar Association (“PIABA”) released a report that found that a National Arbitration Recovery Pool is a feasible solution to the serious problem of customer awards in FINRA cases going unpaid.  PIABA’s report also sheds light on a potential transparency issue for FINRA in that the most recent data provided to PIABA was stale (from 2013) and was insufficient to reflect the true magnitude of the unpaid awards problem.