Erez Law recently filed a FINRA arbitration against Benjamin F. Edwards & Company Inc. related to investment losses with broker Thomas Kintz (CRD #2667817), who has been a registered representative of Benjamin F. Edwards & Company Inc. in Boynton Beach, Florida since 2017.
The Erez Law client, who was a long-time customer of Kintz who placed a high degree of trust and confidence in his broker, alleges the following in the newly filed FINRA claim:
The Erez Law client entrusted Kintz and Benjamin F. Edwards & Company with the majority of his securities investments. Kintz knew that the client earns a modest income and could not afford to expose his savings to undue risk. Regrettably, Kintz brazenly abused the trust and confidence that his cousin placed in him to enrich himself.
It is alleged that starting in or about mid-2018, Kintz embarked on a fatally flawed self-serving and unsuitable strategy of trading the client’s account in complex exchange-traded products (ETPs). Complex ETPs are exchange-traded funds that offer leverage, designed to perform inversely to an index or both or provide exposure to complex markets such as specific futures markets.
According to an SEC Order that was filed in November 2020, from January 2016 to March 2020, certain Benjamin F. Edwards & Company Inc. brokers “believed the financial markets could experience volatility, and, possibly decline over a period of months or longer.” The SEC charged Benjamin F. Edwards & Company Inc. with failing to properly supervise its agents in connection with the sale of Complex ETPs. The charges brought by the SEC are based on the same conduct alleged in this case.
As explained in the SEC order, Kintz was one of the Benjamin F. Edwards & Company Inc. brokers who recommended that the Erez Law client invests in high risk and unsuitable complex ETPs to protect against the supposed decline that did not in fact appear for any sustainable period of time. Kintz recommended and implemented senseless and unsuitable trading in complex ETPs, including VIX Short Term Futures ETN (VXX). The VXX tracks an index with exposure to the futures contracts on the CBOE Volatility Index with average one-month maturity.
Additionally, Kintz also recommended the client invest in high risk and grossly unsuitable leveraged inverse funds, including the Proshares Ultrapro Short QQQ (SQQQ) which seeks the return of -3x the Nasdaq 100 index. The SQQQ is a non-traditional ETF that is designed to hedge against the market and to be held for one trading session. The client was not a trader, speculator, or sophisticated market timer. There was no reasonable basis for the client to short the market over a period of several years. Kintz’s strategy was speculative, unsuitable and reckless. Moreover, SQQQ resets daily and when held for longer the ETF differs from the underlying index during the same period of time due to the effect of compounding.
The claim also alleges that Kintz gambled the client’s capital on the high risk and unsuitable United States Natural Gas Fund (UNG), which is designed to track the movement in natural gas process.
According to the claim, Erez Law alleges that Benjamin F. Edwards & Company Inc. failed to adequately supervise its brokers’ sales of complex ETPs. It is alleged that Kintz executed dozens of trades of Complex ETPs without obtaining the client’s required prior authorization. Stockbrokers such as Kintz are required to obtain their customer’s authorization prior to each transaction unless the client signs a written agreement providing their stockbroker with discretion. If Benjamin F. Edwards & Company Inc. failed to obtain such written discretion then the trades are deemed unauthorized.
It is alleged that Kintz failed to ever adequately disclose to the client the risks involved in the Complex ETPs he sold to the Erez Law client. Kintz engaged in excessive trading designed to enrich himself at the client’s expense. The reckless trading that Kintz implemented in the Erez Law client’s account was designed to enrich him. The short-term trading primarily in complex ETPs since mid-2018 generated thousands of dollars in commissions.
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.
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