SEC and FINRA Warn of Penny Stock Scams

Many investors are lured into purchasing penny stocks. The lure is often that the price per share is very cheap. Furthermore, there are typically news releases touting the merits of the stock. Investors think that this may be a chance to turn a small investment into a large pay-off. However, many times, penny stocks are scams.

The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) issued an alert warning investors that some penny stocks being aggressively promoted as great investment opportunities may in fact be stocks of dormant shell companies with little to no business operations.

The investor alert provides tips to avoid pump-and-dump schemes. In these scams, the fraudsters deliberately buy shares of very low-priced, thinly traded stocks and then spread false or misleading information to pump up the price. The fraudsters then dump their shares, causing the prices to drop and leaving investors with worthless or nearly worthless shares of stock.

The investor alert highlights five tips to help investors avoid scams involving dormant shell companies:

1. Research whether the company has been dormant – and brought back to life. You can search the company name or trading symbol in the SEC’s EDGAR database to see when the company may have last filed periodic reports.
2. Know where the stock trades. Most stock pump-and-dump schemes involve stocks that do not trade on The NASDAQ Stock Market, the New York Stock Exchange or other registered national securities exchanges.
3. Be wary of frequent changes to a company’s name or business focus. Name changes and the potential for manipulation often go hand in hand.
4. Check for mammoth reverse splits. A dormant shell company might carry out a 1-for-20,000 or even 1-for-50,000 reverse split.
5. Know that “Q” is for caution. A stock symbol with a fifth letter “Q” at the end denotes that the company has filed for bankruptcy.

Attorney Randall Place formerly worked in the Market Regulation Department at Florida. Part of Mr. Place’s job at FINRA was to investigate penny stock scams. Place & Hanley, LLC has won arbitration claims on behalf of clients defrauded in penny stock scams.

If your broker recommends a penny stock, chances are that it is part of a scam. If you have losses in a penny stock recommended by a broker, contact Place & Hanley for a no-cost initial consultation at (239) 455-1242.

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FINRA Permanently Bars Omaha, Nebraska Stockbroker Robert John Head

Robert John Head consented to a permanent bar from the Financial Industry Regulatory Authority. FINRA alleged that Head exercised discretion in the account of an elderly customer, who was diagnosed with dementia, without obtaining the customer’s prior written consent to do so. Head was prohibited from placing any trading that the customer had not explicitly and specifically approved. Head also recommended unsuitable investments given the customer’s financial need and medical condition.

Robert John Head was previously registered with:

08/2008 – 01/2014            STIFEL, NICOLAUS & COMPANY, INC.; OMAHA, NE

05/2004 – 08/2008            WELLS FARGO INVESTMENTS, LLC; OMAHA, NE

10/1997 – 06/2004            ROBERT W. BAIRD & CO. INC.; MILWAUKEE, WI

If you had an account where you suffered losses due to unauthorized trading, contact Place & Hanley, LLC for no cost initial consultation.  Call (866) 318-4725.



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FINRA Suspends Stockbroker, Benjamin Brown, Jr. for Unauthorized Trading

The Financial Industry Regulatory Authority suspended stockbroker Benjamin Brown, Jr. for 10 days and fined him $5000 for unauthorized trading.

FINRA alleged that Brown effected option transactions while exercising discretion in a customer’s account without the customer’s prior written authorization to exercise such discretion and without written permission from his member firm to engage in such discretionary trading.

Brown is not currently registered with a FINRA member.  Brown was formerly registered with the following broker-dealers.


02/2012 – 05/2013 – WHITEWOOD GROUP, INC; GREAT NECK, NY





If you had an account where you suffered losses due to unauthorized trading, contact Place & Hanley, LLC for no cost initial consultation.  Call (866) 318-4725.

(866) 318-4725
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FINRA Bars Wilmington, Delaware Broker for Alleged Client Theft

The Financial Industry Regulatory Authority announced that they barred Michael E. Donnelly.  Donnelly was terminated by Coastal Equities, Inc.   Coastal Equities noted that the reason for termination was “misappropriation of client funds.”

FINRA opened an investigation thereafter but Donnelly failed to cooperate in FINRA’s investigation.  FINRA barred Donnelly from association with any FINRA member.

Donnelly was also associated with Coastal Investment Advisors, Inc., an SEC registered investment advisor.

If you believe that you may be a victim of theft by Michael Donnelly, contact Place & Hanley, LLC for a no fee initial consultation at 866-318-4725.

(866) 318-4725
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Chapin Davis Fined and Censured by FINRA

Chapin Davis was fined $35,000 and censured by the Financial Industry Regulatory Authority

According to FINRA, from March 2010 to October 2012, Chapin Davis sold approximately $24.5 million in structured notes and FDIC-insured structured certificates of deposit to retail customers. In connection with the sale of the structured products, Chapin Davis’ supervisory system and written supervisory procedures (“WSPs”) were inadequate, in that there was no system or WSPs for evaluating find conducting due diligence on the products, including determining risks and suitability issues, as applicable, and approving the products; the Firm offered limited training on the products; the WSPs included general provisions on suitability requirements, but did not specifically address the products or provide guidance or restrictions unique to the products, including assessment or consideration of customer-specific suitability, as applicable; and the Firm did not sufficiently review transactions in the products, including monitoring of accounts for over concentration of the products.

If you lost money in structured notes purchased by Chapin Davis, call (866) 318-4725 for a no fee initial consultation.

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Avoiding Investment Fraud

At the Law Offices of Place & Hanley, our goal is to protect and represent investors who have been victims of securities and stockbroker fraud. Our Naples, Florida stockbroker fraud lawyers have represented clients nationwide and are well-suited to help you if you’ve been a victim of fraud. Of course, you can also help yourself by following these tips to avoid investment fraud.

1). Be alert and do your homework

Like all big decisions, do not rush to invest. Ask questions, perform research, and make sure you know exactly what you’re investing in and with who. Frauds tend to be smooth talkers and rather than give you the information directly, they’ll try and divert your attention. They’ll try and grab you at the heat of the moment and it’s important to remember to take a step back and analyze. Check financial statements, company news, and make use of the SEC’s EDGAR filing system. Make use of all the tools available to you before you decide to invest.

2). Be aware of different types of fraud and unsolicited offers

There are all types of securities frauds ranging from pyramid schemes, ponzi schemes, and even internet and social media fraud. Protect yourself online and scrutinize everything you read. Frauds have made use of the internet and social media boom to create new opportunities for themselves. Just because there are good reviews online does not mean it comes from a genuine source. Know what to look for and be alert if the investment is foreign or offshore. If an investment sounds too good to be true, it probably is. There are no such things as guaranteed returns and if something is worth investing in, there will be no pressure to invest right at that moment. Every investment carries some risk. Frauds try to make you forget that simple fact by throwing fake promises and calls to action.

3). Contact the SEC, FINRA, or a Fort Meyers Stockbroker fraud attorney at the Law Offices of Place & Hanley for more information or help.

Fraud happens all the time and gets harder and harder to detect and prevent. You may not even realize you’ve been a victim of fraud until it’s too late and you’ve lost everything. Arm yourself with knowledge. Ask questions. Address concerns with the proper authorities. If you feel that you’ve encountered any type of investment fraud, contact the Naples Stockbroker fraud attorneys at the law offices of Place & Hanley for a free consultation.

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