• December 27, 2023
• Vora Wealth Management

Dharmesh Virenda Vora (CRD: 2629494) is a registered investment advisor at Vora Wealth Management, PLLC in Flagstaff, AZ.

Broker’s Background

Dharmesh Vora entered the securities industry in 2009 and has previously worked for Global Financial Private Capital, LLC, and North Harbor Advisers.

What are Auto-callable Structured Notes

Auto-call Notes are market-linked investments that offer a coupon to investors from the date of purchase through the date of maturity (typically 24 months).  The payment of the aforementioned income is connected to the performance of underlying securities—typically individual stocks or stock indices.  In this case, the Auto-call notes were each tied to the performance of between two or three underlying individual stocks.  The prospectus of the Auto-call Notes dictates that if all of the underlying individual stocks remains at or above a certain price (i.e., the “Coupon Barrier”), all is good in the world and the investor will continue to receive the stated income payment.  If, however, one of the underlying stocks falls to a price below the Coupon Barrier, the investor will no longer receive the stated income payment.  It necessarily follows that having multiple underlying stocks in the basket of the Auto-call Note is riskier than a single underlying stock because it is more likely that at least one stock, among multiple stocks, will decline in value.

 

Separate and apart from the Coupon Barrier that dictates whether the investor receives income, each Auto-call Note additionally states that the stocks underlying the note are being benchmarked at a specific price, known as the “Initial Level.”  If one of the underlying stocks declines to a certain level by the maturity date, known as the “Knock-in Barrier,” not only will the investor not receive income but they will be forced to purchase shares of the depreciated underlying stock at market value.  This is problematic because the cost basis associated with those same shares is commensurate with the Initial Level.  In other words, the investor will incur massive losses on day-one because they will own shares of stock worth far less than the Initial Level value assigned in the Auto-call Note term sheet.  If, on the other hand, the underlying stocks appreciate in value, investors do not get to participate in the upside and the issuer, in this case Citibank, can call the note; hence the name Auto-call Notes.

 

Auto-call Notes and other forms of Structured Notes are speculative in nature.  They are only appropriate for investors who are willing to subject their assets to significant portfolio decline.

 

Current and Past Allegations of Conduct Leading to Investment Loss

According to publicly available records released by the U.S Securities and Exchange Commission (SEC), in October 2023, Dharmesh Vora became the subject of a customer dispute alleging, “UNSUITABLE ADVICE, BREACH OF FIDUCIARY DUTY, GROSS NEGLIGENCE, AND OTHER CAUSES OF ACTION RELATED TO RECOMMENDATION OF STRUCTURED NOTES IN 2021.” The customer dispute is still pending, and the damage amount requested is $486,000.

In addition, Dharmesh Vora has been the subject of several other disclosures, which include the following:

• October 19, 2023—“CUSTOMER DISPUTE ALLEGING UNSUITABLE ADVICE, BREACH OF FIDUCIARY DUTY, UNAUTHORIZED TRADING, FRAUD, AND ELDER ABUSE RELATED TO STRUCTURED NOTES IN 2020 AND 2021.” The damage amount requested is $46,879 and the customer dispute is still pending.
• October 9, 2023—“CLAIMANTS ALLEGE LACK OF SUITABILITY, FRAUD, BREACH OF FIDUCIARY DUTY, NEGLIGENCE, NEGLIGENT MISREPRESENTATION, DISHONEST AND UNETHICAL PRACTICES, BREACH OF CONTRACT, BREACH OF THE IMPLIED DUTY OF GOOD FAITH AND FAIR DEALING, AND OTHER CAUSES OF ACTIONS RELATED TO RECOMMENDATION OF STRUCTURED NOTES IN 2021 AND INSURANCE PRODUCTS.” The damage amount request is $1,485,979, and the customer dispute is still pending.
• September 2023—“CUSTOMER ALLEGES LACK OF SUITABILITY RELATED TO INVESTMENT IN STRUCTURED NOTE.” The damage amount requested is $800,000 and the customer dispute is still pending.
• August 2023— “The United States Securities and Exchange Commission instituted an investigation into Vora Wealth Management’s practices of recommending equity-linked notes (“ELNs”) to customers.”
• January 2023—“Customers allege unsuitable advice related to structured notes in 2021 and other causes of action.” The damage amount requested is $480,510 and the customer dispute is still pending.
• October 2022—“Customers allege unsuitable recommendation of structured notes in 2020 and other causes of action.” The damage amount requested was $375,000 and the customer dispute settled for $103,500.
• September 2022—“Customer alleges unsuitable investment recommendations and undiversified portfolio.” The customer dispute settled for $175,000.
• June 2022—“Customer alleges unsuitable investment recommendations and undiversified portfolio.” The damage amount requested was $300,000 and the customer dispute settled for $210,000.
• May 2022—“Customer alleges unsuitability.” The customer dispute was closed.

 

For a copy of Dharmesh Vora’s SEC AdvisorInfo, click here.

We Help Investors Recover Investment Losses

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.

 

Reasonable basis suitability requires that a recommended investment or investment strategy be suitable or appropriate for at least some investors. Reasonable basis suitability requires an advisor to conduct adequate due diligence so that he or she can determine the risks and rewards of the investment or investment strategy.

 

Quantitative suitability requires a brokerage firm or financial advisor with actual or de facto control over a customer’s account to have a reasonable basis for believing that a series of recommended transactions – even if suitable when viewed in isolation – is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile. No single test defines excessive activity, but factors such as the turnover rate, the cost-equity ratio, and the use of in-and-out trading in a customer’s account may provide a basis for a finding that a member or associated person has violated the quantitative suitability obligation.

 

Customer-specific suitability requires that a member or associated person have a reasonable basis to believe that the recommendation is suitable for a particular customer based on that customer’s investment profile. Among the criteria that a financial advisor must evaluate to satisfy his or her customer-specific suitability obligations include the investor’s age, tax status, time horizon, liquidity needs, and risk tolerance; a client’s other investments, financial situation and needs, investment objectives, and any other information disclosed by the customer should also be considered.

 

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 mwolper@wolperlawfirm.com.