An Ohio-based brokerage firm Great American Advisors, Inc. has been sued in a FINRA arbitration by an elderly Pennsylvania couple. Securities law firm Dimond Kaplan & Rothstein, P.A. represents the retired couple who lost hundreds of thousands of dollars after a Great American Advisors stockbroker recommended and sold risky equity-linked notes to the couple. Over the past several years, the misrepresentation of risky, structured investment products has been a common form of investment fraud.
Equity-linked notes are structured investment products in which the investors' ability to receive the return of their investment money was dependent on the market value of underlying securities. If the trading prices of the underlying shares fell below predetermined price floors, the investors would receive shares in the referenced companies rather than cash payments. Under that scenario, those shares would worth be less than the investors had paid for the equity-linked notes.
The broker, David Brouwer, who worked in Great American Advisors' Homestead, Florida office, misrepresented that the investments would safely provide the retired couple with income. In truth, due to the nature of the securities, the investors faced a significant risk of loss of their money. Mr. Brouwer also failed to disclose that there was a possibility that the securities could convert into the underlying securities at a value less than the invested principal.
In 2011, the U.S. Securities and Exchange Commission (the "SEC") found that Mr. Brouwer had engaged in fraudulent conduct and violated numerous federal securities when he recommended and sold equity-linked notes to customers. As a result, the SEC issued a cease and desist order against Mr. Brouwer and barred Mr. Brouwer from the securities industry.