(Reuters) - A Beverly Hills securities broker, whose clients included Hollywood stars, is being accused by Wall Street’s industry-funded watchdog of lying to regulators and selling worthless securities to unsuspecting customers, including a divorced mother of three.
The Financial Industry Regulatory Authority filed a civil enforcement complaint against broker Bambi Holzer for selling seven investors privately issued securities that later turned out to be fraudulent and for lying to FINRA in regulatory documents.
FINRA has been investigating Holzer since at least July. The complaint, dated October 18, was posted to FINRA’s disciplinary database this week.
In September, the Wall Street watchdog, in a separate move, suspended Holzer for not paying money she owed to an investor who had won an arbitration case against her, according to a disclosure report.
Holzer, now chairman of Wealth & Income Management Group in Beverly Hills, California, did not know that the securities she recommended to clients would later be deemed fraudulent, said Rex Beaber, Holzer’s Los Angeles-based lawyer. Holzer is not to blame for the false regulatory documents, which her former firm prepared, Beaber said.
The action comes after years of criticism from lawyers for investors that FINRA allowed Holzer to continue working in the securities business, despite 64 complaints against her by one-time clients who alleged sales practice violations.
A FINRA spokeswoman declined comment, citing pending litigation.
Holzer has worked in the securities business since 1981, often switching firms every few years, according to regulatory documents.
The case will proceed before a FINRA hearing officer in which Holzer will have an opportunity to rebut the claims. If FINRA wins its case, she could be fined, suspended or barred from the securities industry.
Some former clients have won a total of more than $11 million in settlements and judgments from Holzer, according to her public disclosure report. They include “Seinfeld” actress, Julia Louis-Dreyfus, who sued Holzer after she steered Dreyfus to a type of insurance annuity that locked up her investment until death.
The FINRA complaint focuses on recommendations that Holzer made to seven clients in 2008, when she was a broker at Wedbush Securities Inc in Los Angeles. The securities, issued by Provident Royalties LLC, were purportedly investments in a company that intended to acquire mineral rights. But it was later revealed as a Ponzi scheme and her customers’ investments became worthless. While Holzer recommended the securities, neither she nor Wedbush were accused of taking part in the Ponzi scheme.
The investment was unsuitable for the customers described in FINRA’s complaint, because they needed liquidity, something privately issued securities typically do not offer. Other clients included an 86-year-old widow who has since died, according to FINRA.
A Wedbush spokesman did not immediately return a call requesting comment.
The investors knew the risks they were taking and all had portfolios of more than $1 million, said Beaber, Holzer’s lawyer. “They are highly successful people,” he said.
Additional reporting by Emily Flitter; Editing by Bob Burgdorfer