Joshua Nicholas Barred by FINRA After Allegations of Outside Futures Trading

Joshua Nicholas (CRD#: 6529944) is a previously registered Broker and previously registered Investment Advisor.

Broker’s Background

He entered the securities industry in 2016 and previously worked for Merrill Lynch, Pierce, Fenner & Smith, Inc.; and Midtown Partners.

Current And Past Allegations Of Conduct Leading To Investment Loss

According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), in January 2022 FINRA sanctioned Joshua Nicholas, barring him permanently from all capacities indefinitely, beginning January 24, 2022. The allegations against him are for selling away.

The Financial Industry Regulatory Authority (FINRA) strictly prohibits financial advisors from “selling away” or selling securities and investments to clients that are not offered by the brokerage firm with which they are employed. For example, it is illegal and a violation of industry rules for a financial advisor to recommend or even suggest that a client invest in the financial advisor’s own business or a business operated by his or her friends or family. It is not necessary that the financial advisor earn any compensation for recommending an outside investment.

The purpose behind this prohibition is to ensure that a financial advisor only offers to sell securities that have been vetted by his or her employer brokerage firm through a rigorous due diligence process. Most brokerage firms have an approved list of investments, products, and research that can be provided or made available to clients. Any deviation by the financial advisor from the approved product list may constitute selling away.

The FINRA sanction states, “Without admitting or denying the findings, Nicholas consented to the sanction and to the entry of findings that he converted customer funds. The findings stated that Nicholas engaged in futures contracts through an outside business activity (OBA). Two of Nicholas’s OBA customers lost more than $1 million as a result of his futures trading. In a purported effort to recoup some of their losses, Nicholas convinced the customers to invest $300,000 in a promissory note with his OBA so that entity could invest the additional funds in securities on their behalf. However, Nicholas transferred $280,000 from his company’s bank account to his personal bank account and spent approximately $58,000 of these funds on personal expenses. The findings also stated that Nicholas provided the customers with a fictitious brokerage statement containing material misrepresentations. After executing the promissory note, Nicholas’s customers repeatedly asked him to provide a copy of the company’s account statement to show them whether and how the proceeds of the note had been invested. In response to these requests, Nicholas prepared and emailed a copy of a brokerage statement purporting to show that his company had opened a brokerage account at a FINRA member firm, and that the account owned a number of securities to secure the note. The brokerage statement stated, among other items, that the account was in the name of Nicholas’s company, that the account held shares of certain equity securities, and that the account had earned approximately $72,000 in dividend income that month. In fact, Nicholas had fabricated the document. Neither Nicholas’s company nor he had an account at the firm, and neither his company nor he owned any assets custodied at the firm. The claims in the fabricated statement were therefore false. The findings also included that Nicholas engaged in an undisclosed business activity. Nicholas failed to provide written notice to his member firm that he was engaged in an OBA involving the corporate entity he formed and through which he traded futures contracts. Nicholas did not receive approval from the firm to engage in his OBA. Moreover, Nicholas falsely attested in a firm annual compliance certification that he did not engage in any OBAs. FINRA found that Nicholas engaged in an undisclosed private securities transaction. The promissory note that Nicholas solicited his OBA customers to invest $300,000 in was a security and Nicholas participated in this private securities transaction away from the firm. Nicholas failed to either provide prior written notice to the firm or receive prior written permission from the firm prior to engaging in the transaction.”

For a copy of the FINRA sanction, click here.

In addition, Joshua Nicholas has been the subject of one customer complaint and sanctions from other self-regulatory agencies, including the following:

• December 2020 — “The Business Conduct Committee of the NFA issued a Complaint against JDN Capital, LLC (JDN Capital) and Joshua David Nicholas (Nicholas). The NFA’s complaint alleges that, on September 11, 2020, NFA’s Executive Committee issued a Member Responsibility Action (MRA) against JDN Capital, LLC, and Associate Responsibility Action (ARA) against Joshua David Nicholas. The action resulted from JDN Capital and Nicholas having failed to cooperate with NFA by not producing documents and information that NFA has requested during its investigation of them. The investigation involved a $300,000 loan that JDN Capital and Nicholas solicited, using misleading information, around May 2020 from their former managed account customers to purchase securities in JDN Capital’s name, in exchange for a promissory note that guaranteed 17% annual interest. However, around the time of the loan, Nicholas deposited $225,000 into a personal trading account at a NFA Member futures commission merchant (“FCM A”) and is using those funds to conduct futures and other trading. Therefore, NFA requested JDN Capital and Nicholas produce bank records and other information so NFA could determine, among other things, what JDN Capital and Nicholas did with the loan proceeds, including whether Nicholas misappropriated the money to fund his personal trading account, contrary to the terms of the promissory note. NFA was also unable to determine whether JDN Capital and Nicholas entered into other loans and, if so, the loan amounts and what JDN Capital and Nicholas did with the proceeds. On November 9, 2020, approximately two months after the issuance of the MRA/ARA, Nicholas offered to repay the loan to Mrs. Doe’s Family Trust using money from his personal trading account at FCM A, in exchange for having the restrictions imposed under the MRA/ARA terminated. Accordingly, on November 16, 2020, NFA issued a “Notice and Order Terminating Member Responsibility Action and Associate Responsibility Action under NFA Compliance Rule 3-15” (Notice and Order) because, among other reasons, Nicholas had repaid the $300,000 loan to the Does and NFA had obtained information that it sought during the investigation, though not from JDN Capital and Nicholas. The Complaint charges JDN Capital and Nicholas for failing to cooperate in NFA’s investigation by refusing to produce their bank records and other documents and information that NFA had requested from them in order to determine, among other things, what JDN Capital and Nicholas did with the proceeds of the loan from Mrs. Doe’s Family Trust. Although Nicholas eventually provided NFA with a copy of the promissory note, he waited until after the MRA/ARA was issued to do so. Further, the copy of the promissory note that Nicholas submitted to NFA was heavily redacted to obscure its material terms. Nicholas also failed to cooperate with the terms of the MRA/ARA by violating the MRA/ARA’s trading restriction. The MRA/ARA limited JDN Capital and Nicholas’s trading to liquidating existing positions only. However, NFA learned from FCM A that Nicholas had engaged in a significant amount of trading in his personal account on September 14, 2020, after the MRA/ARA was issued. Nicholas also willfully provided false and misleading information to NFA regarding, for example, the trading and funding of his personal account at FCM A and his employment status with the FINRA member firm. The Complaint also charges JDN Capital and Nicholas with failing to observe high standards of commercial honor and just and equitable principles of trade.” Joshua Nicholas was sanctioned with a civil and administrative penalty/fine of $125,000, and is prohibited from reapplying for NFA membership or associate membership; he is also prohibited from acting or becoming a principal of an NFA member.
• September 2020 — “National Futures Association (NFA) hereby gives notice to JDN Capital, LLC, a registered commodity trading advisor (CTA) Member of NFA, and Joshua David Nicholas, the sole associated person (AP) and the principal of JDN Capital and an NFA Associate that, pursuant to NFA Compliance Rule 3-15, the President of NFA, with the concurrence of NFA’s Executive Committee, has taken a Member Responsibility Action (MRA) against JDN Capital and an Associate Responsibility Action (ARA) against Nicholas. JDN Capital and Nicholas have failed to cooperate with NFA by not producing documents and information that NFA has requested during its investigation of them. The investigation involves a $300,000 loan that JDN Capital and Nicholas solicited, using misleading information, around May 2020 from their former managed account customers to purchase securities in JDN Capital’s name, in exchange for a promissory note that guaranteed 17% annual interest. However, around the time of the loan, Nicholas deposited $225,000 into a personal trading account at a NFA Member FCM and is using those funds to conduct futures and other trading. Therefore, NFA requested JDN Capital and Nicholas produce bank records and other information so NFA could determine, among other things, what JDN Capital and Nicholas did with the loan proceeds, including whether Nicholas misappropriated the money to fund his personal trading account, contrary to the terms of the promissory note. The NFA also alleges that Nicholas provided false and misleading information to NFA during the investigation. NFA is also unable to determine whether JDN Capital and Nicholas entered into other loans and, if so, the loan amounts and what JDN Capital and Nicholas did with the proceeds.” The National Futures Association suspended Joshua Nicholas from September 11, 2020 through November 16, 2020.
• August 2020 — “The Trustees allege unsuitable investment recommendations, selling away and omission of material facts in February 2020.” The customer dispute was settled for $275,000.
• July 2020 — “Conduct involving forgery of a client document.” Joshua Nicholas was permitted to voluntarily resign from Merrill Lynch, Pierce, Fenner & Smith, Inc.

For a copy of Joshua Nicholas’s FINRA BrokerCheck, click here.

We Help Investors Recover Investment Losses

The Wolper Law Firm, P.A. represents investors nationwide in securities litigation and arbitration on a contingency fee basis.  Matt Wolper, the Managing Principal of the Wolper Law Firm, P.A., 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 mwolper@wolperlawfirm.com.

Merrill Lynch Financial Advisor Joshua Nicholas Barred By FINRA

Joshua Nicholas (CRD#: 6529944) is a previously registered Broker and previously registered Investment Advisor.

Broker’s Background

He entered the securities industry in 2016 and previously worked for Merrill Lynch, Pierce, Fenner & Smith, Inc., and Midtown Partners.

Current And Past Allegations Of Conduct Leading To Investment Loss

According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), in January 2022, FINRA sanctioned Joshua Nicholas, barring him permanently from all capacities indefinitely. The FINRA sanction states, “Without admitting or denying the findings, Nicholas consented to the sanction and to the entry of findings that he converted customer funds. The findings stated that Nicholas engaged in futures contracts through an outside business activity (OBA). Two of Nicholas’s OBA customers lost more than $1 million as a result of his futures trading. In a purported effort to recoup some of their losses, Nicholas convinced the customers to invest $300,000 in a promissory note with his OBA so that entity could invest the additional funds in securities on their behalf. However, Nicholas transferred $280,000 from his company’s bank account to his personal bank account and spent approximately $58,000 of these funds on personal expenses. The findings also stated that Nicholas provided the customers with a fictitious brokerage statement containing material misrepresentations … The promissory note that Nicholas solicited his OBA customers to invest $300,000 in was a security and Nicholas participated in this private securities transaction away from the firm. Nicholas failed to either provide prior written notice to the firm or receive prior written permission from the firm prior to engaging in the transaction.”

For a copy of the FINRA sanction, click here.

In addition, Joshua Nicholas has been the subject of four related disclosures, including the following:

• December 2020 — “The Business Conduct Committee of the NFA issued a Complaint against JDN Capital, LLC (JDN Capital) and Joshua David Nicholas (Nicholas). The NFA’s complaint alleges that, on September 11, 2020, NFA’s Executive Committee issued a Member Responsibility Action (MRA) against JDN Capital, LLC, and Associate Responsibility Action (ARA) against Joshua David Nicholas. The action resulted from JDN Capital and Nicholas having failed to cooperate with NFA by not producing documents and information that NFA has requested during its investigation of them. The investigation involved a $300,000 loan that JDN Capital and Nicholas solicited, using misleading information, around May 2020 from their former managed account customers to purchase securities in JDN Capital’s name, in exchange for a promissory note that guaranteed 17% annual interest. However, around the time of the loan, Nicholas deposited $225,000 into a personal trading account at a NFA Member futures commission merchant (“FCM A”) and is using those funds to conduct futures and other trading…”
• September 2020 — “National Futures Association (NFA) hereby gives notice to JDN Capital, LLC, a registered commodity trading advisor (CTA) Member of NFA, and Joshua David Nicholas, the sole associated person (AP) and the principal of JDN Capital and an NFA Associate that, pursuant to NFA Compliance Rule 3-15, the President of NFA, with the concurrence of NFA’s Executive Committee, has taken a Member Responsibility Action (MRA) against JDN Capital and an Associate Responsibility Action (ARA) against Nicholas. JDN Capital and Nicholas have failed to cooperate with NFA by not producing documents and information that NFA has requested during its investigation of them. The investigation involves a $300,000 loan that JDN Capital and Nicholas solicited, using misleading information, around May 2020 from their former managed account customers to purchase securities in JDN Capital’s name, in exchange for a promissory note that guaranteed 17% annual interest. However, around the time of the loan, Nicholas deposited $225,000 into a personal trading account at a NFA Member FCM and is using those funds to conduct futures and other trading. Therefore, NFA requested JDN Capital and Nicholas produce bank records and other information so NFA could determine, among other things, what JDN Capital and Nicholas did with the loan proceeds, including whether Nicholas misappropriated the money to fund his personal trading account, contrary to the terms of the promissory note. The NFA also alleges that Nicholas provided false and misleading information to NFA during the investigation. NFA is also unable to determine whether JDN Capital and Nicholas entered into other loans and, if so, the loan amounts and what JDN Capital and Nicholas did with the proceeds.” The National Futures Association suspended Joshua Nicholas from NFA membership and associate membership beginning September 11, 2020 and ending November 16, 2020.
• August 2020 — “The Trustees allege unsuitable investment recommendations, selling away and omission of material facts in February 2020.” The customer dispute was settled for $275,000.
• July 2020 — “Conduct involving forgery of a client document.” Joshua Nicholas was permitted to voluntarily resign from Merrill Lynch, Pierce, Fenner & Smith, Inc.

For a copy of Joshua Nicholas’s FINRA BrokerCheck, click here.

We Help Investors Recover Investment Losses

The Financial Industry Regulatory Authority (FINRA) strictly prohibits financial advisors from “selling away” or selling securities and investments to clients that are not offered by the brokerage firm with which they are employed. For example, it is illegal and a violation of industry rules for a financial advisor to recommend or even suggest that a client invest in the financial advisor’s own business or a business operated by his or her friends or family. It is not necessary that the financial advisor earn any compensation for recommending an outside investment.

The purpose behind this prohibition is to ensure that a financial advisor only offers to sell securities that have been vetted by his or her employer brokerage firm through a rigorous due diligence process. Most brokerage firms have an approved list of investments, products, and research that can be provided or made available to clients. Any deviation by the financial advisor from the approved product list may constitute selling away.

The Wolper Law Firm, P.A. represents investors nationwide in securities litigation and arbitration on a contingency fee basis.  Matt Wolper, the Managing Principal of the Wolper Law Firm, P.A., 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 mwolper@wolperlawfirm.com.