Recovery Options For Investors Who Were Sold Auto-Callable Structured Notes From National Securities Corp. Broker, Rick Davidson
Rick Davidson (CRD # 1315988) was a Financial Advisor at National Securities Corp. in New York, NY. Rick Davidson has been in the securities industry since 1985 and previously worked at Jeffries, LLC and Morgan Stanley. Rick Davidson is currently working at Aegis Capital.
The Wolper Law Firm has been retained by three investors who were sold equity-linked auto-callable structured notes, junk bonds and other structured products by Rick Davidson and experienced significant investment losses. In some instances, these securities were highly concentrated in the customer’s account.
Auto-callable structured notes are short-term market linked investments that offer investors a coupon (i.e., income stream). The auto-callable structured note is linked to an underlying index or stock and has a maturity date on which the investor can receive a return of his or her principal. If, however, the value of the underlying index or security falls below a certain threshold prior to maturity, the investor stands to lose significant principal or, worse, get “put” the underlying stock at a depressed price. Auto-callable structured notes have become popular in recent years because they pay above-average commissions to brokers, which served as incentive to sell them to customers.
During the recent market downturn, many auto-callable structured notes blew through their protective barriers and resulted in large losses in customer accounts. In some instances, these notes were leveraged, further magnifying the losses.
The customers also allege that Rick Davidson engaged in excessive trading or churning in structured products and auto-callable structured notes. Brokers who engage in excessive and unnecessary trade activity violate the law. Brokers often attempt to conceal excessive trading by convincing that the short-term trades are profitable without also disclosing that, net of commissions, the trades are flat or result in a loss to the client. Excessive trading claims require a careful analysis of the cost-benefit ratio of the investment transactions.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), Rick Davidson has been the subject of six (6) customer complaints during his career and has an employment disclosure relating to his resignation from Morgan Stanley during an inquiry regarding whether he exercised discretion in a client’s account. Among the customer complaints against Rick Davidson including the following:
• November 2019—Customer alleges “suitability.” Damages are unspecified and the matter remains pending.
• May 2017—”Client verbally alleged, inter alia, unauthorized trading with respect to corporate bond investments – January 2015 to May 2016.” The matter was settled for $21,000.
• July 2016—”Claimant alleged unsuitability, inter alia, with respect to investments in account – January 2013 to March 2016.” The matter was settled for $175,000.
• March 2012—”IT IS ALLEGED THAT FINANCIAL ADVISOR ENGAGED IN UNAUTHORIZED TRANSACTIONS BEGINNING IN MARCH 2010.” The matter was settled for $101,787.
• January 2012—”CLIENT CLAIMS MARCH 15, 2011 PURCHASE OF BOND POSITION WAS UNAUTHORIZED AND WAS NOT A SUITABLE INVESTMENT.” The matter was settled for $8,185.
In addition, as referenced above, in May 2016, Rick Davidson resigned from Morgan Stanley amidst “allegations relating to registered representative’s exercise of discretion in clients’ accounts as well as receipt of a loan from a Morgan Stanley employee.”
For a copy of Rick Davidson’s CRD, click https://brokercheck.finra.org/individual/summary/1315998#disclosuresSection
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 email@example.com.
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