Bambi Holzer is infamous in the securities industry as a Beverly Hills, Calif.-based broker who aggressively courted Hollywood stars as clients, along with the less glamorous rich, before and after the tech bubble burst in 2000.
She wrote books, made television appearances and counted as her most famous client former “Seinfeld” star Julia Louis-Dreyfus, who
wound up suing Ms. Holzer and one of her numerous former securities firms in 2007 over a dispute concerning $4.4 million invested in annuities.
Now it appears that Ms. Holzer, who was sued last week by the Financial Industry Regulatory Authority Inc., is facing the wrath of securities regulators for far less glamorous reasons: she allegedly lied to one of her former firms, Wedbush Securities Inc., about several clients' net worth when in 2008 she sold preferred shares of one of the series of deals issued by Provident Royalties LLC. She also allegedly failed to report a pending regulatory action on her employment history, according to Finra.
112-PAGE FINRA REPORT
Litigation is not new to the 55-year-old Ms. Holzer, who has worked for 10 securities firms in the past 30 years.
Indeed,
her BrokerCheck report is a staggering 112 pages in length, which makes it a little longer than — but just as compelling as — Franz Kafka's 1915 novella “The Metamorphosis.” That tale is about a young traveling salesman who wakes one morning to discover he has been turned into a dung beetle. A broker with a clean record typically has a BrokerCheck report of six to eight pages. Reading one of these files is akin to staring at instructions for making oatmeal on the back of a box of Quakers Oats.
Ms. Holzer has 53 settled customer complaints, six more that were dismissed or denied, and four others still pending, according to BrokerCheck. The suit with Ms. Louis-Dreyfus eventually was settled; Ms. Holzer and her firm at the time, UBS PaineWebber Inc., paid out at least $11.4 million to settle dozens of investor claims that she misrepresented variable annuities by asserting they offered guaranteed returns, according to a 2009 Forbes article titled “Beware of Your Broker.”
After resigning from her last firm, Newport Coast Securities Inc., in August, Ms. Holzer was suspended by Finra in September. She could not be reached Thursday afternoon for comment.
'LOST HER SAVINGS'
Rex Beaber, her attorney in the Finra matters, says that Ms. Holzer lost her entire retirement savings, between $250,000 and $500,000, when she invested in Provident preferred shares along with nontraded real estate investment trusts and private real estate partnerships sponsored by Behringer Harvard Holdings. One of the largest fund raisers for nontraded REITS in the past decade, Behringer Harvard has seen several of its offerings
slash dividends and collapse in value.
Ms. Holzer also invested her mother's portfolio in Provident and Behringer Harvard, Mr. Beaber said. “This isn't an evil person who says, 'To make the commission I'm going to put money into'” private placements, he said. “She thought the history of these products would be their future.”
InvestmentNews readers over the past few years know, of course, about
the damage to broker-dealers, advisers and clients caused by Provident. The purported oil-and-gas leasing company turned out to be a $485 million Ponzi scheme that contributed to the demise of dozens of small to midsize broker-dealers after the Securities and Exchange Commission shut Provident down in July 2009.
To date, Ms. Holzer is one of the most prominent brokers to be associated with selling Provident, which promised annual returns of 18% at a time when the housing market was falling apart and interest rates were collapsing. But it's not the Provident fraud that Finra is focused on in its latest complaint against Ms. Holzer; rather, the industry's self-regulator is focusing on the mundane details of how Ms. Holzer allegedly fudged documents involving six clients to whom she sold one of a series of private-placement offerings, Provident Shale Royalties 8, in 2008.
“In the course of obtaining supervisory approval of the Provident 8 transactions in March 2008, Holzer submitted to her firm net worth information for six of these customers, which Holzer knew or should have known to be false,” according to the Finra complaint, which is dated Oct. 18. Ms. Holzer's behavior allegedly violated the Finra rule pertaining to standards of commercial honor and principles of trade. The Finra alleges that she made unsuitable recommendations to seven clients who bought Provident 8 — a “speculative and illiquid investment,” according to the Finra complaint.
Wedbush Securities is not named in the Finra complaint.
'NO KNOWLEDGE'
Mr. Beaber, her lawyer, said that Ms. Holzer had no knowledge of her clients' net worth beyond what they told her. He also said that Wedbush Securities knew about the pending regulatory action because it was a public matter.
The clients exaggerated their net worth because they wanted to meet a $5 million net worth minimum that Wedbush required for such investments, Mr. Beaber said. Ms. Holzer's clients were desperate for the juicy returns, he said.
“In a number of instances, the clients wanted to qualify for the investment, and because they owned real estate, they just played up the value of real estate to meet the criteria,” he said. He added that one client's application for Provident was clearly inaccurate but likely the fault of an employee Ms. Holzer failed to oversee properly.
The plethora of Finra arbitrations is due to the fact she works with wealthy clients, Mr. Beaber said. Many saw positive returns through investing in private placements sold by Ms. Holzer but want redress due to the failures of Provident and Behringer Harvard.
The industry should keep a watch on what Ms. Holzer turns to next if she ever returns to the industry to sell securities or perhaps looks to sell insurance. Based on her voluminous track record of litigation, she might choose a product that could turn into a disaster, or perhaps a dung beetle, for investors.
