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Securities Regulation, Keyed to Choi
Garnatz v. Stifel, Nicolaus & Co., Inc.
Citation:
559 F.2d 1357 (1977)Facts
Milton Garnatz attended investment seminars sponsored by Stifel, Nicolaus in November 1972, where he met with Kingsley Wright. Based on specific representations that the bond margin account program would maximize income while preserving capital, that all purchases required board approval, that margin accounts entailed no risk, that bonds would not decrease more than one percent in value, and that the interest rate would never exceed eight percent, Garnatz agreed to participate despite his express desire to avoid speculation. In reality, most bonds purchased were low-rated or non-rated, no purchases were approved by the board of directors, and the bonds were highly speculative. By April 1973, the account value had declined over one percent, forcing Garnatz to relinquish all income to pay margin calls. Wright repeatedly reassured Garnatz the decline was temporary. In August 1974, the margin interest rate jumped from eight to thirteen percent. By that time, Garnatz had suffered losses totaling over $45,000 from bond sales and declining market values.
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