Erez Law recently filed a FINRA arbitration against PFS Investments Inc. for stocks and futures trading losses by PFS Investments Inc. Broker Kevin Hobbs (CRD #4267482), who was a registered representative of PFS Investments Inc. in Lake Worth, Florida between 2001 and October 2022.
The Erez Law client, a small business owner, alleges the following in the newly filed FINRA claim:
According to the claim, Kevin Hobbs represented to the client that his futures trading strategy had limited risk as he quickly closed losing positions which mitigated any losses. He succeeded in impressing the client and luring him into an illicit scheme.
Erez Law alleges that Kevin Hobbs offered to trade stocks and futures for the client in exchange for a percentage of the profits he generated. The client agreed to these egregious terms not knowing that the terms exceeded the richest fees charged by the most renowned hedge funds and that Kevin Hobbs’ offer violated multiple securities industry rules designed to protect against the harm that eventually and inevitably ensued.
It is alleged that by early April 2020, Kevin Hobbs obtained access to the client’s TD Ameritrade account and was engaging in speculative short term trading. At the same time, Kevin Hobbs was eager for the client to gain access to futures trading on TD Ameritade’s platform. However, TD Ameritrade required that its clients pass certain tests to qualify for access to futures trading. The client was unable to qualify and Kevin Hobbs used his access to the client’s account and took the test which did qualify the account for futures trading. In the interim, Kevin Hobbs recommended that the client open and fund an ETrade account for the express purpose of trading futures in the account.
According to the claim, by early April 2020, he believed that COVID-19 would cause catastrophic harm to the economy and that the stock market was headed for a massive decline. Consequently, by May 2020, he engaged in futures trading in the client’s TD Ameritrade and ETrade accounts positioned for a bear market. By this time, he had direct access to the client’s accounts and was executing all trades directly. Futures are inherently speculative and involve the use of leverage. To make matters worse, he recommended that the client meet several margin calls generated by Kevin Hobbs’ trading.
It is alleged that his trading caused the client rapid and significant losses, losing nearly his entire investment with senseless futures trading. Kevin Hobbs caused the client equally rapid and significant losses in his TD Ameritrade account.
According to the claim, he engaged in illicit conduct including “selling away” in connection with his implementation of a reckless and unsuitable stock and futures trading strategy for which PFS is legally responsible.
It is alleged that Kevin Hobbs engaged in selling away. He violated FINRA Rule 3280, which involved recommending private securities transactions that are not disclosed and approved by the brokerage firms they are registered with and is also commonly referred to as selling away.
Kevin Hobbs participated in the stock and futures trading in the client’s outside accounts without PFS Investments Inc. required approval. By virtue of Kevin Hobbs recommending and implementing an unapproved investment trading strategy, PFS Investments Inc. did not do any required due diligence on the investment strategy and it was therefore unsuitable.
It is alleged that Kevin Hobbs’ stock and futures wager that the markets would rapidly decline in the short term was speculative and grossly unsuitable. The strategy also used excessive leverage, which rendered the trading yet more unsuitable.
According to the claim, Kevin Hobbs failed to disclose to the client the true level of risk attendant to his trading strategy. He also failed to disclose to the client that his involvement in trading his ETrade and TD Ameritrade accounts was strictly prohibited by PFS Investments Inc. and securities rules.
PFS Investments Inc. has a legal obligation to supervise Kevin Hobbs and to ensure that he complies with all applicable securities laws and rules. PFS Investments Inc. failed to adequately supervise Kevin Hobbs. Kevin Hobbs’ wrongful conduct for PFS Investments Inc. caused the client significant damages.
Kevin Hobbs Customer Complaints
Kevin Hobbs has been the subject of five customer complaints, between 2002 to 2022, one of which was withdrawn and one was denied, according to his CRD report. The most recent complaints are regarding:
September 2022. “Consumers allege that Mr. Hobbs is responsible for losses of $800,000 in non-PFSI accounts.” The customer is seeking $800,000 in damages. The complaint was regarding financial futures.
September 2021. “The statement of claim alleges the associated person made unsuitable investment recommendations in the customer’s non-PFS Investments Inc. accounts.” The customer is seeking $537,000 in damages. The complaint was regarding common and preferred stocks.
How to File a Claim Against Kevin Hobbs
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If you have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.
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