All-Tech Is Ordered to Pay Investors

An arbitration panel has ordered one of the nation’s largest day-trading firms to pay $456,000 for losses suffered by four investors who claimed they were duped into believing they could make money easily by making rapid stock trades.

The award covers part of the losses suffered by the four while trading at the San Diego branch of All-Tech Direct Inc., Dennis Villavicencio, an attorney for the investors, said.

The panel from the National Assn. of Securities Dealers, the brokerage industry’s self-policing organization, issued the award Wednesday against All-Tech Investment Group of Montvale, N.J., its chief executive, Harvey Houtkin, and President Mark Shefts after a six-day hearing in San Diego.

The investors claimed All-Tech misled them about the risks of day trading, in which investors typically buy and sell stocks in rapid order, trying to profit from small price moves.

They also claimed that All-Tech, which received commissions of $25 a trade, encouraged investors to trade often, a strategy that often resulted in losses, Villavicencio said. Each of the four also paid $2,000 to $3,000 for a trading course offered by the firm.

“[All-Tech] knew that the vast majority of their clients would lose money,” he said.

All-Tech CEO Houtkin said he was “baffled” by the panel’s decision and plans to appeal it. The investors lost money, he said, because they held stocks overnight rather than selling at the end of each day as All-Tech advised its clients.

“They were thoroughly trained. They knew the training strategy and the risks,” Houtkin said.

One of the four investors, Carmen Margala of Oceanside, started investing with $20,000 and lost $45,000, Villavicencio said. She later testified to a Senate subcommittee about her experiences.

All-Tech’s payment, which includes $124,150 for attorneys’ fees, won’t cover all the losses suffered, but the lawyer declined to specify how much would be covered for each investor.

In June, the NASD levied $475,000 in fines against All-Tech, Houtkin and other executives of the firm for allegedly misleading investors about the risks of day trading in advertisements.