Alan Appelbaum – Aegis Capital Corporation

Alan Appelbaum (Alan Zelig Appelbaum, CRD# 500336) is a previously registered broker who last worked for Aegis Capital Corp. in their Boca Raton, FL office. Appelbaum previously worked for Herbert J. Sims & Co. Inc., Ryan, Beck & Co., LLC, Gruntal & Co., LLC, and several other firms. He had been in the industry since 1976.

The SEC Complaint

On July 28, 2022, the US Securities and Exchange Commission (SEC) filed a complaint in US District Court in the Southern District of Florida against Appelbaum, with the following allegations that occurred during his tenure at Aegis Capital Corp in Boca Raton:

1. From July 2017 through May 2019, Appelbaum continually made unsuitable recommendations to his customers and engaged in unauthorized trading with more than 140 purchases for seven customers.
2. Appelbaum recommended and purchased variable rate interest structured products, or VRSPs. These are risky, complicated products that didn’t pay a fixed amount of principal at maturity. Instead, the structure meant that the amount a customer received at maturity was tied to stock market equity indexes (i.e., Standard & Poor’s 500.) As a result, the investor could potentially lose all their investment even without an issuer default.
3. Interest payments were also tied to the equity indexes, and there was no guarantee of any. Frequently the customers received no interest payments, either monthly or quarterly. The maturity period of these VRSPs was typically 15 years or longer.
4. Appelbaum also executed hundreds of these VRSP transactions for the seven customers from September 2015 through May 2019 without their consent knowing that the trades were unsuitable. While the customers lost money, Appelbaum made over $1 million in commissions.
5. Additionally, Appelbaum stated to these customers that they were guaranteed to receive their full invested principal at maturity from these VRSPs. However, these VRSPs had no guarantee of principal protection.

As a registered representative, Appelbaum was required to determine whether an investment would be suitable for a customer. This includes considering their ages, investment objectives, risk tolerance, their financial needs, and other important factors that are covered in FINRA Rule 2111 regarding suitability. Appelbaum was fully aware of this rule and continued making purchases knowing that they were wholly unsuitable for these customers. VRSPs are recommended only for customers with “high” or “maximum” risk tolerances.

Appelbaum’s Disclosures And Authorizations

Appelbaum also failed to comply with Aegis’ procedures intended to ensure that representatives notified customers of the risks, and that customers thoroughly understood the risks. The procedures were implemented in June of 1017 and included a disclosure form that required customer signatures prior to purchases. Applebaum failed to provide the seven customers with this disclosure for two years after Aegis implemented the disclosure policy.

These customers were all over 55, with several over the age of 80. Appelbaum himself is 75. When questioned about losses, Appelbaum also made false and misleading statements to customers about the investments.

All the customer accounts were non-discretionary, and Appelbaum was required to obtain authorization from the customers prior to any transactions. However, some of the customers testified that Appelbaum did not call for an authorization prior to making any purchases, which was prohibited under Aegis’ policies.

The SEC’s Fines

In the petition, the SEC asks for a jury trial, along with:

• A permanent enjoinment to bar and prevent Appelbaum from continuing working in securities and the possibility of continuing fraudulent activity
• Disgorgement of ill-gotten gains
• Pay pre-judgment interest
• Monetary fines
• Any other relief that the court believes is appropriate.

The SEC’s investigation into Appelbaum’s sales practices continues.

Aegis Financial In Boca Raton, Florida

FINRA recently ordered Aegis Capital Corp. to Pay $1.7 Million in restitution to customers whose accounts were excessively and unsuitably traded commonly referred to as churning. Also, two supervisors were fined, and a supervisor was suspended for failing to respond to red flags and a financial advisor was sanctioned.

Aegis closed the Boca Raton office earlier this year.

Excessive trading frequently leads to customer losses because the fees and commissions reduce the principal value of the account and requires even greater profits for the investor to break even. Aegis has been the subject of multiple securities arbitration claims involving allegations of excessive trading, churning and unsuitable recommendations.

Alan Appelbaum – Boca Raton Florida- Aegis Financial

Appelbaum has 18 disclosures on his publicly available FINRA BrokerCheck report, including 14 customer disputes:

May 2021: A customer dispute alleged unsuitable investments and requested $550,000 in damages. The dispute was settled for $280,000.

May 2021: Appelbaum was permitted to resign from Aegis Capital Corp for allegations that he failed to follow firm procedures and “Exercised discretion without client’s written authorization.”

September 2019: A customer dispute alleged unsuitability and unauthorized transactions and settled for $1,650,000. Appelbaum denied any wrongdoing and said the investments recommended were suitable.

November 2018: A customer dispute alleged unsuitable investment recommendations from 2015-2018 and requested $1,800,000 in damages. The dispute was closed with no action.

December 2015: A customer dispute alleged “failure to recognize claimants change in circumstances and desire to pursue a low-risk conservative strategy, unsuitable trading in proprietary investments and structured products between the years of 2012 and 2014.” $50,000 in damages were requested and the case settled for $20,000.

August 2015: A customer dispute alleged “unsuitable product and churning” and requested $200,000 in damages. The case settled for $35,000.

August 2014: A customer dispute alleged “breach of fiduciary duty, a failure to supervise, negligence, fraud, breach of contract and violation of NASD and FINRA rules.” $350,000 in damages was requested and the case settled for $25,000.

September 2009: A customer dispute alleged that recommendations were “not consistent with clients investment goals and objectives.” $500,000 in damages were requested and the claim was denied.

July 2006: A regulatory disclosure alleges “Mr. Appelbaum serviced eight brokerage accounts for NH residents, which were opened and transacted under another registered representative’s number. Mr. Appelbaum was not licensed to sell securities in NH. the bureau alleged that Mr. Appelbaum engaged in unlicensed activity in violation of RSA 421-b:6,i.” Appelbaum was fined $55,000.

March 2006: A customer dispute alleged that the broker’s mark-up on bonds was excessive. The claim was settled for $250,000.

December 2003: A customer dispute alleged negligence, breach of fiduciary duty, and improper management and monitoring of an account. $523,129 in damages were requested and the case settled for $42,500.

September 2003: A customer dispute alleged fraud, misrepresentation, strict liability misrepresentation, unsuitability, and common breach of fiduciary duty. $450,000 in damages were requested and the case settled for $45,722.

April 2003: A customer dispute alleged the recommendation of unsuitable, speculative securities. $213,000 in damages was requested and the case settled for $3,750.

August 2002: A customer dispute alleged the purchase of high yield bonds was contrary to investment objectives. $216,708 in damages was requested, and the case settled for $2,500.

May 2002: A customer dispute expressed dissatisfaction with the recommendation municipal bonds. $136,238 in damages was requested. The case settled for $15,000.

October 2001: A customer dispute expressed dissatisfaction with the recommendation of municipal bonds. The claim was settled for $75,000.

January 1991: A regulatory disclosure was initiated by National Association of Securities Dealers, Inc. and alleged “violations of article iii, sections 1, 21(a) and 27 of the rules of fair practice and msrb rules g-8, g-9 and g-27. Respondent member, acting through respondent Appelbaum, effected transactions in non-exempt securities while failing to maintain its required minimum net capital; failed to determine from its books and records the quantity of fully paid and excess margin securities in its possession or control and the quantity of such securities not in its possession and control; failed to obtain physical possession or control of all fully paid and excess margin securities; hypothecated securities carried for the accounts of respondent member’s customers so as to permit securities to be commingled with the securities of respondent member under a lien for a loan to respondent member; failed to maintain an adequate amount in the reserve bank account; made a withdrawal from its special reserve account; failed to preserve its records; filed materially inaccurate focus parts i and ii reports; failed to establish, maintain and enforce adequate written supervisory procedures and such written supervisory procedures had various deficiencies; and respondents Boyle and Appelbaum permitted it to hypothecate securities carried for the accounts of customers in such a way as to permit such securities to be commingled with the securities of respondent member under a lien for a loan to respondent member; and, respondent Appelbaum failed to exercise adequate supervision over the financial and operational activities of respondent member.” Appelbaum was censured and fined $10,000.

February 1982: A regulatory disclosure initiated by the SEC states that Appelbaum was subject to a censure. “J.B. Hanauer & Co., a firm with which Mr. Appelbaum was previously affiliated, was the subject of injunction proceedings and that firm was permanently enjoined for violating the anti-fraud and record keeping provisions of the federal securities laws as well as the rules of municipal securities rule making board. Mr. Appelbaum, however, was not the subject of the injuctive order, but rather, was subject to a censure,” the broker comment section states.

Boca Raton Securities Arbitration Lawyers

Silver Law Group has extensive experience representing investors in claims to recover losses for unsuitable investments. We represent investors nationwide to recover investment losses due to stockbroker misconduct, investment fraud, and other causes.

If you have investment losses, call today for a no-cost, confidential consultation with an experienced securities attorney. Most cases are handled on a contingency fee basis, so you won’t owe us until we recover your money for you. Contact us at (800) 975-4345.