The Securities Arbitration Law Firm of KlaymanToskes announced today that it is investigating claims on behalf of investors who sustained losses by investing in Notes associated with National Note of Utah and Wayne LaMar Palmer. On June 25, 2012, the U.S. Securities and Exchange Commission obtained a temporary restraining order and asset freeze against National Note of Utah and Palmer, who were charged with operating a real estate-based Ponzi scheme that bilked $100 million from investors nationwide.
According to the SEC’s complaint, investors were told that their money would be used to buy mortgage notes and real estate assets, or to make real estate loans. More than 600 individuals invested, lured by promises of annual returns of 12 percent, the SEC alleged.
The SEC further alleges that National Note used most of the money it took in from new investors to pay earlier investors, making it a classic Ponzi scheme. It said that since 2009, National Note would not have been able to survive but for the influx of new investor funds, and that its payments to investors all but stopped in October 2011.
Investors who purchased Notes from a FINRA broker or advisor, or through a referral by such broker or advisor, may be able to recover their losses by filing a securities arbitration claim against their broker/advisor’s employer. According to the SEC’s Complaint, Palmer located new investors primarily by word of mouth and referrals. Moreover, Palmer paid “commissions to third parties who solicit[ed] investors in behalf of National Note.”
Brokers who sold investments in National Note, may have been engaged in “selling away” the product from their broker-dealer. Selling away is the inappropriate practice of an investment professional who sells, or solicits the sale of, securities not held or offered by the brokerage firm with which he is associated (affiliated). More specifically, selling away describes the situation where the transaction or securities in question are not approved for sale by the firm, nor are they on the firm’s approved product list. The approved product list identifies the types of securities and investments that are approved for brokers to sell after the securities have been subjected to the brokerage firm’s due diligence process which includes receiving the necessary risk and compliance department reviews and approvals.
Selling away often involves securities that are in the form of a private placement or non-public investment, such as the investments in National Note. Selling away situations typically result from a broker’s desire to not pass up on earning a commission on an investment his client is willing to buy, and further, to not have to share any of the commission with his/her associated firm. Selling away schemes are particularly dangerous for investors because they usually end up becoming victims of theft, securities fraud, a Ponzi-scheme, fraud, or some other loss related to the investment. These schemes also often involve the sale of promissory notes which are essentially loan investments wherein the borrower promises to pay investors high interest rates in exchange for the loan amount from the investor. Once the investor (client) pays the money, the borrower sooner or later stops (or never begins) paying interest payments and the client’s investment vanishes.
If you lost money by investing with Wayne Palmer and/or in National Note securities, you may be able to recover your losses by filing a lawsuit or claim against third parties who helped perpetrate the scheme. To determine if you are eligible, and to discuss the differences between securities arbitration and class action, please contact one of our securities lawyers for a free consultation.