Securities Arbitration

FINRA Arbitration Panel Awards BBVA Securities’ Investors $1.2 Million

November 8, 2013 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) Arbitration Panel has awarded damages to investors in the amount of $1.2 million in compensatory damages and cost of fees associated with the arbitration. The alleged claim was asserted against BBVA Securities of Puerto Rico, Inc. (BBVA Securities) and employees of the brokerage firm.

BBVA Securities is a brokerage firm in San Juan, Puerto Rico.

The Claimants asserted breach of fiduciary duty, unsuitable investments, churning and excessive trading, failure to supervise and gross negligence. These causes of actions related to allegedly unsuitable naked option trading strategy combined with the use of margin which caused losses in the investor’s accounts.

FINRA Files Regulatory Action Against Beverly Hills Broker Bambi Holzer

October 31, 2013 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) filed a civil enforcement action on October 18, 2013 against Bambi Holzer, a formerly registered broker and investment advisor in Beverly Hills, California. FINRA alleged in its complaint that between February and March 2008, Holzer, then a broker at Wedbush Securities, Inc. in Los Angeles, made unsuitable recommendations to seven of her clients to purchase speculative and illiquid investments issued by Provident Shale Royalties 8, LLC. The complaint further alleged that after investing in Provident 8, Holzer’s clients’ accounts were overly concentrated in the highly risky private placement. FINRA highlighted that one of the seven victims of Holzer’s alleged misconduct was an 86 year-old widow who is now deceased. This particular investor’s objectives were income and preservation of principal, meaning the risky and illiquid Provident 8 was blatantly outside the scope of her investment objectives.

In connection with these unsuitable recommendations, Holzer is accused of either knowingly or negligently submitting false net worth information regarding six of the seven customers. Additionally, FINRA alleged that between April 2010 and August 2012, Holzer willfully failed to disclose an arbitration award and judgment and a pending regulatory action on her Form U4, a required regulatory filing. Holzer is also accused of providing false testimony during on-the-record interviews conducted by FINRA.

Early in 2008, Wedbush Securities entered into an agreement with Provident 8 that allowed the investment firm to sell Provident 8’s privately issued securities. Holzer subsequently began recommending Provident 8 to her customers and received a 100 percent commission for those clients that invested. Based on allegations that Provident had commingled assets and investor funds, the Securities and Exchange Commission obtained a Temporary Restraining Order against Provident Royalties, LLC in July 2009. Provident ultimately filed for Chapter 11 bankruptcy and Holzer’s customers’ investments in Provident 8 became worthless.

Massachusetts Securities Regulator Subpoenaed 15 Brokerage Firms Over Products Sold to Senior Investors

September 21, 2013 | by Staff Attorney

In July 2013, William Galvin, the Massachusetts (MA) Secretary of the Commonwealth, began an investigation into “the marketing of complicated financial investments to older people.” In the process of the investigation, Galvin subpoenaed fifteen different brokerage firms in order to obtain information on investments that were sold to senior citizens in Massachusetts. The investigation sought to uncover the way the firms have sold “high-risk, esoteric products to seniors” as well as information on the firms’ compliance, supervision and training.

The firms that were included in the investigation were Morgan Stanley, LPL Financial, Merrill Lynch, UBS AG, Bank of America Corp., Fidelity Investments, Wells Fargo and Co., Charles Schwab Corp., and TD Ameritrade along with other firms. Galvin has stated that the investigation was not an indication of any wrongdoing on behalf of the brokerage firms. The purpose of the investigation was to get more information on brokers’ business practices in offering products to seniors and unsophisticated investors. Regulators have shown concern about “opaque products” advertised to unsophisticated investors looking for higher returns than what most interest rates have to offer. Brokers often pitch these types of products because they will usually get a higher commission rate than by selling other lower risk products such as mutual funds.

This recent investigation is a result of past inappropriate Real Estate Investment Trust (REIT) sales to seniors. Last year, the SEC probed the probe improper sale of REITs to seniors that led to five broker-dealers settling. The settlement for the improper REIT sales included $975,000 in fines and $8.6 million in restitution to the customers.