As recently reported, Brandon Curt Stimpson (CRD# 4299623) has been discharged from employment with broker-dealer Allegis Investment Services, LLC (CRD# 168577, hereinafter referred to as “Allegis”). According to FINRA BrokerCheck, Mr. Simpson’s affiliation with Allegis was terminated on or about December 13, 2017, in connection with allegations that he “[f]ailed to follow firm policies and code of ethics.”
While BrokerCheck does not provide any further information as to Mr. Stimpson’s purported misconduct, a recently reported FINRA customer award appears to shed some light on the issue. Specifically, on or about March 6, 2018, a panel of FINRA arbitrators issued an award against Allegis and Mr. Stimpson in the amount of $404,182 (the “Award”). The Award consists of $287,350 in compensatory damages, $53,730 in pre-judgment interest, reimbursement of $20,000 in fees and costs (including expert witness fees), as well as attorneys’ fees in the amount of $60,000 pursuant to Utah case law and statute.
This Award — which holds Allegis and Respondent Brandon Stimpson jointly and severally liable — was rendered following nine hearing sessions in February 2018. The causes of action raised by Claimant included unsuitability, unauthorized trading, failure to supervise and breach of fiduciary duty, in connection with “[t]he buying and selling of unspecified put options tied to the performance of the Russell 2000 Index.” According to Claimant’s attorney, Mr. Stimpson allegedly invested more than 25% of Claimant’s portfolio in index options.
As we have discussed in several recent blog posts, a put option is a contract that allows the purchaser of the underlying contract to sell a security at a specified price (the strike price). As a general proposition, this allows the purchaser to hedge a position or a portfolio, by essentially creating a price floor, such that a drop in a security price below a certain level will deliver a profit on the option contract.
On the other hand, when an investor — or financial advisor recommends selling a put option — the seller is betting that the price will stay higher than the option price. Moreover, in instances when the seller of the option contract does not own the underlying security, then the seller is engaged in naked option writing. This is an extremely risky strategy that is likely not suitable for the average, retail investor.
Mr. Stimpson was most recently affiliated with Allegis (2014 – 2017), and previous to that, he was affiliated with Signator Financial Services, Inc. (CRD#19061) (2010-2014). Further, BrokerCheck indicates that Mr. Stimpson has been involved in a total of eight customer disputes.
The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience in representing investors in cases involving non-traditional investment products, including managed futures, leveraged and/or inverse funds, as well as option contracts and option strategies. Investors may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or firstname.lastname@example.org for a no-cost, confidential consultation.