Erez Law is currently investigating K.C. Ward Financial financial advisor Carlos Nestor Evertsz-Seda (CRD# 4757897). Erez Law represents a client who alleges that Evertsz-Seda recommended a reckless and unsuitable investment strategy dangerously concentrated in speculative and high risk stocks. Erez Law recently filed a FINRA arbitration claim on behalf of a former K.C. Ward Financial customer, a retiree who was an inexperienced investor. Evertsz-Seda has been registered with K.C. Ward Financial in Ronkonkoma, New York since 2010.
The Erez Law client alleges he turned to Seda for recommendations to invest his irreplaceable retirement savings from his pension and 401k retirement account. The customer informed Seda that this was his “nest egg” and we was relying on that money for his income needs during retirement. The customer was risk-averse and wanted low-risk strategies for his investments that would grow or at least preserve his principal. In fact, K.C. Ward’s documents describe the customer as “moderate risk.” It is alleged that Seda failed to disclose the possibility that his former customer could lose a significant portion of his investment. The customer entrusted Seda with $570,000, representing all of his retirement savings.
Erez Law has alleged that Seda recommended a reckless and unsuitable investment strategy of dangerously concentrating the customer’s retirement savings in just a few speculative and high risk stocks. For example in March 2014, the customer invested $275,000 in a speculative oil and gas stock called Memorial Production Partners, LP, during which time Memorial Production Partners, LP’s stock price declined more than 90%. Seda also recommended the customer invest more than $96,000 in a speculative pharmaceutical stock called Alcobra, which also plummeted in value. Seda also recommended the customer invest more than $83,000 in a speculative and high risk technology stock called GT Advanced Technology, which filed for bankruptcy just a few months later.
The customer lost 63% of his principal in Memorial Production Partners, LP, 83% of his principal in Alcobra Ltd. and 99% of his principal in GT Advanced Technology. Erez Law has alleged that Seda’s investment strategy of concentrating the majority of his customer’s irreplaceable retirement savings in just three speculative and high risk stocks was reckless and grossly unsuitable for the customer. With this overcontration, Seda failed to recommend an adequately diversified portfolio and needlessly exposed the customer’s irreplaceable savings to an extraordinary amount of risk. There was no reasonable basis for dangerously concentrating the customer’s portfolio in just three high risk stocks. Additionally, Erez Law alleged that Seda misrepresented to his former client that the investments and the investment strategy he recommended were relatively low risk and suitable for the client’s desire to preserve his principal, when in reality it was just the opposite. Seda’s reckless and dangerously concentrated strategy caused the customer to suffer significant losses to his retirement savings.
In the claim filed by Erez Law, it is alleged that Seda also engaged in a self-serving excessive trading scheme designed to generate excessive commissions and profits at the customer’s expense. Seda’s excessive trading scheme was so cost prohibitive that the “cost-to-equity ratio” (also commonly referred to as a “cost maintenance) in his former customer’s account was 15% in 2015, meaning that the customer would need to generate a 15% annual return on his investment just to break even after paying commissions generated by Seda’s excessive trading in his account. The SEC holds a cost-to-equity ratio of just 8% to be considered presumptive evidence of excessive trading, and 12% is deemed to be conclusive. Seda’s former customer is currently seeking $100,000 in damages.
In 2014, Seda was sanctioned, fined and suspended by FINRA in connection with accepting kickbacks from an illicit “selling away” scheme whereby Seda solicited former K.C. Ward Financial customers to loan money to an unapproved outside business. FINRA also sanctioned Seda for failing to disclose to K.C. Ward Financial that he was simultaneously employed as a part-time assistant manager at Jiffy Lube. According to the Accept, Waiver and Consent, FINRA found that Seda failed to provide K.C. Ward Financial with outside business activity with an entertainment company. It is alleged that Seda solicited his former customer to provide a $60,000 loan to the entertainment company, and shortly thereafter Seda received $10,000 from the entertainment company as compensation for the loan. Seda was ordered to pay a civil and administrative penalty of $5,000 and was suspended for one month.
Despite having actual knowledge of Seda’s illicit selling away scheme and FINRA rule violations, it is alleged that K.C. Ward failed to place Seda under heightened supervision and failed to adequately supervise him. Louis Ward (CRD# 2080639) is K.C. Ward’s CEO and principal owner and Charles Carrillo (CRD# 41630) is the chief compliance officer. Ward and Carrillo had the requisite power to directly or indirectly control or influence the specific corporate policy which resulted in Seda and/or other K.C. Ward employees violating securities laws. As such, the claim filed by Erez Law alleges that Ward and Carrillo are jointly and severally liable for the securities laws violations.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, K.C. Ward Financial may be liable for investment or other losses suffered by Seda’s customers.
Erez Law represents investors in the United States for claims against K.C. Ward Financial financial advisors Carlos Nestor Evertsz-Seda, who is alleged to recommend a reckless and unsuitable investment strategy dangerously concentrated in speculative and high risk stocks. If you were a client of K.C. Ward Financial financial advisor Carlos Nestor Evertsz-Seda or another firm, and have experienced investment losses, please call us at 888-840-1571 or complete our contact form. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies.
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