Arbitration Claim Filed Against Benjamin Edwards Based On The Sale Of Exchange Traded Products By Financial Advisor Thomas Kintz
Thomas Kintz (CRD # 2667817) is a Financial Advisor at Benjamin Edwards & Co. in Boynton Beach, FL. Thomas Kintz has been in the securities industry since 1995 and previously worked at Ameriprise and AG Edwards.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), Thomas Kintz is the subject of an arbitration claim based on the sale of exchange traded products in a customer account. Exchange traded products are typically leveraged funds that perform inversely or in tandem with an index. Depending on the leverage ratio, the movement of the exchange traded fund may accelerate at a pace that is twice or even three times the pace of the index.
In November 2020, Benjamin Edwards was sanctioned $650,000 by the Securities and Exchange Commission regarding its sales practices with respect to exchange traded products. According to the Sanction:
“From at least January 2016 through March 2020 (the “Relevant Period”), certain Benjamin Edwards brokerage and advisory representatives believed the financial markets could experience volatility, and, possibly, decline over a period of months or longer. These brokerage and advisory representatives recommended that many of their retail brokerage customers and advisory clients buy and hold one or more of the Complex ETPs for many months at a time, as a hedge against the anticipated marked decline. The Complex ETPs were: (1) the iPath S&P 500 VIX Short–Term Futures ETN, which traded under the ticker symbol VXX, (“VXX”); and (2) the ProShares VIX Short-Term Futures ETF, which traded under the ticker symbol VIXY (“VIXY”). The offering documents for VXX and VIXY generally disclosed that the products carried a higher risk of significant losses if held for extended periods. Benjamin Edwards’s brokerage and advisory representatives misunderstood the Complex ETPs, or ignored these disclosures, and made unsuitable recommendations to customers and clients that they buy and hold the Complex ETPs in a way that was contrary to the offering documents’ warnings about longterm holding periods, and at times, in a way that was unsuitable for certain of their retail customers and clients in light of their investment objectives and risk tolerances.”
For a copy of the sanction, click here
The Chicago Board of Options Exchange (CBOE) Volatility Index, or the “VIX,” represents the market’s expectation of thirty (30) day forward-looking volatility. It is commonly referred to as the “fear index.” The VIX is a complex statistical measure of trading activity and price action in options (i.e., calls and puts) on the S&P 500. The short-term options activity on the S&P 500 provides a window into how sophisticated institutional traders view market risk in the short-term. Mechanically, when the overall financial markets are in turmoil, the VIX will spike. When the overall financial markets are stable or appreciating, the VIX is stagnant or will decline.
The VIX is not tradeable in the retail markets—it is just an index. However, in recent years, various asset managers have created exchange traded investment vehicles that track the performance of the VIX. Two such investment vehicles are the Barclays Bank IPATH Series B S&P 500 VIX Short Term Futures Exchange Traded Note, which trades under the symbol “VXX” and the ProShares VIX Short-Term Futures ETF, which trades under the symbol “VIXY.”
VXX and VIXY trade an underlying portfolio of options on the S&P 500 and seeks to correlate performance to the VIX. Thus, investors who trade the VXX or VIXY will experience similar portfolio increases/decreases than if they were able to trade the VIX. Investors who purchase shares of the VXX or VIXY are predicting an increase in market volatility. If that prognostication proves correct, the VXX or VIXY trade will turn profitable. If volatility decreases, the value of VXX or VIXY shares will also decrease and the investor will lose money on the trade. Given that the underlying options positions within the VXX and VIXY are leveraged, and market volatility in and of itself can change by the minute, the VXX and VIXY are speculative securities that carry a high degree of risk. VXX and VIXY are not securities designed for retail investors.
Financial advisors have a legal and regulatory obligation to recommend only suitable investments that are appropriate for their clients’ needs and objectives. Their employing brokerage firm has a legal and regulatory obligation to supervise the Financial Advisors’ sales practices and dealings with clients. To the extent any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.
The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at 800.931.8452 or by email at firstname.lastname@example.org.
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