Securities Lawyers Blog
According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor David Zier (Zier), in October 2014, was terminated by his then employer City National Securities, Inc. (City National) and was under investigation by the Securities and Exchange Commission (SEC) and FINRA. Zier was the CEO of Convergent Wealth Advisors (Convergent) through which he allegedly solicited clients for a private fund he managed called ZAM LLC (ZAM). According to regulators, from 2007 to 2014 Zier falsely told clients ZAM was profitable and gave them fabricated account statements that concealed the fund’s losses.
In October 2014, Zier was found dead in an apparent suicide. Zier’s death occurred just weeks after Convergent’s compliance officers became suspicious of the ZAM fund and began to question Zier about irregularities in ZAM’s records. It is currently unknown the total fund losses but at one time the fund had $20 million. According to the U.S. Commodity Futures Trading Commission (CFTC) Zier fraudulently solicited $2.9 million in investments in ZAM.
The allegations appear to be a value manipulation scheme that often turn into Ponzi schemes. In value manipulation frauds investment advisors provide clients with misstatement of the values of securities for the purposes of either inducing investors to continue to purchase the investment or to retain their investment position in the security. The value of a security is material information to every investor. Value manipulation schemes are most common where the securities are thinly traded or not traded at all on regular securities exchanges and the broker is the only source of information. In these cases where the asset is not regularly traded, advisors and firms may be given authority to set the value of the securities and otherwise have control over what is communicated to clients.