Erez Law recently filed a $436,000 FINRA arbitration against Janney Montgomery Scott, LLC. The Erez Law clients allege that Scott Palmer (CRD# 817586), who was a registered representative of Janney Montgomery Scott, LLC concentrated their investments in the high risk energy sector.
Palmer was registered with Janney Montgomery Scott, LLC in Hackensack, New Jersey from 2007 to 2017, when he was permitted to resign regarding, “Loss of Confidence related to complaint disclosure history.”
According to the statement of claim filed by Erez Law, it is alleged that the retired couple were longtime customers of Janney Montgomery Scott, LLC, who worked with Anne Iverson in the Hackensack, NJ office for many years before her retirement and entrusted Iverson and Janney Montgomery Scott, LLC with their irreplaceable retirement savings. When Palmer took over their accounts when Iverson retired, the customers, who were conservative and risk averse, informed Palmer that they were not interested in speculative or high risk investments or strategies, and that they did not need to generate high returns from their portfolio to meet their cash flow needs.
It is alleged that Palmer employed a speculative and unsuitable strategy of recklessly concentrating almost all of the customers’ retirement savings in risky investments from the volatile energy sector. Additionally, Palmer failed to obtain the customers’ prior authorization before purchasing these risky and unsuitable investments. Palmer did not have written discretionary trading authorization over the accounts, and these transactions were unauthorized.
By dangerously concentrating almost all of the customers’ retirement savings in risky investments from the volatile energy sector, Erez Law alleges that Palmer needlessly exposed the customers to extreme sector concentration risk, in addition to the already significant risks associated with the individual investments Palmer purchased in their accounts. Palmer’s reckless and unsuitable strategy needlessly exposed the customers to risks associated with companies that were vulnerable to the same adverse market conditions and experiencing significant financial distress, and ultimately resulted in devastating losses.
It is alleged that Palmer failed to disclose the extraordinary risks inherent to his dangerly concentrated investment strategy. In addition, Palmer executed an unusually high number of trades in the customers’ accounts and excessively traded or potentially churned their accounts.
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. 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.
When the customers noticed their accounts declining in value, they contacted Palmer to request his guidance on how to preserve their irreplaceable retirement savings. Palmer repeatedly told the customers not to worry and recommended they continue with the same strategy. Palmer’s strategy caused the customers to suffer realized losses of $436,000.
In addition to the case above, Pamer has been the subject of nine customer complaints between 1988 and 2017, one of which was withdrawn and one denied, according to his CRD report:
- December 2017. “Claimants allege that FA made unsuitable investments in their accounts and over-concentrated in the energy sector.” The client is seeking $5,000 in damages and the case is currently pending.
- July 2017. “Claimant alleges the FA made unsuitable investments by creating a high concentration in energy stocks within claimant’s portfolio.” The case is currently pending.
- July 2017. “Claimant alleges the FA made unsuitable investments by creating a high concentration in energy stocks within claimant’s portfolio.” The case is currently pending.
- July 2016. “Claimant alleges that fa made unsuitable investments in her account.” The client sought $125,000 in damages and the case was settled for $75,000.
- January 2015. “Client alleges that the securities purchased in her account were not suitable based on her investment objective and risk tolerance.” The client sought $226,877 in damages and the case was settled for $70,000.
- April 1988. “Alleged unsuitable and excessive option trading, resulting in claimed losses in the amount of $106,775.” The case was settled for $62,500.
- April 1998. “Alleged unsuitable and excessive trading, including options trading, an attempt to reimburse a loss on a trade (one). Alleged losses in excess of $94,000.” The case was settled for $75,000.
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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