Customer Complaints Against First Allied Securities

Our law firm is investigating customer complaints against First Allied Securities.  If you or someone you know lost money investing with First Allied, please contact 212-203-9300 to speak with an attorney for free.  We have experience handing complaints related to investment mismanagement, fraud, theft and negligence.

Complaint: Account Churning

When Howard Jaschke, then a representative of First Allied Securities, executed several hundred unauthorized short-term trades of long-term Treasury bonds for two municipal customers between 2005 and 2008, his firm’s senior management waited nine months to contact the clients — and, even then, the firm failed to inform them of the suspicious trading. According to two separate actions by the Securities and Exchange Commission, the firm failed to supervise Jaschke’s unsuitable trades and account churning, which generated over $14 million in commissions for Jaschke while costing the customers “massive unrealized losses.” While Jaschke ended up paying a $25,000 penalty, First Allied Securities agreed to a $1.95 million settlement in the matter.

UIT Failures Result in $6.7 Million Sanction

A 2015 FINRA sanction against First Allied Securities found widespread supervisory failures that resulted in customers paying unnecessarily high costs for unit investment trust products. Also known as UITs, unit investment trusts are redeemable interests in a portfolio of securities, generally sold during a public offering, for which investors are typically offered sales charge discounts or breakpoint fees. FINRA informed its member firms in a 2004 regulatory notice of their responsibility to “develop and implement procedures to ensure customers receive available sales charge discounts for UITs,” and reminding them that firms must ensure UIT transactions are “on the most advantageous terms to the customer.” In spite of this, First Allies Securities allegedly failed to apply sales charge discounts to 3,712 UIT transactions eligible for them. As a result of this failure, according to FINRA’s findings, the firm’s customers paid excessive charges totaling about $689,647.

As Reuters reported at the time, this sanction was part of a broader action targeting firms who failed to apply sales charge discounts to UIT purchases. In total, 12 firms paid more than $6.7 million in penalties, about $4 million of which was paid as restitution to eligible customers. Other firms included in the action were Fifth Third Securities, MetLife Securities, Park Avenue Securities, Commonwealth Financial Network, Cetera Advisor Networks, Securities America, and Comerica Securities.

“Firms need to ensure that their registered representatives are providing customers the sales charge discounts to which they are entitled,” FINRA’s enforcement chief said in a statement. “The firms sanctioned today failed to provide these discounts, resulting in customer harm in the form of higher costs for which customers have been or will be reimbursed.”

Complaint: Variable Annuity Sales

Barely a year after First Allied Securities was sanctioned for supervisory failures connected to UIT sales, it was sanctioned in another FINRA action targeting eight firms whose supervisory failures resulted in unsuitable variable annuity sales. At issue in the sanction were L-share variable annuities, which FINRA described as complex products “designed for short-term investors willing to pay higher fees in exchange for shorter surrender periods.” First Allied and the other firms allegedly failed to supervise their representatives’ L-share variable annuity recommendations to determine whether they were suitable for the customers buying them. First Allied was issued the second-highest of the fines issued to the eight firms, paying a total of $950,000.

Complaint: Investment Fraud by First Allied Broker

In 2016 the Associated Press described a former First Allied Securities broker named Anthony Diaz who had accomplished something very rare in the securities industry: he was “the only one of the nation’s 650,000 licensed brokers to have been fired more than three times.” Over a period of 15 years, Diaz associated with 11 firms, was fired from five, and resigned from a sixth. Despite his history of firings and customer complaints, the report noted, he managed to continue finding new employment in the industry and “earning missions by pushing high-fee, high-risk” investments. A study conducted by the University of Chicago and the University of Minnesota found that Diaz was exemplary of a trend in the securities industry in which “brokers with a propensity for ripping off their customers” end up at certain firms that appear to “cater to unsophisticated customers,” per the Associated Press.

In one instance, Diaz allegedly advised a retired man to invest almost $500,000 by promising him guaranteed returns of at least 8%. The investor said he didn’t qualify for the investments in question, but Diaz “inflated his net worth” while omitting risks involved in the products. “The whole thing was a total, total rip-off” that ultimately earned him just about $400 a month, the investor ultimately said. “It took me a lot of years to save this money, and a lot of hard work, and unfortunately you’ve got guys like him who don’t really care.”

When federal prosecutors charged Diaz with fraud in 2016, they alleged that he began victimizing his customers ten years earlier, when he was associated with First Allied Securities. (He left the firm in 2009.) While First Allied claimed that it “thoroughly vets” potential hires and holds them to high professional standards, the University of Chicago/University of Minnesota study found that one-fifth of the firm’s representatives had been “disciplined for misconduct.” The firm itself has been named in 18 regulatory actions, according to FINRA records.

Diaz, for his part, was barred from associating with FINRA member firms after a 2014 sanction found that while he was employed at First Allied and other firms, he failed to understand the features of products he recommended and “falsified or caused the falsification” of customers’ reported net worths in order to qualify them for certain investments. In 2020, he was tried in Pennsylvania on charges that he used false representations to encourage patients to invest their life savings in risky investments; some of his former clients testified that they were still unable to access funds they’d invested a decade ago. Diaz was convicted, sentenced to 17.5 years in prison, and ordered to pay more than $1 million in restitution to his victims.

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