Zachary T. Bader (CRD# 5902742) recently accepted and consented to findings by the Financial Industry Regulatory Authority (FINRA) that accused him of excessive trading and churning, as well as recommending unsuitable securities without a reasonable basis to do so.
The alleged misconduct occurred from February 2012 to July 2013. During this time, Bader was first registered with Craig Scott Capital, and then with National Securities Corporation. Bader allegedly engaged in excessive trading involving three of his customers, conduct that FINRA referred to as a reckless disregard for the interests of his clients.
During this timeframe, Bader also allegedly recommended complex Exchange Traded Notes or “ETNs” to 21 customers, even though he did not have a reasonable basis to believe that ETNs were suitable for some of these investors, according to FINRA.
What is churning?
“Churning” is a term often used in the investment world to describe excessive trading, conduct that does not take into account the customer’s investment needs or objectives. Sometimes churning shows activity that has no other reasonable explanation other than the interests of the broker or financial advisor.
The question then becomes, “how much trading is considered excessive?” This can be measured by looking at the turnover rate of the account’s value, as well as the cost-to-equity ratio.
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When is an investment considered unsuitable?
FINRA has also accused Bader of recommending investments that were unsuitable for some of his clients. Each investment adviser must exercise his or her due diligence to determine if an investment recommendation is suitable at least for some investors. The amount of due diligence an adviser is required to exercise will fluctuate depending on factors such as the investment’s complexity and risks.
During the relevant period, FINRA accuses Bader of recommending shares of Barclays iPath S&P 500 VIX Short-Term Futures ETN or “VXX” to 21 of his customers. The VXX is a complex product, and at the time of Bader’s recommendation, FINRA accused him of not fully understanding the product and failing to exercise adequate due diligence to determine the suitability of this product for his customers.
National Securities Corporation disclosed that on August 19, 2014, Bader’s registration with the firm had been terminated. In his AWC, which was accepted by FINRA on November 13, 2015, Bader consented to FINRA’s imposition of a bar from the securities industry.
If Zachary T. Bader, formerly with National Securities Corporation, was your broker and you lost money, we invite you to contact Meyer Wilson today for a free review of your case. Our law firm helps investors recover losses caused by investment misconduct.
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