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Erez Law Files Claim Against First Republic Securities Company, LLC and Brokers Matthew Babrick and James Wilcox

Posted on Wednesday, November 18th, 2020 at 9:05 pm    

First Republic Securities Company

Erez Law recently filed a $1 million-plus FINRA arbitration against First Republic Securities Company, LLC in Los Angeles, California regarding investment losses due to the unsuitable Harvest Volatility Management, LLC Put Writing Strategy.

Their customer alleges that Matthew Babrick (CRD #4433983) and James Wilcox (CRD #4261884), who were registered representatives of First Republic Securities Company, LLC, recommended he invest in the unsuitable Harvest Volatility Management, LLC Put Writing Strategy.

The Erez Law client alleges the following in the newly filed FINRA claim:

The client entrusted First Republic Securities with his securities investments from the sale of his business. The client informed Babrick and Wilcox that he was risk-averse and did not need nor want to subject the proceeds from the sale of his business to undue risk. The client also informed Babrick and Wilcox that he was primarily interested in generating a stable income from his portfolio while preserving his capital. Based on Babrick and Wilcox’s representations and assurances that they would only recommend suitable investments, he agreed to become their customer. the client entrusted them with the majority of the proceeds from the sale of his business.

Regrettably, First Republic Securities Company, LLC recommended an unsuitable, unnecessary, and risky investment strategy with unacceptable results. 

First Republic Securities Company, LLC Company, LLC recommended the unsuitable Harvest Volatility Management, LLC Put Writing Strategy. The Harvest PWS program was represented to investors as a low-risk strategy that allows investors to generate enhanced yield while reducing risk, all without requiring investors to deposit any additional funds into their First Republic Securities Company, LLC account to participate in the Harvest PWS. Harvest is a registered investment advisor that manages an options overlay strategy it calls PWS. 

The Harvest PWS program involves using the equity in an investor’s First Republic Securities Company, LLC account(s) to pursue a purportedly low-risk options strategy involving selling options on the S&P 500 index. The Harvest PWS sells put options on the S&P 500 to generate premium/income. In doing so, the Harvest PWS has the upside limited to the premium collected and downside of the S&P 500 index below the strike price on the options sold. 

Harvest manages assets enrolled in the Harvest PWS on a discretionary basis. In other words, investors are not contacted prior to any transactions nor do they authorize any specific transactions.   

Erez Law alleges that Babrick and Wilcox represented to the client that the Harvest PWS would generate additional returns all while requiring no additional investment of capital. Babrick and Wilcox specifically represented to the client that the Harvest PWS would generate a yield of 5%. Regrettably, this was grossly misleading. 

It is alleged that Babrick and Wilcox presented the client with numerous representations designed to communicate the safety of the Harvest PWS including but not limited to consistent returns, conservative risk, and an enhanced portfolio. In reality, the Harvest PWS was an unsuitable strategy that exposed the client to significant market risks. 

It is alleged that Babrick and Wilcox failed to disclose that their strategy of combining the client’s fixed income securities with the Harvest PWS significantly increased the risk of the fixed income portfolio that served as the collateral for the Harvest PWS. They also failed to adequately disclose that the client could be subject to margin calls. In effect, the recommendation of the Harvest PWS defeated the very purpose of investing in low risk fixed income securities.

Additionally, Harvest and First Republic Securities Company, LLC each charged a separate annual management fee on the mandate amount. Babrick and Wilcox were able to generate additional and excessive fees by selling the Harvest PWS to the client. Babrick and Wilcox generated fees in connection with the account(s) that served as collateral for Harvest PWS and also generated a second layer of fees by recommending the Harvest PWS. Babrick and Wilcox were able to generate two revenue streams from the same assets in what may be referred to as double-dipping. In doing so, they were motivated to generate additional fees and exposed the client to additional and unnecessary risks to his severe detriment.

This was not an isolated case. First Republic Securities Company, LLC, Babrick and Wilcox recommended Harvest to other customers.

Wilcox has been registered with First Republic Securities Company, LLC in Jackson, Wyoming since January 2018. Wilcox was the subject of one additional customer complaint regarding:

July 2020. “For the period February 2018 to March 2020, Client alleges, inter alia, the registered representative recommended an unsuitable investment strategy.” The customer is seeking $800,000 in damages. The complaint was regarding index options and took place while Babrick was registered with First Republic Securities Company, LLC.

Babrick has been registered with First Republic Securities Company, LLC in Los Angeles, California since January 2018. Babrick recently has been the subject of two additional customer complaints in 2020, one of which was denied, according to his CRD report:

July 2020. “For the period February 2018 to March 2020, Client alleges, inter alia, the registered representative recommended an unsuitable investment strategy.” The customer is seeking $800,000 in damages. The complaint was regarding index options and took place while Babrick was registered with First Republic Securities Company, LLC.

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.