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Michael Nixon Suspended by FINRA for Selling Steepener Notes

Michael Nixon (CRD#: 2169631) is a registered Investment Advisor and previously registered Broker.

Broker’s Background

He entered the securities industry in 1991 and previously worked for Paulson Investment Company, LLC; Newport Coast Securities, Inc.; Meyers Associates, LP; Anderson & Strudwick, Inc.; Jesup & Lamont Securities Corp.; Empire Financial Group, Inc.; Centennial Capital Management, Inc.; American Frontier Financial Corp.; Dickinson & Co.; Montano Securities Corp.; and F.N. Wolf & Co., Inc.

Current And Past Allegations Of Conduct Leading To Investment Loss

According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), in December 2021, FINRA sanctioned Michael Nixon, levying a civil and administrative fine of $5,000, and suspending him from all capacities for four months, beginning January 3, 2021 and ending May 2, 2021. The FINRA sanction states, “Without admitting or denying the findings, Nixon consented to the sanctions and to the entry of findings that he recommended that a customer purchase a type of complex, structured product known as a steepener without having a reasonable basis for his recommendations. The findings stated that Nixon lacked an understanding of the risks associated with steepeners when he recommended that the customer purchase them. Specifically, Nixon failed to recognize the possibility that the yield curve on a steepener could quickly flatten, resulting in the customer having to choose between holding the products for an extended period while receiving little to no interest, or selling the products in the secondary market for a substantial loss of principal. Indeed, soon after one of Nixon’s recommendations that the customer purchase a steepener, the yield curve began to flatten. Subsequently, less than seven months after its purchase, Nixon recommended that the customer sell the steepener on the secondary market at a loss.”

For a copy of the FINRA sanction, click here.

In addition, Michael Nixon has additional disclosures reflected on his BrokerCheck, including employment disclosures, regulatory disclosures and customer complaints. Among the disclosures are the following:

  • August 2019 – “Without admitting or denying the findings, Nixon consented to the sanctions and to the entry of findings that he exercised discretionary trading authority on behalf of his customers without prior written authorization from the customers and written approval from his member firm. The finding stated that after some of the discretionary trades had taken place, Nixon stated on an annual compliance questionnaire that he submitted to the firm that he had not exercised discretionary trading authority in any of his customer’s accounts.” Michael Nixon was fined $5,000, and suspended from all capacities for 15 business days, from September 24, 2019 to October 14, 2019. For a copy of the FINRA sanction, click here.
  • July 2018 – “Claimants allege violation of the Florida Securities Act, the Virginia Securities Act, common law fraud, securities fraud, breach of fiduciary duty, securities recommended and purchased were unsuitable, respondent negligently recommended unsuitable investments and negligently supervised representatives and investments, breach of contract, and Newport, Paulson and Onesto liability for their agent. Activities leading to the allegations occurred between 2013 to 2018.” The customer dispute was settled for $192,500.
  • October 1998 – “CUSTOMER ALLEGES MISREPRESENTATION AND DECEIT, BREACH OF FIDUCIARY DUTIES, AND VIOLATIONS OF NASD AND SEC RULES IN CONNECTION WITH A MARGIN CALL AND SUBSEQUENT STOCK LIQUIDATION TO MEET THE MARGIN CALL. CUSTOMER SEEKS COMPENSATORY DAMAGES OF $4,500.00 PLUS PUNITIVE DAMAGES OF $4,500.00.” The customer was awarded damages of $2,006.95.
  • November 1992 – “BRANCH MANAGER LEARNED OF 11-4-92 FELONY CHARGES,WHICH WERE LATER DISMISSED DUE TO LACK OF SUFFICIENT EVIDENCE AND WERE REDUCED TO A MISDEMEANOR CHARGE. ON 11/13/1992, I WAS PERMITTED TO RESIGN.” Michael Nixon was permitted to resign from F.N. WOLF & CO., INC.
  • November 1992 – “1 COUNT OF GRAND LARCENY-FELONY-CHARGE DISMISSED-NON INVESTMENT RELATED. 1 COUNT OF BURGLARY-FELONY-CHARGE DISMISSED-NON INVESTMENT RELATED. 1 COUNT OF ATTEMPTED BURGLARY-FELONY-CHARGE DISMISSED-NON INVESTMENT RELATED. ALL THREE FELONY CHARGES WERE DISMISSED DUE TO LACK OF SUFFICIENT EVIDENCE. CHARGES WERE REDUCED TO ONE COUNT OF ATTEMPTED UNLAWFUL ENTRY-MISDEMEANOR-PLEAD GUILTY-NON INVESTMENT RELATED.”

For a copy of Michael Nixon’s FINRA BrokerCheck, 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.

Steepener notes, adjustable rate market notes, and spread linked notes are not traditional investments but rather structured products.  During the first 12-24 months, the steepener notes, adjustable rate market notes, spread linked notes and structured notes generally pay above-average “teaser” rates of interest.  However, for each year thereafter until maturity, which can often be 15-20 years, the interest the interest rate is determined by a complex formula that is correlated to a stock index, such as the S&P 500, a fixed income index or a derivative benchmark such as the constant maturity swap rate, or CMS swap rate. Depending on the value of the benchmark, the rate of interest paid to the investor may increase to a cap set forth in the prospectus or decrease to zero.  These nuances are set forth in the prospectus of the steepener notes, adjustable rate market notes, spread linked notes and structured notes but generally not understood by retail customers.  

In addition, some steepener notes, adjustable rate market notes, and spread linked notes have call features. This enables the issuer to call (or redeem) the security prior to maturity if, for example, the interest rate environment requires the issuer to pay higher than expected rates of interest to the investor. Alternatively, if the interest rate environment permits the payment of a lower rate of interest, the issuer is under no requirement to call the security. The call feature creates an imbalanced risk/return environment for the customer, who is often lured into the investment with the prospect of higher investment returns. In reality, to the extent a higher return is warranted pursuant to the prospectus, the issuer has the right to call the security if certain other conditions are met. This eliminates the possibility of the investor continuing to receive the higher income.

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.

Attorney Matthew Wolper

Attorney Matthew WolperMatt Wolper is a trial lawyer who focuses exclusively on securities litigation and arbitration. Mr. Wolper has handled hundreds of securities matters nationwide before the Financial Industry Regulatory Authority (FINRA), American Arbitration Association (“AAA”), JAMS, and in state and federal court. Mr. Wolper has handled and tried cases involving complex financial products and strategies ranging from traditional stocks and bonds to options, margin and other securities-based lending products, closed/open-end mutual funds, structured products, hedge funds, and penny stocks. [Attorney Bio]