Investors in Northstar Financial Services May Have Recourse to Recover Their Losses
Investors in Northstar Financial Services (Bermuda) Ltd (Northstar) may have claims to be pursued through arbitration before the Financial Industry Regulatory Authority (FINRA), in the event that the investment was recommended by a financial advisor without a reasonable basis, or if the investor was otherwise misled concerning the investment’s many risk components. Various brokerage firms and their affiliated financial advisors purportedly recommended investments in Northstar, and in some instances, allegedly recommended Northstar investments as safe, secure, and liquid, not unlike money market products with fixed or variable interest rates.
Beginning in 2018, serious problems began to emerge, around the time that Northstar was acquired by Global Bankers, a North Carolina-based conglomerate under the ownership of Mr. Greg Lindberg. As of early 2019, Mr. Lindberg had been indicted on charges of corruption in North Carolina. And most recently, as of March 2020, Mr. Lindberg has been convicted in connection with charges of conspiracy to commit honest services wire fraud and bribery concerning programs receiving certain federal funds.
As it currently stands, investors are likely facing outsized losses on their Northstar investments, which they are unable to exit. It is believed that Northstar relied on a number of brokerage firms to help sell their investment products, including but not limited to such firms as Ocean Financial Services, LLC (Ocean Financial), Bankoh Investment Services, Inc. (Bankoh), as well as SunTrust Investment Services (SunTrust).
Under applicable securities laws and FINRA rules, brokerage firms have a legal obligation to perform adequate due diligence on any investment product (or investment strategy) recommended to customers by its brokers. By extension, financial advisors have an affirmative duty to, among other things, understand the risks associated with a particular investment product or investment strategy. In fact, under FINRA Rule 2111, a broker must have a reasonable basis to believe, based upon the employer’s due diligence, that the investment at hand is suitable for at least some investors. In conducting such a reasonable basis suitability analysis, Rule 2111 specifically mandates that “a broker must perform reasonable diligence to understand the nature of the recommended security or investment strategy involving a security or securities, as well as the potential risks and rewards, and determine whether the recommendation is suitable for at least some investors based on that understanding.”
Furthermore, broker-dealers such as Ocean Financial, Bankoh, and SunTrust are legally obligated to ensure that their registered representatives are adequately supervised. Accordingly, brokerage firms must take reasonable steps to ensure that their brokers follow applicable securities rules and regulations, as well as adhere to the firm’s internal policies. In those instances when a brokerage firm fails to adequately supervise its brokers, it may be held liable for losses suffered by investors.
The attorneys at Giarrusso Law Group LLC have extensive experience representing investors unsuitably allocated to risky and complicated investment products. Investors may pursue a claim to recover monies through securities arbitration before FINRA, or in some instances, through litigation. Investors who wish to discuss a possible claim are invited to contact us by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost, no-obligation consultation.