The Financial Industry Regulatory Authority (FINRA) filed a civil enforcement action on October 18, 2013 against Bambi Holzer, a formerly registered broker and investment advisor in Beverly Hills, California. FINRA alleged in its complaint that between February and March 2008, Holzer, then a broker at Wedbush Securities, Inc. in Los Angeles, made unsuitable recommendations to seven of her clients to purchase speculative and illiquid investments issued by Provident Shale Royalties 8, LLC. The complaint further alleged that after investing in Provident 8, Holzer’s clients’ accounts were overly concentrated in the highly risky private placement. FINRA highlighted that one of the seven victims of Holzer’s alleged misconduct was an 86 year-old widow who is now deceased. This particular investor’s objectives were income and preservation of principal, meaning the risky and illiquid Provident 8 was blatantly outside the scope of her investment objectives.
In connection with these unsuitable recommendations, Holzer is accused of either knowingly or negligently submitting false net worth information regarding six of the seven customers. Additionally, FINRA alleged that between April 2010 and August 2012, Holzer willfully failed to disclose an arbitration award and judgment and a pending regulatory action on her Form U4, a required regulatory filing. Holzer is also accused of providing false testimony during on-the-record interviews conducted by FINRA.
Early in 2008, Wedbush Securities entered into an agreement with Provident 8 that allowed the investment firm to sell Provident 8’s privately issued securities. Holzer subsequently began recommending Provident 8 to her customers and received a 100 percent commission for those clients that invested. Based on allegations that Provident had commingled assets and investor funds, the Securities and Exchange Commission obtained a Temporary Restraining Order against Provident Royalties, LLC in July 2009. Provident ultimately filed for Chapter 11 bankruptcy and Holzer’s customers’ investments in Provident 8 became worthless.
FINRA had been previously criticized for not barring Holzer from the securities industry earlier, given that customers had filed sixty-four complaints against her, four of which are still pending. Holzer has worked in the industry since 1981. The complaints filed against Holzer date back to the 1990s, although most occurred over the past decade. Complaints filed by Holzer’s former customers resulted in multimillion dollar settlements and judgments. Holzer’s previous victims include actress, Julia Louis-Dreyfus, best known for her roles on “Seinfeld” and “VEEP.”
Holzer’s attorney, Rex Beaber, denied that his client engaged in wrongdoing. Beaber indicated that Holzer was unaware of the fraudulent nature of the Provident 8 securities and that the recommendations were made to sophisticated investors with multimillion dollar portfolios. Beaber further stated that Holzer was not responsible for the inaccurate regulatory filings because they were prepared by her former firm.
In a matter unrelated to this case, FINRA suspended Holzer’s registration in September 2013 after she failed to comply with a settlement agreement in connection with a customer-initiated arbitration and she is no longer associated with a FINRA member firm. Depending on the results of FINRA’s action, Holzer could be fined, suspended, or barred entirely from the securities industry.
By Julia Iodice