..as reported in the Sun Sentinel

 Claim highlights what consumers can do

October 01, 2011|By Donna Gehrke-White

Robin Pittman of Hallandale Beach thought she was investing for a comfortable retirement. But the broker who promised her a ticket to her Golden Years instead gave her a setback she hasn’t recovered from: He advised her to invest in a high-risk stock of a small company and she lost her money — more than $100,000.

Now Pittman finds herself with a penniless Roth IRA. “When it first happened I was in shock,” said Pittman, 60, an administrative assistant at a construction company. “I would wake up at night” petrified over losing her nest egg.

Pittman’s case spotlights an issue confronting many South Florida investors these days: What can you do if you believe your financial adviser or broker has pushed you into a bad investment?

As Pittman discovered, a little-known Washington-based group — the Financial Industry Regulation Authority — has created an arbitration program for investors to file claims against investment firms. The nonprofit industry group also serves as a watchdog, similar to the Bar Association for lawyers.

Pittman recently filed an arbitration claim with FINRA and hopes it will lead to her recouping at least part of her savings. She is asking her broker’s former firm to pay her back the money she lost in her Roth IRA and another investment. Plus, she says, she is owed legal fees and $48,426 in interest.

FINRA spokeswoman Michelle Ong said the agency offers a first line of defense for individual investors as the nation’s largest independent regulator of U.S. securities firms. FINRA created the online BrokerCheck at finra.org where investors can research any FINRA-registered broker or brokerage firm. It also has established rules for the nation’s brokerages.

“It should be the first resource investors turn to when choosing whether to do business or continue to do business with a particular broker or brokerage firm,” she said.

The federal Securities Exchange Commission and state agencies, such as the Florida Office of Financial Regulation, also oversee the financial industry. Investors can check with the state office to see whether brokers are registered to work in Florida.

But some in the financial industry question whether regulatory oversight is sufficient and if FINRA can effectively watch over brokerages. A few brokers can take advantage of investors without getting in trouble with the regulatory agency, said South Florida investment adviser Frank Armstrong. “As long as you don’t break their [FINRA] little rules, you can create a whole lot of havoc,” he said.

Those rules forbid brokers from “churning” stocks to make commissions, selling or buying investments without the client’s authorization and requiring brokers to recommend only “suitable” stock for investors.

Former Miami federal prosecutor Andres Rivero said FINRA can be slow to act. But “it has a good record” of helping investors, said Rivero, who is now in private practice in Coral Gables.

Pittman said she is grateful for FINRA’s arbitration system: It gives her a chance to get back her nest egg. “It took me forever to save it,” said Pittman, who made $28,000 a year when she invested with broker Ted Bakurin of Parkland.

The single mom of two grown children accuses New Jersey-based Garden State Securities Inc. of not properly supervising Bakurin who she says invested her money in an unsuitable stock that should never have been used for retirement savings. She blames Bakurin for recommending the high-risk penny stock that earned him a big commission, according to her claim. It was not even traded on an exchange.

Bakurin denied any wrongdoing in a telephone interview. “Not everything is as it seems,” he said. Bakurin said he did make money for Pittman in an annuities account. He declined to talk further about the annuities account.

Garden State Securities could not be reached despite several calls and an e-mail from the Sun Sentinel. The firm has not yet responded to the arbitration claim Pittman has filed.

Pittman’s attorney, Mark Tepper, said Bakurin’s investment recommendation to Pittman violates FINRA rules concerning disclosures about risky investments.

FINRA suspended and fined Bakurin $20,000 last year in another case “for selling customers unsuitable securities without disclosing the risks,” agency records show. His broker’s license was revoked last year after he didn’t pay the fine, according to FINRA records. Two other cases filed against Bakurin are pending before FINRA’s arbitration board, the agency’s records show.

Bakurin said the FINRA license revocation and fine gives a distorted view of his work. “I know what my past looks like,” Bakurin said.

Pittman’s arbitration filing claims Bakurin recommended she fund her entire Roth IRA account in 2006 with stock from a small Vero Beach company named Multi-Link Telecommunications. Her claim alleges he did not tell Pittman, as required, about the dangers of buying low-priced shares of small companies: These “penny stocks” may trade infrequently and may be hard to accurately price.

Pittman ended up buying 211,400 shares in four transactions in 17 days from late April to mid-May. All the stocks sold for an average of 47.6 cents per share. Just two months later the investment tanked.

In July 2006, Multi-Link Telecommunications and its stock were merged with a Georgia-based pharmaceutical company, Auriga Laboratories, according to her arbitration papers. “Those merged shares eventually became worthless,” her claim added. Pittman lost “irreplaceable savings.”

Bakurin told Pittman “not to worry — she would get her initial investment back,” according to her FINRA claim.

Pittman is still waiting for that to happen.