Bad Brokers And Good Investments

Posted By Brie Austin In Category: Blog , Business , Insights

When you invest your money into the securities market, there are bad brokers and good investments. Like anything else you have to do your homework to sort them out. The securities industry for a long time has been a swamp infested with leeches just looking for fresh meat. When they find an inexperienced investor, they tend to use high-pressure sales tactics, and abundant turnover of your holdings to spike their commissions.  But that doesn’t mean that a wise investor can’t navigate around them. 

Many of the bad brokers focused on earning maximum commissions rahter than increasing your holdings, seem to share some common behaviors. Most tend to go from one bad firm to the next, in part because the legitimate firms likely won’t hire them.

In 2015 there were 5000+ brokers expelled from the securities industry.  Some moved on, others sought out new ways to exploit the inexperienced investors.

One area that brokers moved into was stock loss recovery, such as the firm Cold Spring Advisory which is run behind the scenes by Louis Ottimo.  

Louis Ottimo is the de facto force behind Cold Spring Advisory., who himself has been fined, censured, and barred from FINRA, and owned or been involved with several firms that have also been censured, fined, and/or filed bankruptcy. Why would anyone pay Louis Ottimo (or the firm that fronts for him) an upfront fee hoping that despite a career of misdeeds they’ll somehow now watch out for you?

Louis Ottimo, who has had years of liens placed against him from the I.R.S., and others, has recently filed a petition for Chapter 7  Bankruptcy. Among others, he lists Cold Spring Advisory as a creditor.

Brokers that bounce from one bad firm to another would include people like Paul Stuart Shechter. The first firm he worked for was the disgraced Sterling Foster, a company that pumped up stock through hype, made money and the the investors got left holding the bad paper when the stock tanked, much the say the company in the “Boiler Room” had done. From there, it never got much better, with every firm he joined thereafter being sued, sanctioned, owners arrested, and /or the firm simply shut down.

  • 06/2011 – 10/2011 OBSIDIAN FINANCIAL GROUP, LLC 104255 HAUPPAUGE, NY
  • 06/2005 – 05/2010 ITRADEDIRECT.COM CORP 18281 FARMINGVILLE, NY
  • 03/2003 – 06/2005 GUNNALLEN FINANCIAL, INC 17609 TAMPA, FL
    • FINRA cancelled the firm’s license Dec 2008.
  • 09/1998 – 08/2000 JOSEPHTHAL & CO., INC. 3227 NEW YORK, NY
  • 08/1997 – 09/1998 SEABOARD SECURITIES, INC. 755 FLORHAM PARK, NJ
    • Expelled from FINRA February 20111
  • 05/1997 – 08/1997 CONTINENTAL BROKER-DEALER CORP. 14048 CARLE PL., NY
    • Expelled from NASD 2004
  • 03/1996 – 10/1996 CONTINENTAL BROKER-DEALER CORP. 14048 CARLE PL, NY
    • Expelled from NASD 2004
  • 08/1995 – 02/1996 STERLING FOSTER & COMPANY, INC. 36052 UNIONDALE, NY

John Begen too began his securities career at Sterling Foster. One of the last firms he worked at, J.P. Turner & Co. had “37 fines, censures, arbitration and injunctions on its regulatory record” according to The Street.

Mr. Bergen worked for a lot of the other previously listed companies, including Obsidian Financial Group, LLC., Granite Associates, and Continental Broker-Dealer Corp. In 2004 Harrison Securities Inc. appeared before the Security Exchange Commission where it was alleged that on at least twenty-two occasions from April 2001 through April 2002, Harrison conducted a securities business while not maintaining sufficient net capital, and that, on at least three occasions, Harrison filed inaccurate Financial and Operational Combined Uniform Single (FOCUS) reports. The OIP also asserts that Blumer, a certified public accountant (CPA), willfully aided and abetted and caused the firm’s violations, and that Song, for the period in which she served as Harrison’s FINOP, caused certain of the firm’s violations.

So knowing that the sharks are swimming about, how does someone with little investment experience get started?

Firstly you need to determine how much money have available to put at risk, and equally important where your account will be held. In the case of the latter, you have to consider several things that will impact your ability, or inability to make money.

Picking a firm is very important, and it goes far beyond just be reputable. Certainly you want a firm that adheres to aboveboard practices, but once you’ve found a few that are reputable you need to consider others things as well.

Cost of a trade: You have to consider the commissions and/or other fees that the brokerage firm with charge. Some have multiple plans, such as one for day traders and the another more suitable for a long-term investor. The right plan can impact whether you can actually make money or not.

Minimum Trades: Many firms require you to make a minimum amount of trades within a given period. Check the contract clauses and sub-clauses to be fully aware of what your commitments will be.

Investment Options: Many brokerage funds are tied up with certain mutual funds, and/or other investment products. See which is in alignment with your goals.

Research Reports: Does the firm provide you access to research reports? Many do, so investigate the firms carefully.

For more information about investing check out How To Find The Right Broker And Start Investing Now‘ in Forbes Magazine.



About Brie Austin

Co-author of I'd Do It Again, he is a columnist/reporter for a variety of magazines in the areas of music, lifestyle, nightlife, travel and business. He also writes business documents and creates copy for websites.

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