The opinion of the court was delivered by: MISHLER
MEMORANDUM OF DECISION AND ORDER
JACOB MISHLER, UNITED STATES DISTRICT JUDGE.
Plaintiff brings this action seeking damages for securities fraud and civil RICO violations. Defendants move to dismiss the action for failure to state a claim upon which relief can be granted and failure to plead fraud with requisite particularity. For the reasons set forth below the claims are dismissed.
Plaintiff John H. Bischoff, Jr. ("Bischoff") is an unsophisticated investor.
At all relevant times, defendant G.K. Scott & Co., Inc. ("Scott") was a registered broker-dealer with the Securities and Exchange Commission ("SEC") and a member of the National Association of Securities Dealers, Inc. Defendant George Kevorkian ("Kevorkian") is president of Scott and a "controlling person" of defendants Scott and Fischer. Defendant Irv J. Fischer ("Fischer") is a registered representative employed by Scott.
In April 1983 plaintiff opened an account with defendants at Fischer's suggestion. The account was originally funded with six securities worth approximately $ 68,000. Plaintiff told Fischer that because he needed money for his children's college expenses, he wanted to limit speculative transactions to $ 10,000. Fischer agreed. Based on this representation by Fischer, plaintiff opened the account. At no time did he provide discretionary authority to defendants with respect to the account. As alleged by plaintiff, Fischer never intended to so limit speculative trading but misrepresented his intentions in order to induce plaintiff to open the account.
On the day after plaintiff delivered his six securities, defendants, contrary to plaintiff's instructions and without plaintiff's knowledge, sold five of them and within the next month purchased three speculative over-the-counter securities
for which Scott acted as market-maker, a status which was noted on plaintiff's monthly statements dated April 30 and May 31, 1983.
Continuing through April 1985, defendants made further unauthorized purchases of speculative securities without disclosing their risky nature. While plaintiff received monthly statements informing him of these transactions, defendants did not inform plaintiff that they "dominated and controlled the market price for such securities, and that such prices did not bear any relationship to such securities' intrinsic worth."
Noticing the declining value of his account, plaintiff requested, first in December 1983 and again in April 1984, that defendants liquidate his account. On both occasions Fischer advised plaintiff to retain the securities because they would increase in value. Plaintiff acquiesced, relying on Fischer's expertise. Finally, in the spring of 1985, after the account's value had substantially declined, plaintiff directed defendants to liquidate. At the time this action was filed in December 1985 defendants had not fully complied, and the account contained one security for which no price was available.
Had not defendants made "fraudulent material misrepresentations and omissions," plaintiff claims, he "would not have opened the account with defendants." Complaint at para. 18.
Plaintiff's complaint alleges violations of Sections 12 and 15 of the Securities Act of 1933, 15 U.S.C. §§ 77 l and 77o; Sections 10(b) and 20 of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b) and 78t and Rule 10b-5, 17 C.F.R. § 240.10b-5, promulgated thereunder; and civil RICO claims pursuant to 18 U.S.C. § 1961 et seq. The securities fraud claims rest upon allegations of misrepresentation, non-disclosure, and mismanagement of plaintiff's account through unauthorized trades. The RICO claim is based upon the same events.
THE SECURITIES FRAUD CLAIMS
To state a Rule 10b-5 claim, plaintiff must allege ...