FINRA Charges Aegis Capital Corp Broker With Fraud
James Bradley Schwartz (also known as Jim Schwartz) of New York New York a stockbroker formerly registered with Aegis Capital Corp. has been charged by Financial Industry Regulatory Authority (FINRA) Department of Enforcement in a Complaint alleging that (1) Schwartz excessively traded and churned customers’ accounts and (2) Schwartz engaged in deceptive and fraudulent activities through making unauthorized trades in customer accounts. Department of Enforcement v. James Bradley Schwartz Disciplinary Proceeding No. 2016051704302 (Feb. 26, 2019).
According to the Complaint, between August of 2014 and May of 2016, during the time Schwartz had been employed by Aegis Capital Corp., he excessively traded and churned accounts of customers DN, MN, KK and FP. Apparently, throughout this period, a total of five hundred thirty-five trades were placed in the customers’ accounts by Schwartz.
The Complaint alleged that Schwartz’s trading caused customers’ accounts to contain annual cost-to-equity ratios which ranged between eighty-seven percent and one hundred twenty percent; annual turnover rates in those customers’ accounts ranged from approximately twenty to fifty-five. FINRA Department of Enforcement claimed that Schwartz’s churning of the customers’ accounts were unsuitable as it resulted in customers suffering a combined $660,000.00 in losses. Meanwhile, the Complaint alleged that by way of Schwartz’s trading, he managed to generate commissions and sales credits totaling $194,000.00.
The Complaint alleged that Schwartz was able to defraud the customers because he maintained control over the accounts of the customers. Specifically, without the customers’ permission, Schwartz effected a total of two-hundred sixty-one trades containing a principal value estimated at $10,000,000.00. Allegedly, trades were even placed by Schwartz in the account of a customer who was deceased.
FINRA Department of Enforcement alleged that Schwartz’s excessive trading and churning of customer accounts was violative of Securities Exchange Act of 1934 Section 10(b), Securities Exchange Commission (SEC) Rule 10b-5 and FINRA Rules 2010, 2020 and 2111. Moreover, FINRA alleged Schwartz’s unauthorized trading was violative of FINRA Rule 2010.
FINRA Public Disclosure reveals that Schwartz is referenced in nine customer initiated investment related disputes containing allegations of his misconduct while employed with Aegis Capital Corp and Paulson Investment Company LLC. Particularly, on September 20, 2016, a customer initiated investment related complaint involving Schwartz’s conduct was resolved for $782,000.00 in damages supported by accusations of account mismanagement and poor investment recommendations between June of 2013 and January of 2016.
Then, a customer initiated investment related arbitration claim concerning Schwartz’s activities was settled for $95,000.00 in damages founded on allegations that fiduciary duties owed to the customer had been breached; misrepresentations were made to the customer; the customer’s account was handled negligently; and stock and over-the-counter equities trades were effected in the customer’s account without the customer’s consent. FINRA Arbitration No. 15-02901 (Dec. 9, 2016).
Subsequently, a customer initiated investment related arbitration claim regarding Schwartz’s conduct was resolved for $180,000.00 in damages based upon accusations of Schwartz making unsuitable investment recommendations, breaching fiduciary obligations to the customer, mismanaging the customer’s investments, and trading in the customer’s account on an excessive basis. FINRA Arbitration No. 15-03428 (Jan. 17, 2017).
Another customer filed an investment related arbitration claim involving Schwartz’s activities in which the customer requested $1,694,099.00 in damages supported by allegations that trades were effected in the customer’s account without the customer having provided authorization; and the customer was provided bad advice concerning the securities held in the customer’s account. FINRA Arbitration No. 18-00408 (Feb. 12, 2018). Another customer initiated investment related arbitration claim concerning Schwartz’s activities was settled for $100,000.00 in damages founded on accusations including breach of fiduciary duty, breach of contract, omissions, misrepresentation, excessive trading, unauthorized trading, and unsuitable over-the-counter equities, common stock or preferred stock recommendations. FINRA Arbitration No. 17-01007 (Mar. 16, 2018).
Thereafter, a customer initiated investment related arbitration claim regarding Schwartz’s conduct was resolved for $800,000.00 in damages based upon allegations that unauthorized trades were executed in the customer’s account; the customer’s account was handled in a negligent manner; unauthorized and unsuitable trades were executed in the customer’s account; transactions ran afoul of federal and state securities laws; and Paulson Investment Company LLC was liable for failing to supervise Schwartz’s inappropriate trading of stocks, exchange traded funds, over-the-counter equities and municipal debt products. FINRA Arbitration No. 17-01932 (Apr. 30, 2018).
Furthermore, a customer filed an investment related arbitration claim involving Schwartz’s conduct where the customer sought $32,871.30 in damages supported by accusations that the customer’s account had been mishandled; fiduciary and contractual obligations were violated; omissions and misrepresentations were made concerning warrants; and the customer was placed in unsuitable investments. Another customer initiated investment related arbitration claim concerning Schwartz’s activities was settled for $132,500.00 in damages founded on allegations including breach of contract, breach of fiduciary duty, unauthorized trading, negligence, and churning of the customer’s investment portfolio. FINRA Arbitration No. 18-01797 (Jan. 22, 2019).
Schwartz’s registration with Aegis Capital Corp. has been terminated as of June 30, 2016. Between June 6, 2016 and December 9, 2016, Schwartz was associated with First Standard Financial Company LLC. He then became registered with Joseph Gunnar & Co. LLC from December 9, 2016 to February 28, 2017.
since 1999, Schwartz has been associated with fourteen firms, nine of which have been expelled by FINRA or are otherwise defunct. #cockroach