What Did Your Brokerage Firm or Investment Adviser Do Wrong With GWG
Published On: July 5, 2016

According to a press release last week, a North Dakota farmer brought a claim against National Securities Corporation, alleging that brokers at the firm engaged in churning in his account, recommended unsuitable high risk securities and used boiler room tactics to convince him to invest in the unsuitable securities. Boiler room tactics can be classified by brokers selling stock (typically micro-cap stock) and using false or misleading statements to sell it, because of their overwhelming desire to sell the stock and claim large commissions for themselves. Often, the stocks that are touted trade on the Pink Sheets (or the system on which companies trade do not need to meet minimum requirements or file with the SEC), because this exchange requires very little in terms of disclosure and regulation.

According to the press release, brokers at National Securities Corp recommended the client purchase a small amount of stock in an agricultural security. Subsequently, the brokers then recommended the client invest most of the remaining balance of his account in a single high-risk security called the First Hand Technology Value. This concentrated approximately half of the client’s net worth into a single security. A broker must take into account the client’s age, net worth, investment objectives and portfolio sophistication before recommending or selling a security. If he does not, his brokerage firm may be responsible for investment losses because it is the firm’s responsibility to reasonably supervise their brokers.

Up until that point, the client’s investment experience had been limited to self-directed trades in a relatively small online account, and conservative trades in his IRA. According to the allegations in a claim filed with the Financial Industry Regulatory Authority (FINRA), the brokers failed to discuss with the customer his investment experience, and also failed to discuss the risky and speculative nature of the securities they were purchasing for them. The brokers continued to aggressively buy and sell stocks in the customer’s account, sometimes using margin debt. The client was not aware what margin was, nor was he aware that he was accumulating significant interest obligations. When the client attempted to close his account in 2014, the brokers met with the client in person, convincing him to leave the account in their hands and convincing him to give them more money. The customer then gave them the rest of his savings, which the brokers subsequently put half into a single illiquid, high-fee investment. These tactics resulted in the client losing more than half a million dollars, not including his losses sustained in a private real estate investment trust (REIT).

If you invested money with National Securities Corporation, you may be able to recover your investment losses by calling our Chicago-based securities law firm and speaking to an attorney for free. There is no obligation with the call. Our attorneys help investors recover losses sustained because of broker tactics such as those stated. We take cases on a contingency fee basis only, so we only make money if you recover yours. Please call today as many of these cases can have a statute of limitations.

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If you have suffered financial losses because of the negligence or fraud of your financial advisor or broker through unsuitable investment recommendations, over-concentration, churning, misrepresenting risks, conversion or selling away, you have legal rights and options to pursue recovery of those losses.

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