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NEWSLETTERS & ALERTS
Case of Elderly Investor Abuse by a Stifel, Nicolaus Broker
by Howard Haykin
Harold Pomeranz agreed to a $5K fine and a 3-month suspension to settle FINRA charges that he recommended unsuitable short-term unit investment trust (UIT) transactions in an elderly customer’s account.
BACKGROUND. Pomeranz, who resides in Plainview, NY, entered the securities industry in 1970. From July 2007 until his voluntary resignation in September 2016, Pomeranz was registered as a General Securities Representative, a Registered Options Representative, and a Direct Participation Programs Principal through Stifel, Nicolaus & Company. Pomeranz is not currently associated with a FINRA member firm.
FINRA FINDINGS. Between January 2011 and December 2014, Pomeranz recommended and effected approximately 21 UIT transactions in the account of an elderly customer, 83 years of age.
The UITs that Pomeranz recommended had maturity dates of 24 months, and carried initial sales charges ranging from 2.5% to 3.95%. Yet the average holding period for the UITs Pomeranz recommended was less than 14 months. Moreover, on numerous occasions, Pomeranz recommended that the customers use the proceeds from the relatively short-term sale of a UIT to purchase another UIT with similar or even identical investment objectives.
UITs are investment companies that offer shares of a fixed portfolio of securities in a one-time public offering, and terminate on a specified date. As such, they are not designed to be used as trading vehicles. In addition, UITs typically carry significant upfront charges and, as with mutual funds that carry front-end sales charges, short-term trading of UITs is presumptively improper.
Pomeranz's recommendations to purchase and sell UITs on a short-term basis burdened the customer with unnecessary sales charges, and were unsuitable in view of the frequency, size and cost of the transactions.
This case was reported in FINRA Disciplinary Actions for May 2017.
For details on this case, go to ... FINRA Disciplinary Actions Online, and refer to Case #2016049938201.