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FINRA Bars Ex-BofA Rep Accused of Forging Document, Taking Client Funds

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What You Need to Know

  • The former Bank of America broker and advisor trainee allegedly converted $58,000 of client funds for his own use.
  • He also allegedly forged a client document.
  • In addition, he falsely claimed in an annual compliance certification that he did not engage in outside business activities, according to FINRA.

The Financial Industry Regulatory Authority has barred a former Bank of America broker and advisor trainee after he allegedly forged a client document and converted $58,000 in client funds for his own use.

Joshua David Nicholas also failed to provide written notice to the wirehouse that he was engaged in an outside business activity involving a corporate entity he formed and through which he traded futures contracts, according to FINRA. That entity was a Stuart, Florida-based discretionary managed futures firm called JDN Capital.

Nicholas did not receive approval from the wirehouse to engage in his OBA and “falsely attested in a firm annual compliance certification that he did not engage in any OBAs,” according to FINRA.

Without admitting or denying the regulator’s findings, Nicholas signed a FINRA letter of acceptance, waiver and consent on Friday in which he consented to be barred from associating with any FINRA member in all capacities. FINRA signed the letter Monday.

Nicholas entered the industry briefly in August 2016, when he joined Midtown Partners as a registered broker, according to his report on FINRA’s BrokerCheck website. He left that firm, which FINRA expelled in March 2020, the same month he joined it.

He later served as a general securities representative for BofA Merrill Lynch, from February 2020 to July 31, 2020, according to FINRA. He voluntarily resigned from the firm amid allegations that he forged a client document, according to a disclosure on his BrokerCheck report.

On Aug. 14, 2020, the wirehouse filed an amended Form 5 Uniform Termination Notice disclosing that two of the broker’s clients, referred to in the AWC letter only as customers “A” and “B,” filed an arbitration concerning Nicholas, alleging unsuitable investment recommendations, selling away and omission of material facts, according to FINRA. That dispute was settled for $275,000.

Asked for comment on Tuesday, BofA/Merrill spokesman Bill Halldin told ThinkAdvisor only that “this individual was a trainee to become a financial solutions advisor, so he was not in our Merrill wealth management business.”

Miami attorney Kawa Foad, who represented Nicholas in his dispute with FINRA, did not immediately respond to a request for comment.

Clients Lost Much More

The two OBA clients lost much more than just the funds that were allegedly converted by Nicholas for his own personal use. They lost more than $1 million as a result of his futures trading, according to FINRA.

“In a purported effort to recoup some of their losses, Nicholas convinced” the clients to invest $300,000 in a promissory note with his OBA so that entity could invest the additional funds in securities on their behalf, according to a disclosure on his BrokerCheck report.

Nicholas transferred $280,000 from his company’s bank account to his personal bank account and spent about $58,000 of those funds on personal expenses, FINRA said.

He also allegedly provided the clients with a fictitious brokerage statement containing “material misrepresentations,” according to FINRA. After executing the promissory note, his clients “repeatedly asked him to provide a copy of the company’s account statement to show them whether and how the proceeds of the note had been invested,” FINRA said.

In response, he prepared and emailed a copy of a brokerage statement purporting to show that his company had opened a brokerage account at a FINRA member firm, and that the account owned several securities to secure the note, according to FINRA.

The brokerage statement stated, among other things, that the account was in the name of his company, held shares of certain equity securities, and earned about $72,000 in dividend income that month, FINRA said.

In reality, “Nicholas had fabricated the document,” according to FINRA. “Neither Nicholas’s company nor he had an account at the firm, and neither his company nor he owned any assets custodied at the firm,” FINRA said.

NFA Trouble

Nicholas was also an associate member of the National Futures Association, the self-regulatory organization for the derivatives industry. Its Business Conduct Committee filed a complaint against him and JDN Capital on Dec. 8, 2020, over the same conduct. NFA identified the clients as a retired couple.

Before the complaint was filed, Nicholas and JDN Capital withdrew their NFA membership.

In a settlement on April 19, 2021, Nicholas agreed not to apply for NFA membership or reapply for NFA associate membership for eight years, or act as or become a principal at an NFA member ever again. If he does apply as an NFA member or reapply as an NFA associate member after the eight years, he has agreed to pay a $125,000 fine to NFA.

As part of the same settlement, JDN Capital agreed to not reapply for NFA membership or act as or be listed as a principal of an NFA member at any time in the future.

(Photo: Shutterstock)