Alan Appelbaum Barred by FINRA, Subject of Pending SEC Complaint
Alan Appelbaum (CRD #: 500336), a broker formerly registered with Aegis Capital Corporation, has been barred by FINRA, according to his BrokerCheck record, accessed on October 8, 2022. Read on to learn more about Alan Appelbaum’s conduct as a broker.
Bar by FINRA
In a Letter of Acceptance, Waiver & Consent (AWC) filed on September 23, 2022, Alan Appelbaum consented to the entry of findings that he allegedly refused to provide information and documents requested as part of a FINRA investigation into his sales of complex structured products.
The AWC concluded that this alleged refusal to provide information violated FINRA Rules 8210 and 2010.
FINRA Rules 8210 and 2010
FINRA Rule 8210 requires brokers to provide documents, testimony, or information upon FINRA requests.
FINRA Rule 2010 holds brokers to high standards of commercial honor and just and equitable principles of trade.
Sanctions
FINRA permanently barred Alan Appelbaum starting September 23, 2022.
You can read the full AWC here.
SEC Complaint
On July 28, 2022, the Securities and Exchange Commission filed a civil complaint against Alan Appelbaum alleging that he repeatedly violated the antifraud provisions of federal securities laws by making unsuitable investment recommendations and engaging in unauthorized trading.
The SEC alleges that, from July 2017 to May 2019, Alan Appelbaum made over 140 unsuitable recommendations and purchases of variable rate interest structured products (VRSPs) for seven clients. These VRSPs allegedly had the following qualities:
- Did not pay a fixed amount of principal at maturity (typically occurring at 15+ years) but instead had a complex structure under which the recovery of principal at maturity depended upon the operation of derivative features linked to equity indexes, such as the S&P 500 or the Russell 2000 indexes.
- Interest payments also depended on the operation of derivative features, typically also linked to equity indexes, and spreads between long-term and short-term U.S. bond yield curves.
- Paid a fixed interest rate for an initial period (typically 1-3 years), did not guarantee interest payments afterward, and sometimes did not pay monthly or quarterly interest.
According to the complaint, these VRSPs offered no assurance of liquidity and typically sold at a significant discount from their face value in the secondary market. Their complex structure also meant that investors could lose a portion or all of their investment even if the issuer of the VRSP did not default.
The SEC alleges that Alan Appelbaum recommended and purchased VRSPs for clients who had a “moderate” risk tolerance, were unwilling to lose their entire invested principal, and generally had investment time horizons inconsistent with the VRSP maturity dates.
The SEC alleges that Alan Appelbaum knew, should have known, or was otherwise reckless in not knowing that these VRSPs were unsuitable for his clients.
Alan Appelbaum allegedly also made material misrepresentations and omissions regarding the suitability of these securities, misled multiple clients as to the idea that the VRSPs would pay off “at par” (face value) when they reached maturity, and omitted the material fact that clients could lose some or all of their principal.
Further, from September 2015 through May 2019, Alan Appelbaum allegedly executed hundreds of unauthorized trades in the same clients’ accounts without their consent, despite these accounts being non-discretionary. Some of these trades allegedly also involved unsuitable VRSPs.
In total, Alan Appelbaum allegedly received at least $1 million in compensation for these alleged unauthorized and unsuitable VRSP trades. His clients allegedly experienced “significant” losses due to his trading activity, including one client who lost over $1 million and another who lost over $200,000.
The SEC complaint alleges that Alan Appelbaum violated, directly or indirectly, singularly or in concert, Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and may be otherwise liable for violations of these regulations.
This complaint is currently pending.
The Securities Act of 1933
Section 17(a) of the Securities Act of 1933 bans the use of deceptive and fraudulent schemes in relation to the purchase or sale of securities across state lines. This section specifically prohibits the making of false or misleading statements and the omission of material facts.
The Securities Exchange Act of 1934
Section 10(b) of the Securities Exchange Act of 1934 forbids deceptive, manipulative, and otherwise fraudulent practices relating to the securities business. Rule 10b-5 specifically bans the use of false statements and omissions of fact to mislead investors.
Investor Disputes
On May 19, 2021, an investor named Alan Appelbaum in a dispute involving unsuitable investments. The client sought $550,000 and received a settlement of $280,000.
Another dispute, filed on September 16, 2019, alleged that Alan Appelbaum committed violations of suitability and executed unauthorized transactions from July 2015 to September 2019. The client received a settlement of $1.65 million.
Resignation from Aegis Capital Corporation
On May 10, 2021, Alan Appelbaum was permitted to resign from Aegis Capital Corporation after allegedly failing to follow firm procedures by exercising discretion without a client’s written authorization.
Background Information
Alan Appelbaum has passed the following exams:
- Series 63 – Uniform Securities Agent State Law Examination
- SIE – Securities Industry Essentials Examination
- Series 7 – General Securities Representative Examination
- Series 27 – Financial and Operations Principal Examination
- Series 4 – Registered Options Principal Examination
- Series 12 – NYSE Branch Manager Examination
- Series 53 – Municipal Securities Principal Examination
- Series 24 – General Securities Principal Examination
He previously worked for the following firms:
- Aegis Capital Corporation (CRD#:15007)
- Herbert J. Sims & Company (CRD#:3420)
- Ryan, Beck & Company (CRD#:3248)
- Gruntal & Company (CRD#:372)
- A. F. Best Securities (CRD#:14335)
- Paine, Webber, Jackson & Curtis (CRD#:8174)
- J. B. Hanauer & Company (CRD#:6958)
Kurta Law Can Help
If you worked with Alan Appelbaum and you have concerns about your investments, please contact us today at 877-600-0098 or info@kurtalawfirm.com for a free consultation.
For over 20 years, Kurta Law has advocated on behalf of investors who want to recover their investment losses from brokers and brokerage firms. Kurta Law is a nationally recognized law firm and exclusively represents investors against brokers and brokerage firms on a contingency basis. This means that the firm only earns a fee if our securities attorneys recover money on your behalf.
Loading...
Reload document 
Open in new tab