Securities Arbitration Lawyers BlogDocument Security Systems Underwritten By Aegis Financial
Did your broker recommend buying shares in Document Security Systems (DSS) which was underwritten by Aegis Financial?
Document Security Systems, Inc., is a multinational company now known as DSS that operates a variety of business segments including healthcare, direct marketing, consumer packaging, real estate, renewable energy, blockchain security, and securitized digital assets. The company’s prospectus filed with the SEC indicates that the company’s focus is fraud and counterfeit protections for printed documents and digital assets and information. The company also holds multiple technology patents to prevent unauthorized copying and scanning.
SLCG Report Highlighting Aegis Financial
According to a recent report by SLCG Economic Consulting, DSS is one of many companies whose stocks would have been delisted had Aegis not continued underwriting them in order to resell them to its customers, costing investors billions of dollars in losses.
As an underwriter, Aegis buys very low-priced stocks from companies ready for de-listing, giving the company some much-needed capital. Then the firm resells these low-value stocks to its customers. There is no indication that these stocks will ever bring a return to the investors.
The firm makes money in the “bid-ask spread”. This is the difference between the highest price a buyer is willing to pay and the lowest price that the seller is willing to accept. The seller receives the bid price while the buyer pays the ask price.
The “spread” is the difference between the two ends. The spread is the principal cost of the trade, or outside commissions, collected by the market maker during the processing of orders at the two prices.
As the underwriter, Aegis was responsible for determining the value of these stocks. Once they determine value, Aegis buys them from DSS and resells them to its investment customers through its distribution network, profiting from the sales.
Aegis Financial Has Been the Subject of Multiple FINRA Arbitration Claims
DSS isn’t the only company Aegis has bought underperforming stock from and re-sold to investors. Known as micro-cap issuers, DSS’ stocks were sinking before Aegis bought them and revitalized by re-selling.
As the underwriter, Aegis was required to value the initial price of the offerings and accept all risks involved. Aegis was also frequently the market-maker, setting the buy and sell prices for these stocks. This encouraged brokers to sell them even though they were highly risky for retail customers.
Regulation Best Interest (RegBI) requires brokers and broker-dealers to offer recommendations suitable for their investment risk objectives. While Aegis bought and re-sold these questionable stocks, they were fully aware that the companies were close to bankruptcy and/or being de-listed and that the stocks were risky and worth very little.
Like any other firm, Aegis also has a duty of due diligence to ensure customers are buying investments that are safe and right for their portfolio. Additionally, many analysts allegedly gave very strong “buy” recommendations for these stocks despite FINRA Rule 2241 requiring broker-dealers to identify any conflicts of interest and disclose them to their clients.
Did Your Aegis Financial Broker Recommend Document Security Systems (DSS)?
Silver Law Group represents investors in stockbroker misconduct cases involving allegations of negligence, breach of fiduciary duty, failure to supervise, and other causes of actions. These claims are frequently submitted to FINRA which administers the largest arbitration forum for investor disputes. We handle these cases on a contingency fee basis.
Silver Law Group represents the interests of investors who have been the victims of investment fraud. Our attorneys represent investors in class actions against issuers and securities arbitration claims against brokers for misconduct like the allegations against Aegis. Scott Silver, managing partner of Silver Law Group, is the chairman of the Securities and Financial Fraud Group of the American Association of Justice and represents investors nationwide in securities investment fraud cases. Please contact Scott Silver for a no-cost consultation at ssilver@silverlaw.com or toll-free at (800) 975-4345.