Articles Posted in Wedbush Morgan

Three years after Forbes magazine wrote an article exposing broker Bambi Holzer as someone whose investment advice to clients had resulted in more than $12M in securities settlements, brokerage firms continue to clear her trades. Over the years there have been dozens of complaints filed against her for improper broker activities-more than nearly anyone that we here at Shepherd Smith Edwards and Kantas, LTD, LLP have ever seen.

Holzer is currently a Newport Coast Securities broker, but her employment history with different broker-dealers within the industry has involved numerous financial firms. According to the Financial Industry Regulatory Authority, she was previously registered with Wedbush Morgan Securities Inc., Brookstreet Securities Corporation, and Sequoia Equities Securities. Holzer also worked with UBS (UBS), where she and the firm were compelled to pay at least $11.4 million to settle securities claims that she had allegedly misrepresented variable annuities by misrepresenting that they came with guaranteed returns. Following her time there, Holzer went to go work at AG Edwards (AGE), where she was fired in 2003 for engaging in business practices allegedly not in line with the policies of the firm.

Later, while at Brookstreet, Holzer allegedly made misrepresentations during a 2005 presentation in Beverly Hills about how trusts had allowed a fictional couple to defer $732,000 in taxes and make $9 million. She would later say on her website that 500 people watched her that day. However, a court document says that there were actually just 33 people in attendance.

Also while at Brookstreet, NASD, FINRA’s predecessor suspended Holzer for 21 days and ordered her to pay a $100,000 fine for negligent misrepresentations she allegedly made about certain product features related to variable annuities when she worked at PaineWebber. And an example of one complaint still pending against Holzer is the FINRA arbitration claim filed in early 2010 by a Wedbush Morgan Securities customer who is contending that account mishandling, breach of fiduciary duty, and breach of contract allegedly resulting in $824,000 in damages.

Holzer’s record on FINRA’s Central Registration Depository is 105 pages long, and the lawsuits and regulatory disciplinary actions against her span over 90 of these pages. Allegations include:

• Violations of the Illinois Securities Act • Negligent representations related to variable annuities
• Fraud • Misrepresentations of fees • Unsuitable investments
• Private placement-related fraud • Churning • Variable annuity-related fraud • Inadequate supervision • Elder abuse
• Negligent sale/recommendation of Provident Royalties, LLC • Negligent recommendation/sale of unsafe products, including the Behringer Harvard Security Trust

Many of the FINRA claims against Holzer involve private placement and variable annuity instruments. A lot of these arbitration cases have resulted in substantial settlements.

Beware of Your Broker, Forbes, March 25, 2009

FINRA Central Registration Depository

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SEC Roundup: Massachusetts Investment Adviser Gets $1.78M Judgment and Allianz to Pay $12.3M to Settle Foreign Corrupt Practices Act Lawsuit, Stockbroker Fraud Blog, January 7, 2013

Clearing House Association Wants Greater Protections for Clearing Members, Institutional Investor Securities Blog, December 31, 2012

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New York Stock Regulation Inc. announced its enforcement actions against four trading companies. The regulator says that Ronin Capital, LLC mismarked over 8,300 short orders because of inadequate supervisory procedures and supervision. The company continued to mismark short orders even after the SEC brought the violation to its attention. Ronin Capital was censured by NYSE Arca and ordered to pay $200,000.

NYSE Arca fined Goldman Sachs Execution & Clearing LP (GSEC) $105,000 for failing to adequately supervise business operators and associated persons in a way that guaranteed compliance with odd lot trading order rules.

Pearson Capital Management LLC was censured and fined $5,000 because it failed to meet market maker requirements. Penn Mott Securities was fined $3,200 for similar violations.

Last month, when Brookstreet Securities suffered a flame-out over high risk mortgage investments, its second in command, also the son of its founder, joined Wedbush Morgan and invited Brookstreet brokers to join him at that firm. Some thought it an odd fit, but the firms may have more in common than earlier believed.

Recently, a group on nuns, who claim they were led to believe they were making safe investments, apparently had their funds invested by Wedbush into mortgage-backed CMO securities which were just pools of mobile home loans. They soon lost $1 million, according to a complaint filed by The Sisters of St. Joseph of Carondelet in California against Wedbush Morgan in arbitration through the National Association of Securities Dealers.

Ed Wedbush, president of the firm that handled the nuns’ investments, said in an interview that the losses in this and other cases came on the riskier portions of mortgage investments and were the result of “clients being very aggressive and wanting high yields.” They should have understood, he said, that “high yield is high risk.” (The statement resembles another recently made by Oppenheimer & Company, which claimed an elderly widow “only has herself to blame” for losses in a joint account as her husband lay dying. Oppenheimer was subsequently fined $1 million and ordered to reimburse over a million to the widow by the state of Massachusetts.)

As we reported in June: Brookstreet Securities Corp. reported severe problems with CMO securities and soon announced its closing. Scott Brooks (son of Stan Brooks, founder of Brookstreet) left for Wedbush Morgan Securities Inc. of Los Angeles, inviting Brookstreet’s representatives to join him.

Brookstreet operated using independent contractors almost exclusively and Wedbush reportedly plans to sign the Brookstreet representatives to similar agreements. Wedbush Morgan had about 40 independent contractor reps of 260 total brokers, said Ed Wedbush, that firm’s CEO. About 100 of the 650 Brookstreet brokers have so-far followed Scott Brooks, according to Ed Wedbush. “We’re recruiting, like other firms, some of their brokers and bond traders,” he said.

Many Brookstreet reps don’t know much about Wedbush, said Larry Papike, a San Diego-based recruiter, “So I think brokers really started looking around for other solutions,” he said. Securities America Inc. and J.P. Turner & Co. have picked up a number of Brookstreet reps, Mr. Papike said.

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