Boiler Room Tactics Used By Brokers At National Securities Corporation Allegedly Lead To Heavy Losses For A Client, Through Churning And Overconcentration

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The Law Offices Of Jeffrey A. Feldman Represents A North Dakota Farmer (“Claimant”) In A FINRA Arbitration Claim (FINRA Case No. 15-01558), Alleging That Brokers At National Securities Corporation (“Respondents”) Engaged In Churning In The Claimant’s Account, And Recommended Unsuitable High Risk Securities. More Information About The Law Offices Of Jeffrey A. Feldman Can Be Found At:

Initially brokers at National Securities Corporation gained the Claimant’s trust by recommending a small purchase of an agricultural security, per allegations in the claim filed with FINRA. Soon thereafter Respondents recommended that Claimant invest most of the remaining balance of his account in a single high risk security called the First Hand Technology Value Fund according to the FINRA claim. As alleged in the FINRA Arbitration claim, this one trade concentrated approximately half of the Claimant’s net worth into a single security.

Up to that point, as alleged in the FINRA claim, the Claimant’s investment experience had been limited to self-directed trades in a relatively small online account, and conservative trades in his IRA, directed by a financial advisor. According to allegations in the claim filed with FINRA, Respondents not only failed to discuss with the Claimant his investment experience, but they failed to discuss with him the risky and speculative nature of the securities they were purchasing for him. Respondents then continued to aggressively buy and sell risky securities in the Claimant’s account, using margin debt, per the claim filed with FINRA. Once again, as alleged in the FINRA claim, Respondents failed to discuss the margin purchases with the Claimant, who did not even understand what margin was, or that he was accumulating significant interest obligations.

In 2014, when the Claimant realized that things were not going well in his account, he attempted to close it, per allegations in the FINRA claim. Respondents reacted by travelling to North Dakota from their New York offices, as alleged in the FINRA statement of claim, to meet the Claimant in person and convince him to leave his account in their hands. In fact, per allegations in the FINRA claim, they were able to convince the Claimant that they could recoup his losses if he could just give them more money. The Claimant entrusted them with the rest of his savings, according to the claim filed with FINRA. Respondents then proceeded to recommend an investment in a private REIT called the American Realty Capital NYC REIT Inc., per allegations in the FINRA claim, which they described as “very safe.” With this one investment, Respondents concentrated about half of the Claimant’s liquid assets into a single illiquid, high fee investment, as alleged in the arbitration claim filed with FINRA.    

Per allegations in the FINRA claim, the boiler room tactics employed by National Securities Corporation’s agents resulted in overall losses of more than half a million dollars, not including the losses sustained in the private REIT. According to Mr. Feldman: “As you would expect with boiler room tactics, a majority of what the Claimant lost was in the form of commissions and margin interest, which totaled more than a quarter of a million dollars.”

FINRA Case No. 15-01558

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Jeffrey Feldman
Law Offices of Jeffrey Feldman
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