Heath Shayne Bowen of Idaho Falls, Idaho, president of Allegis Investment Services, LLC, has been charged by the Securities Commissioner for the State of Colorado in a Complaint alleging that investors have been defrauded by Bowen, and exposed to misrepresentations while their assets were under Bowen’s management, which led to customers incurring substantial investment losses. Securities Commissioner for the State of Colorado v. Heath Bowen, et al., Case Number: 2017CV31584 (May 1, 2017).
According to the Complaint, the Securities Act of the State of Colorado compelled the firm to furnish full information about facts to investors and to act in the investors’ best interest. The Complaint alleged that the firm instead fraudulently promoted a complex and speculative investment strategy utilizing net credit spread options that were designed and sold by Bowen and Peter Klaass – the firm’s vice president.
Apparently, Bowen was primarily responsible for the firm to be in compliance with the securities laws, as well as for providing an education about the investment strategy to the firm’s investment adviser representatives and detailing the strategy to customers. The strategy reportedly caused the retirement funds of investors to incur risks of forty to one-hundred percent losses in value on each trade so that the firm would be able to procure investment management fees.
Apparently, between 2011 and 2015, the strategy had been marketed to customers located in Colorado as a mechanism to produce income for them on a conservative basis. However, Bowen failed to educate the customers about the strategy containing risks of forty to one-hundred percent of the customers’ investment account value, and that the potential positive returns, if any, were less than one percent on average.
The Complaint alleged that there were misrepresentations commonly made to customers, including that the firm could assist clients in exiting trades when the market went against them; that the most that customers could lose was between seven percent to fifteen percent of the customers’ account value; and that the strategy was geared for producing income in a safe manner. The Complaint further indicated that omissions had been commonly made: customers were not informed that they did not possess the ability to exit a trade prior to the expiration of an option; or that losses could be catastrophic based upon a minimal market movement; or that there was a potential for loss that corresponded to guaranteed returns.
The Complaint alleged that the customers were mainly seniors who depended on their retirement fund income to cover their personal living expenses. Apparently, customers collectively suffered $500,000.00 in losses as a result of one trading period in August of 2015; their account values faced declines ranging from 7.72% to 54%. The Complaint additionally alleged that customers were manipulated into buying speculative investments without appropriate disclosures. Consequently, the Securities Commissioner for the State of Colorado alleged that Bowen violated the Securities Act of Colorado’s antifraud provisions, and seeks revocation of Bowen’s registration.
FINRA Public Disclosure reveals that Bowen is the subject of a customer initiated investment related arbitration claim, in which the customer requested $456,529.00 in damages supported by allegations that Bowen made misrepresentations to the customer about an options strategy, and implemented an investment strategy utilizing options that was not suitable for the customer. FINRA Arbitration No. 17-02268 (Sept. 29, 2017).
Further, a customer filed an investment related arbitration claim involving Bowen’s conduct, where the customer sought $400,000.00 in damages founded on accusations that Bowen failed to supervise options transactions effected in the customer’s account. FINRA Arbitration No. 17-00135 (Jan. 30, 2017).
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