Joshua David Nicholas, of Stuart, Florida, a stockbroker formerly registered with Merrill Lynch Pierce Fenner Smith Incorporated, has been barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity founded on findings that Nicholas converted a customer’s funds when he was associated with Merrill Lynch. Letter of Acceptance, Waiver, and Consent No. 2020067572701 (January 24, 2022).
According to the AWC, before and during the time that Nicholas was employed by Merrill Lynch, he used his company, JDN Capital, to trade futures contracts for investors. The AWC states that by February of 2020, Nicholas’ trading of futures through this outside business activity resulted in $1,000,000.00 in losses for the JDN Capital customers.
FINRA states that in April of 2020, Nicholas recommended for the customers to purchase a $300,000.00 promissory note issued by JDN Capital. The customers were led to believe that their money would be invested by JDN Capital in securities. The AWC indicates that the customer’s promissory note was executed on April 30, 2020, and it required JDN Capital to pay 17 percent annually on the note and to secure the investors’ $300,000.00 in funds through making securities purchases. Nicholas signed this note on JDN Capital’s behalf.
The AWC states that $300,000.00 was wired to JDN Capital’s account. Nicholas transferred all but $20,000.00 to his own account. He then used $58,000.00 to pay for his expenses. FINRA states that Nicholas’ use of $58,000.00 to pay for his expenses showed that he violated FINRA Rule 2010.
FINRA also states that Nicholas misrepresented information on a brokerage statement that he provided to the customers. The AWC states that in April of 2020, Nicholas was asked by the customers to provide an account statement showing how the customers’ funds were invested. Nicholas gave a brokerage statement to the customers, which showed that a brokerage account was opened by JDN Capital and that the account held securities that secured the promissory note. Nicholas had the customers believe that the account earned dividend income of $72,000.00 in April of 2020. The regulator states that the entire account document was fake.
There was no account established by JDN Capital at a FINRA-member securities broker dealer. There were no assets that Nicholas or JDN Capital held for purposes of investing the customers’ funds. FINRA found that Nicholas violated FINRA Rule 2010 by supplying the customer with a fake account statement.
FINRA additionally states that Nicholas engaged in outside business activities through JDN Capital in 2018. Nicholas created JDN Capital in 2018 as a commodity trading advisor. He executed futures trades for compensation through this outside business activity. He was required to provide Merrill Lynch with information about those activities. He failed to disclose JDN Capital to Merrill Lynch, and he made false statements about his outside business activities, including within a compliance certification where he claimed not to have engaged in them. Nicholas violated FINRA Rules 2010 and 3270 for this reason.
The regulator also found that Nicholas’ solicitation of the $300,000.00 promissory note and his participation in the securities transaction showed that he engaged in a private securities transaction. Merrill Lynch was not made aware of any of his activities concerning the promissory note, including his solicitation of the investment and his drafting and execution of the agreement. Nicholas violated FINRA Rules 2010 and 3280 for this reason.
FINRA Public Disclosure shows that on June 15, 2021, a customer initiated investment related arbitration claim regarding Nicholas’ activities was resolved for $275,000.00 in damages supported by accusations of Nicholas selling away, failing to disclose information concerning the customer’s investments, and making unsuitable recommendations while he was registered with Merrill Lynch. FINRA Arbitration No. 20-02541 (June 15, 2021).
Nicholas voluntarily resigned from Merrill Lynch on July 29, 2020, based upon allegations of forgery of a customer’s document.