Erez Law recently filed a $358,000 FINRA arbitration against Oppenheimer & Co. Inc. and National Securities Corp. for Puerto Rico bond losses.
The Erez Law customer alleges that Richard Strauss (CRD #1487648), who was a registered representatives of Oppenheimer & Co. Inc., and later Tom Holly (CRD #1713313), who was a registered representative of National Securities Corp., recommended an unsuitable investment strategy concentrated in Puerto Rico bonds.
Puerto Rico suffers from long-term financial and economic deficiencies that rendered its credit increasingly more speculative. The deterioration of Puerto Rico’s financial condition culminated in its debt being downgraded to junk status or speculative (below investment grade). For the past several years, Puerto Rico has been struggling with compounding debt and economic decline. As a result, the value of Puerto Rico’s municipal tax-free bonds has considerably fallen. Since September 2013, when the steep decline in Puerto Rico bond values began, investors holding these bonds have suffered massive losses. In May 2017, Puerto Rico filed for bankruptcy protection from creditors in what is being described as the largest municipal bankruptcy filing in history.
To make matters worse, after Hurricane Maria devastated the island in September 2017, Puerto Rico debt fell by 4%, the biggest weekly drop since July 2015. This sharp fall came after Governor Alejandro García Padilla announced that Puerto Rico would ask bondholders to take less than what they were owed.
Erez Law has alleged in the claim that the Florida resident was an unsophisticated, conservative and risk averse investor who entrusted Strauss and Oppenheimer with the vast majority of his liquid net worth. The customer informed Strauss that he was relying solely on income from his investments to meet his living expenses. The customer’s capital could not be replaced and could not be subjected to a high degree of risk. Despite the customer’s documented risk tolerance and aversion to high risk investments or strategies, it is alleged that Oppenheimer recommended high risk investments and strategies with disastrous results.
Strauss recommended a dangerous and unsuitable strategy of concentrating the customer’s Oppenheimer portfolio in high risk Puerto Rico bonds. It is alleged that Strauss assured the Erez Law client that the Puerto Rico bonds were guaranteed and that there was nothing to worry about because Puerto Rico was part of the United States. The customer entrusted 25% of his savings in high risk and unsuitable Puerto Rico bonds, including:
- Puerto Rico Commonwealth Aqueduct
- Puerto Rico Electric and Power Authority
- Puerto Rico Commonwealth
- Puerto Rico Public Buildings Authority
- Puerto Rico Commonwealth Infrastructure
- Puerto Rico Sales Tax
Despite the risks associated with Puerto Rico bonds, it is alleged that Strauss recommended a speculative and unsuitable strategy of dangerously concentrating the customer’s portfolio in high risk Puerto Rico bonds, which lacked material diversification and exposed the customer to credit risk of a single financially troubled territory. Additionally, Strauss failed to adequately disclose the risks associated with the Puerto Rico bonds he recommended. It is alleged that Strauss recommended the customer continue with the speculative strategy even as Puerto Rico bonds plummeted in value. Strauss recommended the customer further concentrate the Oppenheimer portfolio by investing in additional funds in increasingly speculative Puerto Rico debt.
The customer continued to invest with Strauss and Oppenheimer until November 2015, when he transferred his accounts to National Securities Corp., the firm in which Strauss was then employed. The customer did not know at the time that Strauss had been fired by Oppenheimer after he was caught engaging in unauthorized trades. Soon, Holly informed the customer that Strauss had “retired” and that he would be taking over the customer’s accounts. Holly then too recommended the customer hold his Puerto Rico bonds.
Strauss was registered with National Securities Corporation in Boca Raton, Florida from November 6 to 18, 2015, and previously with Oppenheimer & Co. Inc. in Boca Raton, Florida from 2009 to 2015. In addition to the case above, Strauss has been the subject of one additional customer complaint, according to his CRD report:
- October 2015. “Trustee On Account Alleges That Unauthorized Purchases Took Place In The Account From June 17, 2015 Through October 2015.” The case was settled for $11,349.91.
Holly has been registered with National Securities Corporation in Boca Raton, Florida since 2004. Holly has been the subject of four customer disputes, two of which were denied, according to his CRD report:
- June 2002. “Client alleges FA and firm solicited transactions in unsuitable securities and excessive trading resulting in damages of $640,500.00.” The case was settled for $190,000.
- July 1999. “Misrepresentations & unsuitable recommendations.” The customer sought $8,500 in damages and the case was settled for $6,000.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.