SEC Charges Aegis with Unsuitable Recommendations  

Alan Appelbaum, Paul Gallivan of Aegis Allegedly recommended Highly Complex Structured Products to customers 

According to a press release on July 29, 2022, the Securities and Exhange Commission reportedly charged Aegis Capital Corp., former Aegis Managing Director Alan Z. Appelbaum, and former Aegis registered representative Paul F. Gallivan in connection with unsuitable recommendations of structured products to customers. 

The SEC’s complaint against Appelbaum alleges that he made unsuitable recommendations of highly complex variable interest rate structured products (“VRSPs”) to seven customers.  

Despite the risky nature of the VRSPs, Appelbaum purportedly recommended these securities to seven customers who had a “moderate” risk tolerance, were unwilling to lose their entire invested principal, and typically had investment time horizons that were inconsistent with the VRSP maturity dates, according to the complaint.  

The complaint further alleges that Appelbaum made materially false and misleading statements to customers in connection with his recommendation of the VRSPs and purportedly engaged in unauthorized trading.  

The SEC reportedly found that fourteen Aegis brokers recommended VRSPs to forty-eight customers for whom the VRSPs were unsuitable in light of the customers’ financial situation and needs, as reflected by their risk tolerance, investment objectives, age, investment experience, liquidity needs, and investment time horizon.  

The SEC order finds that Aegis allegedly failed to reasonably supervise its registered representatives. Aegis agreed to a censure, to cease and desist from future violations of the charged provisions, and to pay disgorgement plus prejudgment interest of $220,865 and a civil penalty of $2.3 million, without admitting or denying the SEC’s findings. 

The SEC also reportedly settled with Gallivan, finding that he allegedly made unsuitable recommendations of VRSPs to four customers and made materially false and misleading statements to customers about the VRSPs. Gallivan agreed to cease and desist from future violations of the charged provisions, to pay disgorgement plus prejudgment interest of $29,973 and a civil penalty of $25,000, to twelve-month associational and penny stock suspensions and a twelve-month investment company prohibition.  

Potential Lawsuits to Recover Financial Losses      

When brokers and registered investment advisors violate securities laws, such as making unsuitable investment recommendations or unauthorized trades, the brokerage firm they are working with may be liable for investment losses through FINRA Arbitration. Brokerage firms that fail to monitor the business activities of their employees may be liable for investment losses due to negligent supervision for the misconduct of their employees.           

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Seattle, Washington.                  

We represent investors in all 50 states including Florida. Our attorneys have recovered millions of dollars from many brokerage firms in the past.                  

If you are concerned about your investments with Aegis Capital Corp., please call the securities fraud attorneys at The White Law Group at 888-637-5510 for a free consultation.                   

For more information on The White Law Group, and its representation of investors, please visit www.WhiteSecuritiesLaw.com.