Carmel, Milazzo & DiChiara LLP (CMD) is investigating potential claims against securities broker Stuart Horowitz of Coral Springs, Florida and Securities America, Inc. for fraud and failure to supervise.
Recently, Horowitz submitted an Acceptance, Waiver and Consent (AWC) with FINRA, in which he was assessed a deferred fine of $100,000 and suspended from association with any FINRA member in any capacity for one year. Without admitting or denying the findings, Horowitz consented to the sanctions and to the entry of findings that he recommended and engaged in unsuitable trading in preferred notes of an unregistered limited partnership investment fund.
The findings stated that his recommendations lacked a reasonable basis because he failed to adequately investigate red flags that the fund was not a viable investment. Shortly after Horowitz’s association with his member firm, he began sending emails to firm personnel requesting a quick approval process for the preferred notes. Horowitz told the firm that it was urgent that there be a quick approval process so that he could begin selling the preferred notes because there may only be a short period in which they could be sold. The offering documents for the preferred notes did not specify a deadline by which conversion requests had to be completed, although they did set a cap on the amount of money that could be converted to preferred notes. In addition, Horowitz attempted to persuade his customers to not participate in this conversion directly with the issuer even though they could have done so without the firm’s and Horowitz’s participation. Horowitz’s previous broker-dealer decided not to allow its representatives to sell the preferred notes to that firm’s customers due to concerns about the fund’s ability to generate income for investors. Horowitz became aware of this decision soon after, while he was associated with his new firm. However, Horowitz’s new firm advised him that it was awaiting an independent third-party due diligence report before approving the preferred notes for sale by the firm. Horowitz then requested that he nonetheless be permitted to sell the preferred notes to his existing customers, notwithstanding that the firm had not received the third-party report. The following day, the firm agreed to allow Horowitz to offer the preferred notes for sale to existing investors in the fund.
Thereafter, Horowitz recommended the conversion of his customers’ interests to the preferred notes although the firm had not obtained the third-party due diligence report and Horowitz had done nothing more than review the preferred notes offering documents and other written and oral representations the fund had made. Horowitz was also aware of red flags that cast doubt on the veracity of the issuer’s representations and the continuing viability of the fund. Within months, Horowitz’s branch office converted just over $8 million of existing interests to the preferred notes, which required additional capital contributions from his customers of just over $2.5 million. Horowitz was responsible for all but $137,500 of these conversions, and he was paid more than $200,000 in net commissions from the conversion process. The fund began making late payments to preferred note holders, and within months stopped making payments altogether. The findings also stated that Horowitz did not apprise his firm of any of the red flags. Despite Horowitz’s increasing knowledge of severe problems the fund had experienced and was experiencing, he continued to recommend that his customers convert their interests to the preferred notes. Horowitz’s staff processed some conversions on behalf of his customers even after he had learned that distributions on existing interests had been reduced to zero.
According to Mr. Horowitz’s FINRA BrokerCheck, he has been the subject of a staggering thirty-six (36) customer complaints and one (1) regulatory event.
Securities fraud, also known as stock fraud and investment fraud, is a deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of securities laws.
Investors are protected against fraudulent securities activities by several different civil laws. First, the Securities Exchange Act of 1934 (15 U.S.C. § 78a et seq.) and Rule 10b-5 protect investors against deceptive and manipulative acts in the purchase or sale of securities. This sweeping legislation is the cornerstone of federal securities laws. Rule 10b-5 makes it unlawful to employ a device or scheme to defraud, to make any untrue statement of material fact or omit to state a material fact not misleading, or to engage in any practice that would operate as a fraud.
If you or someone you know lost money investing with Stuart Horowitz and/or Securities America, Inc., you may be entitled to recover your investment losses through FINRA arbitration. CMD accepts cases on a contingency fee basis, which means we only get paid if you get paid. Your time to file a claim may be limited, so contact us today at (212) 658-0458 for a free and confidential case evaluation.