Erez Law recently filed a FINRA arbitration against former Cetera Advisors LLC and its broker George Merhoff (CRD# 2918171).
The Erez Law client alleges the following in the newly filed FINRA claim:
The client informed Merhoff that he was approaching retirement age, and that he was not interested in investing his savings in high risk or speculative investments or strategies. Due to the client’s advanced age, he could not replace lost savings and as such could not afford to subject his savings to undue risk.
According to the claim, Cetera owed the client a fiduciary duty pursuant to the Investment Advisers Act of 1940 because the client was enrolled in Cetera’s fee-based platform. In other words, Cetera charged the client an investment advisory fee based on the value of the assets he maintained at Cetera. As such, Merhoff and Cetera are deemed to be acting as investment advisors under the Investment Advisers Act of 1940, which creates a high legal standard known as a “fiduciary duty” and encumbers Cetera and Merhoff with certain explicit legal duties to the client including, but not limited to, the duty to actively monitor his investments. Regrettably, Merhoff completely abused the trust and confidence that the client placed in him.
Erez Law alleges that Merhoff repeatedly engaged in unauthorized trading and recklessly concentrated the client’s retirement savings in high-risk stocks.
According to the claim filed by Erez Law, beginning in or about 2013 and continuing through 2018, Merhoff purchased high risk and unsuitable stocks including stocks in the risky energy and mining sectors, without obtaining the client’s prior authorization. Brokers such as Merhoff are required to obtain their customer’s prior authorization before every transaction. Merhoff did not obtain the client’s required authorization prior to executing transactions in the client’s account. As such the transactions Merohff executed in the client’s account were unauthorized. Furthermore, brokers are required to provide their customers with a fair and balanced disclosure of the risks associated with the investments and investment strategies they recommend. As Merhoff failed to obtain the client’s authorization before purchasing securities in his account, Merhoff also failed to provide required disclosures to the client.
It is alleged that the securities that Merhoff purchased in the client’s account were high-risk investments that were unsuitable for the client, who was not seeking to speculate with his savings.
Merhoff purchased high-risk stocks, many in the volatile energy and mining sectors. The following are just a few examples of some of the speculative and unsuitable securities Merhoff purchased in the client’s account:
- Linn Energy/ LinnCo
- Teekay LNG Partners
- Transocean
- Chesapeake Energy
- Pengrowth Energy Corp.
- Riviera Resources
- Roan Resources
- AGNC Investment Corp.
- RAIT Financial
Merhoff failed to recommend an adequately diversified and suitable portfolio for the client.
It goes without saying that Merhoff failed to disclose the significant risks inherent in his unsuitable and reckless strategy. Merhoff’s failure to adequately disclose the enormous risks associated with his reckless investment strategy deprived the client of his fundamental right to make informed decisions about his irreplaceable retirement savings.
It is alleged that Merhoff’s continuous reckless mismanagement and unsuitable recommendations caused the client staggering losses. In addition to causing the client very significant losses of capital, Merhoff deprived him of the opportunity to participate in the greatest bull market in a generation. Had the client’s retirement account been properly invested, he would have experienced significant gains as he would have participated in markets that have risen to record levels. The opportunity cost can be measured by well-managed damages, a measure of damages designed to compensate investors in this exact situation for the lost opportunity caused by someone’s wrongdoing.
Merhoff was registered with Cetera Advisors LLC in Klamath Falls, Oregon from 2012 to April 2019, when he was terminated regarding, “Discharged due to violating firms policies and procedures by making undisclosed payments to a customer of the firm.”
In June 2019, FINRA permanently barred Merhoff after he consented to the sanction and to the entry of findings that he failed to provide documents and information requested by FINRA in connection with its review of his issuance of consolidated account reports to customers and his making of undisclosed payments to customers.
In August 2017, the Oregon Department Consumer and Business Services, Division of Financial Regulation (DFR), alleged “violation of the suitability rule and failure to supervise. Cetera Advisors, LLC and Mr. Merhoff neither admitted nor denied the allegations.” Merhoff was sanctioned to a $70,000 civil and administrative penalty and fine.
Over the past few years, oil prices have significantly declined. A supply glut in 2014 and 2015 led to some of the lowest prices the market has seen in recent years. In turn, securities values also dropped, including the values of Linn Energy. The volatile energy sector experienced significant turmoil, and many energy companies were negatively impacted when global crude oil prices fell below $40 per barrel at the end of 2015. This was the lowest level since early 2009, as supply was in excess of global demand. Oil and gas companies experienced a spike in bankruptcies, which have left many investors reeling.
In addition to the case above, Merhoff has also been the subject of 45 customer complaints between 2015 and 2020, according to his CRD report:
- June 2020. “Claimant alleges unsuitable investment recommendations.” The customer is seeking $45,000 in damages in this pending customer complaint.
- April 2020. “Unsuitable investments, fraud, negligence, fraudulent misrepresentations, breach of fiduciary duty, violation of FINRA rules.” The case is currently pending.
- April 2020. “Breach of fiduciary duty, negligence, negligent misrepresentations, fraud, and breach of contract.” The case is currently pending.
- April 2020. “Breach of fiduciary duties, negligent misrepresentations, common law fraud, breach of contract.” The customer is seeking $500,000 in damages in this pending customer complaint.
- February 2020. “Breach of fiduciary duty, unsuitable investment recommendations, violation of FINRA’s rule 3110, negligence, and breach of contract.” The customer sought $43,000 in damages and the case was settled for $11,000.
- January 2020. “Breach of fiduciary duty. negligence, fraud, and breach of contract.” The customer is seeking $500,000 in damages in this pending customer complaint.
- January 2020. “Breach of fiduciary duty, unsuitable recommendations, violation of FINRA rules, negligence, breach of contract, well managed theory of damages.” The customer sought $35,000 in damages and the case was settled for $10,000.
- January 2020. “Breach of fiduciary duty, negligence, fraud, and breach of contract.” The customer is seeking $500,000 in damages in this pending customer complaint.
- December 2019. “Violation of Oregon and FINRA regulations, breach of fiduciary duty, unsuitable recommendations, negligence, and breach of contract.” The customer is seeking $460,000 in damages in this pending customer complaint.
- October 2019. “Violation of Oregon Securities Law, Breach of Fiduciary Duty, unsuitable Investments, Violation of FINRA Rules, Negligence, and Breach of Contract.” The customer is seeking $325,000 in this pending complaint.
- September 2019. “Violation of Oregon Securities Law, violation of California Corporation Code, and Negligence.” The customer is seeking $610,970 in this pending complaint.
- September 2019. “Negligence, Breach of Fiduciary Duty, and Violation of Oregon Securities Law.” The customer is seeking $100,000 in this pending complaint.
- July 2019. “incurred investment losses due to over-concentration.” The case is currently pending.
- July 2019. “incurred investment losses due to over-concentration.” The case is currently pending.
- June 2019. “Negligence, breach of fiduciary duty, violations of Oregon and FINRA rules, unsuitable investments, breach of contract, common law fraud, and poor performance.” The customer is seeking $350,000 in this pending complaint.
- June 2019. “Negligence, Breach of Fiduciary Duty, and Violation of Oregon Securities Law.” The customer is seeking $300,000 in this pending complaint.
- June 2019. “Negligence, Breach of Fiduciary Duty, and Violation of Oregon Securities Law.” The customer sought $250,000 in damages and the case was settled for $15,000.
- June 2019. “Breach of Fiduciary Duty, fraud, material omissions of fact, breach of contract, professional negligence, violation of Oregon and SEC securities laws.” The case is currently pending.
- April 2019. “Negligence and Breach of Fiduciary Duty.” The customer sought $150,000 in damages and the case was settled for $10,000.
- April 2019. “Negligence and Breach of Fiduciary Duty.” The customer sought $100,000 in damages and the case was settled for $10,000.
- April 2019. “Negligence and Breach of Fiduciary Duty.” The customer sought $100,000 in damages and the case was settled for $15,000.
- February 2019. “Violations of Oregon Securities Laws and FINRA rules, Breach of Fiduciary Duty, Unsuitable Investments, Negligence, Breach of Contract.” The customer sought $45,000 in damages and the case was settled for $15,000.
- October 2018. “Negligence, Breach of Fiduciary Duty and Contract, and Violation of Oregon Securities Law.” The customer sought $500,000 in damages and the case was settled for $12,000.
- October 2018. “Violation of Oregon Securities Law, Breach of Fiduciary Duty, Unsuitable Investment Recommendations, Violation of NASD and FINRA Rules, Negligence, and Breach of Contract.” The customer sought $306,635 in damages and the case was settled for $99,000.
- September 2018. “Unsuitable investment by lack of diversity.” The customer sought $76,795 in damages and the case was settled for $65,000.
- August 2018. “Negligence, Breach of Fiduciary Duty, and Breach of Contract.” The customer sought $100,000 in damages and the case was settled for $20,000.
- June 2018. “Violation of Oregon and FINRA Securities Rules, Breach of Fiduciary Duty, Unsuitable Investment Recommendations, Negligence, and Breach of Contract.” The customer sought $35,562 in damages and the case was settled for $14,500.
- September 2017. “Negligence, Breach of Fiduciary Duty, Breach of Contract. and Violation of Oregon Securities Law.” The customer sought $50,000 in damages and the case was settled for $4,200.
- July 2017. “Violations of Oregon Securities Law, Breach of Fiduciary Duty, Violation of FINRA rules, and Breach of Contract.” The customer sought $175,000 in damages and the case was settled for $75,000.
- June 2017. “Negligence, breach of fiduciary duty, breach of contract, violation of Oregon Securities law,” The customer sought $500,000 in damages and the case was settled for $155,000.
- May 2017. “Unsuitable recommendations, violations of common law fraud, breach of fiduciary duty, and negligence.” The case was settled for $15,000.
- April 2017. “Negligence, Breach of Fiduciary Duty, Negligent Supervision, and Breach of Contract.” The customer sought $100,000 in damages and the case was settled for $10,000.
- April 2017. “Negligence, breach of fiduciary duty, and breach of contract.” The customer sought $200,000 in damages and the case was settled for $50,000.
- March 2017. “Breach of fiduciary duty, negligence, and Oregon securities law violations.” The customer sought $140,000 in damages and the case was settled for $135,000.
- July 2016. “Unsuitability, common law fraud, breach of contract and fiduciary duty, and violations of Oregon securities law.” The customer sought $100,000 in damages and the case was settled for $15,000.
- July 2016. “Unsuitability, common law fraud, breach of contract and fiduciary duty, and violations of Oregon securities law.” The case was settled for $20,000.
- June 2016. “Negligence, breach of fiduciary duty, and breach of contract.” The client sought $60,000 in damages and the case was settled for $10,000.
- May 2016. “The clients allege negligence, breach of fiduciary duty, and breach of contract.” The client sought $150,000 in damages and the case was settled for $65,000.
- April 2016. “Negligence, Breach of Fiduciary Duty, and Breach of Contract.” The customer sought $50,000 in damages and the case was settled for $10,000.
- March 2016. “Breach of Fiduciary Duty, Negligence, and Oregon Securities Law Violations.” The customer sought $4,656,000 in damages and the case was settled for $2.9 million.
- March 2016. “Unsuitable investments which resulted in portfolio decline.” The case was settled for undisclosed amounts.
- February 2016. “Unsuitable investment.” The case was settled for an undisclosed amount.
- February 2016. “Unsuitable investments and poor performance.” The customer sought $900,000 in damages and the case was settled for $290,000.
- February 2016. “Unsuitable investments and issues with the money market fund.” The case was settled for $10,000.
- December 2015. “Unsuitable investments.” The case was settled for an undisclosed amount.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and 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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