Info on Barrington Capital
Copyright 1998 Law Bulletin Publishing Company
Chicago Daily Law Bulletin
November 9, 1998, Monday
SECTION: Pg. 6
LENGTH: 496 words
HEADLINE: Another brokerage firm, another restitution fund
BYLINE: JAMES J ECCLESTON; another restitution fund
BODY:
Reminiscent of the Prudential Securities and Paine Webber settlement funds to reimburse investors for abusive sales practices involving limited partnerships, the brokerage house of D.H. Blair recently agreed to establish a $ 2.25 million restitution fund.
While D.H. Blair is now defunct, several of its former brokers have transferred to Barrington Capital Group in New York. Investors beware.
D.H. Blair has had lengthy and significant regulatory problems. For example, in August 1997 the firm was censured and fined $ 2 million by the National Association of Securities Dealers. In February 1998, the New York Stock Exchange censured the firm and fined it $ 250,000. In January 1998, the Illinois Securities Department alleged that the firm engaged in inequitable business practices by unauthorized transfers in a customer's account. Moreover, some of its brokers, such as Alfred Salvatore Palagonia, have been permanently barred from the securities industry.
The $ 2.25 million investor restitution fund now available results from an agreement with state regulators from Indiana, Missouri and Connecticut. Investors are eligible to participate if they file a complaint based on trades made between Jan. 1, 1996, and June 30, 1998. The NASD will be the forum for filing and resolving investor claims.
The funds will be available to Illinois residents in the event that state securities regulators sign on to the agreement. Nonetheless, whether or not the regulators join the accord, Illinois investors should act independently, quickly filing claims to recover any losses in connection with D.H. Blair, its brokers and its principals.
D.H. Blair specialized in the sale of small-company stocks. In selling those stocks to customers, the state regulators alleged that the firm committed sales practice abuses. Ordinarily, these abuses relate to the Hook, Pump and Dump scam.
In an effort to win investor confidence -- setting the Hook -- brokers sell a well-known, typically local, stock (such as Motorola) to gain the trust of customers.
Next comes the Pump phase, when the solid stock is sold in exchange for a high-risk, no-name company of which the brokerage firm insiders own stock at pennies a share. The move usually leads to a series of lies, and omissions designed to keep a grip on the investors' money.
Finally, in the Dump phase, the insiders at the brokerage firm sell the no-name stock for hefty profits, leaving the investors holding the bag and incurring large losses. Profitable Counsel By James J. Eccleston Eccleston is a Chicago-based securities attorney, representing investors as well as brokers and brokerage firms nationwide. He is a registered investment adviser and a licensed principal of the National Association of Securities Dealers. Further information, including previous articles, investor alerts and an annual check-up for investors, can be obtained through his site at www.FinancialCounsel.com on the Internet.
LANGUAGE: ENGLISH
LOAD-DATE: November 10, 1998
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