A $1M Financial Industry Regulatory Authority (FINRA) arbitration claim has been filed against First Republic Securities (FRS) for losses apparently incurred from the Put Writing Strategy (PWS) of Harvest Volatility Management (Harvest) which, the claimant believes, was unjustifiably recommended by FRS and its representatives. James Wilcox and Matthew Donald Babrick are the two stockbrokers of the firm have been named in the claim.
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What are the complaints against FRS and Harvest?
The claimant says that he was advised that “the yield would enhance by 5% without the requirement of additional funding of the brokerage account.” Moreover, he was given to understand that the “PWS was a low risk strategy that would deliver consistent returns.” Besides, “at no stage was he advised that the Harvest PWS would be combined with his fixed income securities,” which not only enhanced the risk profile of the investment, but could even lead to triggering a margin call.
The advised strategy was in direct disregard of his desire of taking on little risk, if any, and a preference for preservation of capital while making money.
In reality, as seems to be understood in investment management circles, the overlay strategy adopted by Harvest PWS, that seeks to earn income by using equity in a customer’s brokerage account, along with selling of options on the S&P 500 index, is a known high-risk investment strategy. Assets are brought into the program by Harvest on a discretionary basis, and ‘discretion,’ in the business of investments, is that of the portfolio manager, not of the customer. He will only find out post facto.
Other details on the transaction are emerging. The brokers, while ostensibly working for the customer, and charging a commission on his brokerage account, appear to have also earned a commission from Harvest PMS for recommending the investment to the claimant. To make matters worse, Harvest PMS and FRS both charged management fees on the account.
Who are James Wilcox and Matthew Donald Babrick?
The two brokers named in the claim are James W. Wilcox and Matthew Donald Babrick. Both of them, coincidentally, are also registered with First Republic Investment Management Inc. as investment advisors. And that is not all they have in common.
Los Angeles, California based Babrick has a track record of over 17 years in the industry. Initially registered with Merrill Lynch Penner and Smith, he subsequently moved to Goldman Sachs before joining FRS.
According to BrokerCheck, Jackson, Wyoming based James Wilcox is a veteran of 20 years in the industry, mostly with Goldman Sachs, before moving last year to FRS.
It also seems that both have past disputes on their record. And one, in which the client is claiming $800K in damages arising from unsuitable trading strategy, names both Babrick and Wilcox. This was brought on the 10th of July this year and again involves FRS.
What should FRS Harvest investors do?
FRS investors are encourage to consult with an investment fraud lawyer. Many times losses in accounts are assumed to be due to market losses, however it could be the result of fraud. Only an experienced investment attorney can determine that.
Haselkorn & Thibaut, a national investor law firm, is investigating several brokerage firms suspected of unsuitably selling Harvest PWS, and other products from the Harvest portfolio. If you are one of those hapless customers, we are here to help you explore your legal options. Their toll free number is 1 888-628-5590.