A Letter of Acceptance, Waiver, and Consent (“AWC”) has been agreed between the Financial Industry Regulatory Authority (FINRA) and Edmund Zack, formerly a broker with Aegis Capital Corporation, on March 19, 2021. The AWC covers the following findings of FINRA:
Excessive and Unsuitable Trading and Unsuitable Stock Recommendations
It was recommended to a customer who had an investment objective of “growth” and “moderate” risk tolerance, limited prior investment experience, and no experience with margin, that he actively trade in speculative, low-priced securities, as well as leverage margin to enhance his trading capacity.
There does not appear to exist any basis that could have led Zack to believe that these transactions were suitable for this customer. As the customer followed Zack’s recommendations routinely, it can be assumed that Zack, for all practical purposes, controlled his account.
$10,424 is what the customer ended up paying in commissions and trading costs while incurring losses of $11,357. In addition, the annualized turnover rate on the account was 22 with a cost-to-equity ratio of 122%.
Based on the above data, and correlating it with the customer’s profile and investment experience, FINRA concluded that trading in the account done by Zack was not only quantitatively unsuitable but also excessive.
Discretionary Authority used without prior authorization
Zack affected the sale of securities in the accounts of 27 customers through the exercise of discretionary trading authority for which neither prior written authorization was obtained from customers nor approval for treating the accounts as discretionary from Aegis.
The written supervisory procedures (WSPs) of Aegis make it clear that a registered representative could not conduct discretionary trading on a customer’s account unless there existed on record a written authorization from both the customer as well as the firm.
On one particular day in October 2017, 27 customer accounts were subject to the exercise of discretionary authority by Zack, which resulted in the sale of shares of Social Reality, Inc. (SRAX). The discretion was exercised in violation of Aegis policies; neither holding a written discretionary authority from customers for transacting on their accounts, nor from Aegis. He also did not hold a transactional authority from customers for carrying out this sale on their accounts.
Causing inaccuracies in books of record
A trade was defined as ‘solicited’ in Aegis’ WSPs if the customer placed an order for a transaction based on a recommendation from the advisor. At the time he had recommended the purchase of SRAX shares, he had also recommended their sale once the target price had been reached. Based on the sale recommendation he had made earlier, Zack triggered the sale transactions in customer accounts but failed to mark them as solicited, which meant that it was the customers who had initiated the sale transaction.
This resulted in Aegis classifying these trades inaccurately as ‘unsolicited’ which further carried the inaccuracy to their books and records resulting in the books and records maintained by Aegis to be inaccurate, which is a violation of SEC rules. By being the cause of these inaccuracies, Zack himself violated the rules of FINRA.
Securities Industry history of Edmund Zack (CRD#: 2215116)
|14 Sep 1992||25 Sep 1992||GKN Securities Corp.||New York, NY|
|1 Oct 1992||27 Oct 1992||First Montauk Securities Corp.||Red Bank, NJ|
|23 Oct 1992||27 May 1997||GKN Securities Corp.||New York, NY|
|19 Mar 1997||22 Feb 2001||Carlin Equities Corp.||New York, NY|
|15 Feb 2007||24 Feb 2010||J.H. Darbie & Co., Inc.||New York, NY|
|8 Jul 2010||4 Jun 2012||National Securities Corporation||Huntington, NY|
|1 Jun 2012||17 Nov 2017||Aegis Capital Corp.||New York, NY|
|26 Oct 2017||15 Apr 2019||Western International Securities., Inc.||New York, NY|
|18 Apr 2019||20 Sep 2019||Benchmark Investments, Inc.||New York, NY|
|23 Sep 2019||20 Dec 2019||Dawson James Securities, Inc.||New York, NY|
A suspension of eight months from the securities industry has been handed out to Edmund Zack for the violations listed above, in addition to a fine of $10,000. He has also consented to paying back $5,161 in commissions. He remains subject to FINRA’s jurisdiction even though he is currently not registered with a FINRA member.
Aegis Capital has also been fined $80,00 by FINRA over multiple violations of MSRB and FINRA rules, and asked to pay $43.912 to customers in restitution.
A study conducted by Reuters in 2017, based on data provided by FINRA, had included Aegis among the 48 firms whose brokers had had serious cases against them. The Reuters study had estimated that 39% of Aegis Capital’s brokers had one of the most serious red flags on their public disclosure.
Recovering Losses & Case Evaluation
Haselkorn & Thibaut, a national investment fraud law firm, is investigating Edmund Zack on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms. It is currently investigating another former Aegis Capital broker, Kishan Parikh.
If you believe you could have lost money as a result of your dealings with either Edmund Zack or Aegis Capital, please contact our securities arbitration lawyers for a free and confidential evaluation of your case at 1 888-628-5590.