History Of Edmund Zack
Since January 1992, Zack has been associated with nine different FINRA member firms.
From June 2012 through October 2017, Zack was registered with FINRA as a General
Securities Representative (GSR) through his association with Aegis Capital Corp., a
FINRA member firm. In a Uniform Termination Notice for Securities Industry
Registration (Form U5) dated November 17, 2017, Aegis reported Zack’s voluntary
From November 2017 to December 2019, Zack was registered with FINRA as a GSR
through associations with three other FINRA member firms. The most recent FINRA
member firm reported Zack’s voluntary termination in a Form U5 dated December 20,
Although Zack is no longer registered through, or associated with, a FINRA member
firm, he remains subject to FINRA’s jurisdiction pursuant to Article V, Section 4(a) of
Edmund Zack Report
This matter originated from FINRA’s 2016 cycle examination of Aegis and a referral
received from the U.S. Securities and Exchange Commission.
Zack engaged in unsuitable and excessive trading.
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FINRA Rule 2111 requires, among other things, a registered representative to have a
reasonable basis to believe that a recommended transaction or investment strategy is
suitable for a customer based on that customer’s specific investment profile. When
evaluating suitability, FINRA Rule 2111 requires a registered representative to consider,
among other things, the customer’s investment objectives, risk tolerance, financial
situation, and investment experience.
FINRA Rule 2111 also requires a registered representative “to have a reasonable basis for
believing that a series of recommended transactions, even if suitable when viewed in
isolation, are not excessive and unsuitable for the customer when taken together” in light
of that investment profile. Excessive trading occurs, and is unsuitable, when a registered
representative has actual or de facto control over trading in a customer’s account and the
level of activity in that account is inconsistent with the customer’s investment needs and
No single test defines excessive activity, but factors such as the turnover rate and the costto-equity ratio may provide a basis for finding a violation of FINRA’s suitability rule. The
turnover rate represents the number of times that a portfolio of securities is exchanged for
another portfolio of securities. The cost-to-equity ratio measures the amount an account
must appreciate, or break-even, to cover commissions and other expenses so that a
customer may begin to see a return. A turnover rate of six or a cost-to-equity ratio above
20% generally indicates that excessive trading has occurred.
A violation of FINRA Rule 2111 is also a violation of FINRA Rule 2010, which requires
associated persons to observe high standards of commercial honor and just and equitable
principles of trade.
Between November 2014 and September 2015, Zack recommended Customer A actively
trade in speculative, low-priced securities and increase his trading capacity by using
margin. Zack did not have a reasonable basis to believe these transactions were suitable for
Customer A, who had an investment objective of “growth” and a “moderate” risk tolerance,
limited prior investment experience, and no experience with margin.
Because Customer A routinely followed Zack’s recommendations, Zack exercised de facto
control over his account. Zack’s active trading generated an annualized cost-to-equity ratio
of 122% and an annualized turnover rate of 22. Customer A paid $10,424 in commissions
and trading costs, and incurred losses of $11,357.
Zack’s trading in Customer A’s account was qualitatively unsuitable given Customer A’s
investment profile and limited investment experience. Zack’s trading in Customer A’s
account was also excessive and quantitatively unsuitable.
By virtue of the foregoing, Zack violated FINRA Rules 2111 and 2010.
Zack exercised discretion without written authorization.
NASD Rule 2510(b) prohibits registered representatives from exercising discretionary
authority in a customer’s account unless the customer has given prior written authorization
to the representative and the account has been accepted in writing by the representative’s
member firm as a discretionary account. A violation of NASD Rule 2510(b) is also a
violation of FINRA Rule 2010.
Aegis’s written supervisory procedures (WSPs) prohibited registered representatives from
trading in a customer’s account on a discretionary basis unless the registered representative
received prior written approval from the customer and the firm.
However, on a single day in October 2017, Zack exercised discretionary trading authority
in the accounts of 27 Aegis customers when he sold shares of Social Realty, Inc. (SRAX)
without obtaining prior written authorization from the customers and Aegis to exercise
discretion in these customer accounts, or discussing and receiving approval from each
customer before selling the shares.
By exercising discretion in the accounts of his 27 Aegis customers, Zack violated NASD
Rule 2510(b) and FINRA Rule 2010.
Zack caused Aegis to maintain inaccurate books and records.
FINRA Rule 4511 requires member firms to make and preserve books and records in
conformity with Section 17(a) of the Exchange Act and Exchange Act Rule 17a-3. Rule
17a-3 requires firms to make and keep accurate records of, among other things, instructions
for the purchase or sale of a security. A registered representative who enters inaccurate
information on an order ticket causes his member firm to maintain inaccurate books and
records in violation of Exchange Act § 17(a) and Exchange Act Rule 17a-3, and violates
FINRA Rule 4511. A violation of FINRA Rule 4511 is also a violation of FINRA Rule
Aegis’s WSPs defined a trade as solicited if it was recommended to a customer and the
customer placed an order as a result of that recommendation.
When Zack solicited the customers’ purchase of SRAX shares, he recommended the
customers sell the shares when the stock reached a certain price. Zack initiated the sale of
SRAX shares in his customers’ accounts based on his earlier recommendation, but marked
the trades as unsolicited, indicating that the customers initiated the sales. By marking the
order tickets for these trades unsolicited rather than solicited, Zack caused Aegis to
maintain inaccurate books and records.
By causing Aegis to maintain inaccurate books and records, Zack violated FINRA Rules
4511 and 2010.
Penalties, Punishments & Sanctions
an eight-month suspension from associating with any FINRA member in all
a $10,000 fine; and
disgorgement of $5,161, commissions received in connection with Respondent’s
trading in Customer A’s account, plus interest as described below.
The fine shall be due and payable either immediately upon reassociation with a member
firm or prior to any application or request for relief from any statutory disqualification
resulting from this or any other event or proceeding, whichever is earlier.
Disgorgement of commissions received is ordered to be paid to FINRA in the amount of
$5,161, plus interest at the rate set forth in Section 6621(a)(2) of the Internal Revenue
Code, 26 U.S.C. § 6621(a)(2), from September 30, 2015, until the date this AWC is
accepted by the National Adjudicatory Council (NAC). Disgorgement shall be due and
payable either immediately upon reassociation with a member firm or prior to any
application or request for relief from any statutory disqualification resulting from this or
any other event or proceeding, whichever is earlier.
Respondent specifically and voluntarily waives any right to claim an inability to pay, now
or at any time after the execution of this AWC, the monetary sanctions imposed in this
Respondent understands that if he is barred or suspended from associating with any FINRA
member, he becomes subject to a statutory disqualification as that term is defined in Article
III, Section 4 of FINRA’s By-Laws, incorporating Section 3(a)(39) of the Securities
Exchange Act of 1934. Accordingly, he may not be associated with any FINRA member
in any capacity, including clerical or ministerial functions, during the period of the bar or
suspension. See FINRA Rules 8310 and 8311.
Edmund Zack Review
Between November 2014 and September 2015, Zack violated FINRA Rules 2111 and
2010 when he made unsuitable stock recommendations to, and engaged in excessive and
quantitatively unsuitable trading in the Aegis account held by, one of his customers.
In October 2017, Zack violated NASD Rule 2510(b) and FINRA Rule 2010 when he
exercised discretionary trading authority to effect sales of securities in 27 customers’
accounts without having obtained prior written authorization from the customers or
approval from Aegis to treat the accounts as discretionary.
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Because Zack marked these sale orders as unsolicited, he caused Aegis to maintain
inaccurate books and records in violation of Section 17(a) of the Securities Exchange Act
of 1934 (Exchange Act) and Rule 17a-3 thereunder. By causing the firm to maintain
inaccurate books and records, Zack violated FINRA Rules 4511 and 2010.
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Help For Victims Of Edmund Zack
If you have lost funds because of misrepresentation, unsuitable investment, or unsuitable investment strategy from Edmund Zack. Then you can take legal action and get justice. Fraud, Malpractice & dereliction of duty should not be taken lightly, especially in this industry. We highly suggest that you notify authorities or seek legal action if your financial advisor or brokerage firm fails to abide by FINRA’s rules are regulations.
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Financial advisors are regulatory & legally obligated to suggest (recommend) the most suitable investments/investment strategies to their clients. Their suggestions should have their client’s best interests and should be appropriate for their client’s goals and needs. Similarly, the brokerage firm which hires financial advisors also has a regulatory & legal obligation to keep a close watch and supervise their Financial Advisors’ practices & behavior. They need to make sure that the financial advisor is not being manipulative or having an unreasonable bias towards certain investments. If the financial advisor and/or the brokerage firm breaches these duties, then the client/customer may be entitled to a full or partial recovery of their losses.
Financial advisors need to have the interest of their clients when giving suggestions related to investments and investment strategies. Reasonable basis suitability requires the advisor to do their best to analyze & identify the risks and rewards associated with their suggested investment and/or investment strategy.