- March 29, 2021
- Dawson James Securities
Edmund Zack (CRD#: 2215116) was a previously registered broker at Dawson James Securities, Inc., in New York, NY. He entered the securities industry in 1992 and previously worked for Benchmark Investments, Inc.; Western International Securities, Inc.; Aegis Capital Corp.; National Securities Corporation; J. H. Darbie & Co., Inc.; Carlin Equities Corp.; GKN Securities Corp.; and First Montauk Securities Corp.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), in March 2021, FINRA sanctioned Edmund Zack, assessing civil and administrative penalties of $10,000, disgorgement of $5,161, and suspension of all capacities for a period of eight months beginning on April 5, 2021 and ending on December 4, 2021. The FINRA sanction states, “Without admitting or denying the findings, Zack consented to the sanctions and to the entry of findings that he made unsuitable stock recommendations to, and engaged in excessive and quantitatively unsuitable trading in the member firm account held by, one of his customers. The findings stated that Zack recommended the customer actively trade in speculative, low-priced securities and increase his trading capacity by using margin. Zack did not have a reasonable basis to believe these transactions were suitable for the customer, who had an investment objective of growth and a moderate risk tolerance, limited prior investment experience, and no experience with margin. Because the customer routinely followed Zack’s recommendations, Zack exercised de facto control over his account. Zack’s active trading generated an annualized cost-to-equity ratio of 122 percent and an annualized turnover rate of 22. The customer paid $10,424 in commissions and trading costs, and incurred losses of $11,357. The findings also stated that Zack exercised discretionary trading authority in firm customer accounts when he sold shares of a security (Security A) without obtaining prior written authorization from the customers and the firm to exercise discretion in these accounts, or discussing and receiving approval from each customer before selling the shares. The findings also included that Zack caused the firm to maintain inaccurate books and records by marking order tickets for discretionary trades as unsolicited rather than solicited. When Zack solicited the customers’ purchase of Security A shares, he recommended the customers sell the shares when the stock reached a certain price. Zack initiated the sale of Security A shares in his customers’ accounts based on his earlier recommendation, but marked the trades as unsolicited, indicating that the customers initiated the sales.”
For a copy of the FINRA sanction, click here.
Edmund Zack has no additional disciplinary history.
For a copy of Edmund Zack’s FINRA BrokerCheck, click here.
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.
FINRA has defined the standards in which investment recommendations made by brokerage firms and registered financial advisors are evaluated. The FINRA suitability rule focuses on three fundamental concepts: (1) reasonable basis suitability, (2) quantitative suitability, and (3) customer-specific suitability.
● 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, other investments, financial situation and needs, tax status, and investment objectives. Other considerations include the customer’s time horizon, liquidity needs, risk tolerance, and any other information disclosed by the customer.
When a financial advisor carries out frequent trades engineered to drive up commissions rather than in the best interests of the client, it’s commonly called churning. This conduct is also in violation of FINRA regulations, as it fails to put the investment goals of the client first.
Failure by a financial advisor to adhere to these requirements is evidence of negligence or, worse, investment fraud. If you as the investor can establish, at a minimum, negligent misconduct, you may be entitled to recover your 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 email@example.com.