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Investments - Unsuitable
Funds from Medical Malpractice Award Invested in a ‘Dry Well’
by Howard Haykin
Disabled, unemployed, living on a fixed income, and possessing limited investment experience, a woman opened an account in October 2014 with Bishop, Rosen & Co., a now-defunct brokerage firm. As of January 2015, the account was valued at $114,000. By February 2016, she had lost $87,000 – or 76% of her account value. With a starting net worth of just $152,000 - largely derived from a medical malpractice award - this investor could not afford any sizable losses.
The culprit in this case was a broker, Hector Ramos, who concentrated the customer's account with a handful of speculative energy sector securities.
- Starting in February 2015, the broker recommended that the customer invest primarily in 4 energy sector securities.
- In the months that followed, the broker repeatedly increased her positions in energy sector securities, including 2 additional energy sector securities.
- The broker increased the customer’s investment in a coal company, even after that company issued a profit warning and its stock price dropped more than 22% in one day.
- As of March 2016, more than 96% of the customer’s account value was invested in energy sector securities, more than 80% was invested in the one coal company, and realized losses totaled $86,891.
CUSTOMER WILL NEVER RECOVER HER FULL LOSSES. Life is not fair on Wall Street, where losses are difficult to recover – particularly when trying to recover from a broker who is himself experiencing ‘financial hardship’. In this case, the broker, Hector Ramos, was ordered to pay the customer just $50,000 of her $87,000 in losses. But for that to happen, the broker must complete a 3-month suspension and then pay off a $168,000 lien that his former employer, Morgan Stanley, holds against him. Finally, given the 2016 demise of broker-dealer Bishop, Rosen & Co., this customer has no one to sue other than Hector Ramos.
[For further details, click on … FINRA Case #2018059983001.]