The U.S. Securities and Exchange Commission says RiverFront Investment Group has agreed to pay a $300,000 to settle allegations that the firm charged clients additional investment management fees beyond the agreed upon wrap fees. RiverFront is settling the SEC charges without denying or admitting to them.
With wrap fee programs, clients pay a yearly fee that is supposed to cover a number of services, including the cost of trades made by a sponsoring brokerage firm. Any additional fees have to be fully disclosed.
According to the regulator, RiverFront used a designated broker-dealer from ’08 until late ’09, which is when it started to use other brokers. However, although RiverFront told investors that some “trading away” from the sponsoring broker was occurring, the firm did not accurately describe how often this was happening. The use of these other brokers cost clients additional fees.
RiverFront maintains that it had been looking for best execution prices when working with the other broker-dealers, and the SEC acknowledges that the firm did not make money by trading away when it used these brokerage firms. However, clients still paid millions of dollars in added charges. It wasn’t until late 2011 that RiverFront modified its Form ADV disclosure so that clients were notified about its use of non-designated brokers.
The U.S. Securities and Exchange Commission says RiverFront Investment Group has agreed to pay a $300,000 to settle allegations that the firm charged clients additional investment management fees beyond the agreed upon wrap fees. RiverFront is settling the SEC charges without denying or admitting to them.
The U.S. Attorney’s Office has issued a statement announcing that Patrick E. Churchville, the president and owner of ClearPath Wealth Management, will plead guilty to one count of tax fraud and numerous counts of wire fraud related to the running a $21M Ponzi scam. According to prosecutors, Churchville also used $2.5M of investor money to buy a house and neglected to pay over $820K of his federal income taxes.
Court documents report that a federal probe determined that from ‘08 through October ’11 the Rhode Island investment adviser and his firm invested about $18M in JER Receivables on behalf of investors. The government said that in 6/10, Churchville found out that the investments were no longer rendering returns and that ClearPath had been the subject of misleading and fraudulent representations by JER principals. However, instead of notifying clients that he lost millions of dollars of their money, he tried to hide the losses while continuing to collect investment fees.
As a result, Churchville misappropriated about $21M of investor money, misusing their funds while bringing in money from new investors. For example, he used investor money to repay JER investors while pretending that the funds were investment returns. He also lied when he told investors that past investments with JER Receivables had resulted in high return rates.
The government’s probe, conducted by the FBI, the U.S. Attorney’s office, and the IRS Criminal Investigation, also found that Churchville set up a scam in which he used investor money as collateral and, without their permission, used the funds to help him get $2.5M to buy a home. He did not report that money as income on his personal tax returns, hence the more than $820K nonpayment of his taxes.
The U.S. Securities and Exchange Commission is ordering WFG Advisors to pay a $100K penalty for charging clients too much on their investments business development companies and real estate investment trusts. The Dallas-based firm is the registered investment advisory arm of Williams Finance Group.
According to the regulator, the purported overcharges took place from 1/11 through 8/13. The SEC claims that WFG Advisors had policies and procedures that were inadequate, which kept it from identifying and stopping incidents of overcharging. Because of these inadequacies, including what the regulator considered a lack of technological capabilities, 35 accounts were collectively overcharged $34,640.63 in advisory fees.
The Commission said client’s in the firm’s wrap account program were told that they would be charged a commission to buy alternative investment product interests, including interests in BDCs and REITs. However, there wasn’t supposed to be an advisory fee. Instead, said the Commission, WFG Advisors charged both a commission and an advisory fee. (Forms submitted to the regulator included false statements saying that wrap program participants would not have to pay commissions for transactions that took place in their accounts.)
SEC & Fraud Cases: Ponzi Scam Targeting Middle Class Investors is Stopped, NY-Based Forex Trader is Accused of Bilking Ex-Classmates, Family, and Friends, and NC Investment Adviser is Sued Over $11.5M Real Estate-Related Scheme
SEC Stops Ponzi Scam Involving Pre-IPO Stocks and Middle Class Investors
The U.S. Securities and Exchange Commission is charging Jaswant Gill and Javier Rios with fraud. The regulator claims that the two men and their investment firm, JSG Capital Investments, targeted middle-class investors through a Ponzi scam in which they touted purportedly huge returns through pro-IPO stock in renowned companies such as Airbnb, Alibaba, and Uber.
Gill and Rios are accused of pocketing at least $2.8M in investor money for their own lavish spending instead of investing the money in the pre-IPO shares. Funds of new investors were used to pay “returns” to earlier investors.
Gill allegedly touted fake credentials. He, Rios, and their firm are not registered with the Commission or with a state regulator.
The SEC said that in total the two investment advisers raised $10M through their company and related entities. They are said to have promised these retail investors access to investment opportunities that were typically only available to “one-percenters.” They also guaranteed yearly returns as high as 60%.
The U.S. Attorney’s Office for the Northern District of California has filed a parallel criminal case against Rios and Gill.
Trader Accused of Bilking Friends and Family of Millions of Dollars
The SEC is suing Haena Park for allegedly defrauding friends, her ex-Harvard classmates, family members, and other individuals of millions of dollars. Park is accused of using investor funds and making misrepresentations about her investment history, as well about the profits the investments were supposed to have made.
Since 2012, Park has raised at least $14M from over 30 investors, sustaining $16M in trading losses in the process.
Securities Fraud Cases: Ex-Head of MICG Investment Management Firm Faces 13 New Charges, SEC Accuses Unregistered Brokers of Bilking Investors in $6M Scam, and $250M Pump-And-Dump Case Leads to Guilty Plea
Government Charges Convicted Broker with More Fraud Charges
Jeffrey Martinovich is charged with 13 new counts of fraud. He is is ex-head of MICG Investment Management and was convicted of 17 fraud charges three years ago.
Martinovich is accused of improperly moving over $700K from a company hedge fund in 2010. According to prosecutors, he spent $170K of the funds for his legal defense fees and at least $59K on his personal expenses. He also purportedly took out over $147K more from the hedge fund account.
It was in 2011 that the Financial Industry Regulatory Authority expelled Martinovich and his firm for securities fraud, improperly using client money, and causing false statements to be sent to investors related to the MICG Venture Strategies LLC, a proprietary hedge fund. The self-regulatory organization said that Martinovich and MICG improperly assigned asset values that were excessive to two non-public securities.
FINRA said that the assets’ value were inflated so that incentive and management fee could be increased.
Offshore Broker Pleads Guilty in $250M Pump-and-Dump Scam
Gregg Mulholland has pleaded guilty to conspiracy for operating a pump-and-dump-scam that manipulated shares of over 40 companies in the U.S. One company, Cynk Technology, saw its share price increase by 24,000%.
The U.S. Securities and Exchange Commission is charging John Galanis, his son Jason Galanis, and five other people with fraud involving a multimillion-dollar tribal bonds scam. The SEC claims that Jason ran the scheme to obtain a “source of discretionary liquidity.”
He and his father allegedly persuaded a Native American tribal corporation affiliated with the Wakpamni District of the Oglala Sioux Nation to put out limited recourse bonds that the two of them had structured. Jason then acquired two investment advisory firms and appointed officers to coordinate the purchase of $32 million in bonds. He used client money to purchase the bonds.
Investors were told that the bond proceeds would be invested in annuities to make enough money to pay back bondholders and to benefit the tribal corporation. Instead, the money went to a bank account owned by a company that Jason and his associates controlled. The funds were allegedly misappropriated to make luxury purchases and to pay lawyers representing Jason and his dad in a criminal case involving unrelated stock fraud charges.
The SEC wants disgorgement, interest, penalties, and permanent injunctions. Also named in the complaint are Devon Archer, Bevan Cooney, Hugh Dukerley, Gary Hirst, and Michelle Morton. They face charges of violating federal securities laws’ antifraud provisions and other rules.
According to InvestmentNews, New York City Council Speaker Melissa Mark-Viverito is asking the U.S. Securities and Exchange Commission (“SEC”) to conduct a probe into OppenheimerFunds, Inc. (“OPY”) and its impact on Puerto Rico’s financial woes. Speaker Mark-Viverito believes that the asset-management company played a part in making Puerto Rico’s financial crisis worse by investing even more in the island’s debt. She claims that just in the last eight months, OppenheimerFunds has added $500 million to investments it made in Puerto Rican debt.
Right now, the U.S. territory owes over $70 billion in debt, which it is struggling to pay. It recently defaulted on over $370 million of a bond payment that was due this month. Another $2 billion is due in July, including around $700 million in general obligation debt.
To satisfy investor redemptions, OppenheimerFunds has sold its non-Puerto Rico bonds, which would have raised the current allocation of the asset manager’s funds to the Commonwealth. In a letter to the SEC, Mark-Viverito, who was born in Puerto Rico, urged the agency to look into whether Oppenheimer has complied with all regulations and securities laws when handling its Puerto Rican bond investments. She believes banks, hedge funds, and other investors in the territory’s general-obligation bonds and utility debt are to blame for the island’s financial woes.
Nine financial professionals are charged with scamming investors in a $131M financial fraud involving Forcefield Energy Inc. According to authorities, from 12/09 to 4/15 the defendants, which include brokers, stock promoters, and investor relations officials, manipulated the LED lighting provider’s stock by trading it in secret, using undisclosed accounts, hiding kickbacks that were paid to brokers and stock promoters to tout the stock, and inflating the volume of trades to make it seem as if there was a real demand for the stock. Also this week the U.S. Securities and Exchange Commission filed civil fraud charges against the nine defendants and former ForceField executive chairman Richard St. Julien who was arrested last year on charges accusing him of running scams to inflate his company’s stock price.
Speaking about the criminal case, U.S. Attorney Robert Capers said that the defendants took a business that didn’t have much revenue and “essentially no business” and fooled their clients and the market into thinking that it was worth hundreds of millions of dollars. The nine defendant are charged with securities fraud, and conspiracies to commit wire fraud, securities fraud, and money laundering. They are former Stratton Oakmont Inc. broker Christopher Castaldo, unregistered broker Louis F. Petrossi, Mitchell & Sullivan Capital LLC managing partner of investor relations Jared Mitchell, registered representatives Richard L. Brown, Naveed A. Khan, Gerald J. Cocuzzo, Maroof Miyana, and Pranav V. Patel, and Kenai Capital Management LLC head Herschel Knippa III.
The U.S. Securities and Exchange Commission is charging four men with fraud. The regulator claims that Joseph Andrew Paul, James S. Quay, John D. Ellis, Jr., and Donald H. Ellison sought to bilk investors, including seniors, by promising them lucrative returns for their money.
The SEC contends that Ellis and Paul lied about their investment advisory firm’s performance record, generated fraudulent marketing collateral that included performance figures from the website of another firm, and recruited Quay and Ellison to be part of the scheme. The latter two then purportedly used the fraudulent materials to deceive investors who answered a mass mailing that offered a free dinner at a restaurant in Florida. Quay, who previously was found liable for securities fraud and convicted of tax fraud, allegedly used the name “Stephen Jameson” as an alias to hide his real identity. The SEC said that Jameson was not a registered investment professional when the allegedly fraudulent behavior took place, nor was Ellison for most of that time.
“Free Lunch” Seminars
The Commission has warned more than once that when it comes to investment seminars there is no such thing as a “free lunch.” While you, as the attendee, may not have to pay for the food, these seminars are educational programs and investment workshops geared toward getting you to buy an investment product that a host or an affiliate is touting.
While there are plenty of legitimate investment seminars, there are those that have purposely been set up to bilk prospective attendees. At such gatherings there may be fake products sold, misrepresentations about risks and returns made, conflicts of interest related to the products for sale and the information provided, and advertising collateral that is misleading or inaccurate. Unfortunately, older investors continue to be a favorite target of financial scammers.
At Shepherd Smith Edwards and Kantas, LTD LLP, our elder financial fraud lawyers are here to work with investors to get their money back.
The Securities and Exchange Commission has filed charges against brothers Daniel Rivera and Matthew Rivera with fraud. The two men are accused of running a $2.7 million Ponzi scam that targeted unsophisticated older investors.
According to the SEC, from ’08 to ’14, Daniel told investors that they could make money from Robbins Lane, which was a real estate venture in Pennsylvania. On occasion, he even purportedly recommended to some of them that they sell their retirement assets to invest in the venture.
In truth, said the Commission, Robbins Lane, which the Rivera brothers founded, lacked an investment portfolio and the ability to provide the senior investors any income. Yet Daniel set up a Robbins Lane website and produced a brochure touting the opportunity as one that gave older investors “guaranteed” income every month.
However, rather than invest the fund Daniel used the money to cover his own expense and his daughter’s college tuition. He diverted some of the money toward a janitorial business that he ran with Matthew. Hundreds of thousands of dollars in investor money went to pay other investors.
New Jersey adviser John Bivona is facing U.S. Securities and Exchange Commission charges accusing him of raising over $53M from investors in a Ponzi-like scam that involved the selling of investments in pre-IPO tech companies. However, contends the SEC, instead of investing the funds as intended, he used investor money to pay taxes, legal fees, a car loan, a vacation house mortgages, and cover his nephew’s credit card bills.
The regulator, in its complaint, said Bivona funneled millions of dollars into earlier funds that he and his company managed, while at least $5.7M went to family members, including nephew Frank Mazzola, who also is dealing with SEC charges for a previous investment scam.
The Commission alleges that Bivona raised the money through Saddle River Advisors, which has not registered with the regulator since 2013, and SRA Management. Because he purportedly took the money for his own spending, to pay family bills, and keep different funds running, his firms often never had enough money to buy the shares investors had been promised.
The SEC believes that Bivona was able to keep his Ponzi scam going because he kept transferring funds between over a dozen bank accounts associated with a number of entities. Meantime, investors never received financial statements they were promised.
In its press release announcing the charges, the SEC linked to one of its bulletins that identifies the possible warnings signs that the unregistered offering you are thinking of investing in may be a scam. The Commission noted that unregistered securities are
Elder Investors: Morgan Stanley Must Pay Home Shopping Network’s Estate Over $34M, Broker Accused of Making Over $1.7M From Churning at Craig Scott Capital, and $10M Ponzi Scam Involving Jamaican Businesses Targets Older Investors
FINRA Panel Awards Estate Over $34M from Morgan Stanley in the Wake of Churning Allegations
A Financial Industry Regulatory Authority arbitration panel awarded the estate of Home Shopping Network Roy M. Speer over $34M in its case against Morgan Stanley (MS). The panel ruled that the firm, branch manager Terry McCoy, and broker Ami Forte were jointly liable for breach of fiduciary duty, negligence, unauthorized trading, constructive fraud, unjust enrichment, and negligent supervision. The alleged negligence would have occurred from 1/09 to 6/12 and involved investments in the financial services and banking sectors.
According to Mrs. Speer’s lawyer, in six of Mr. Speer’s accounts, about 12,000 transactions took place, most of them involving municipal bond trading and corporate trading. Many of these trades were unauthorized.
The arbitrators awarded $32.8M in compensatory damages to Speer’s widow, Lynnda Speer, and $1.5M for the costs involved in the arbitration process. The panel said that Morgan Stanley violated a law in Florida that prohibits the exploitation of vulnerable adults. Mr. Speer had dementia. Forte, who was his broker, is said to have been in a relationship with him.
Former Craig Scott Capital Broker Accused of Elder Financial Fraud
FINRA is accusing broker Edward Beyn of making over $1.7M in commissions and fees by engaging in excessive trading in client accounts while he was a registered representative at Craig Scott Capital. He is now with Rothschild Liberman. Beyn is accused of churning nine accounts of six customers, all of them over the age of 60, from 3/12 through 5/15. They all sustained losses.
SEC Cases: Ex-AIG Broker-Dealers to Pay $9.5M For Purportedly Directing Investors Toward Pricier Mutual Funds, California Water District Resolves Bond Offering Charges for $125M, & Businessman is Accused of Stealing Investor Money
Former AIG Affiliate Brokerage Firms to Pay $7.5M Fine, $2M Restitution Over High-Priced Mutual Funds
Royal Alliance Associates, FSC Securities Corp., and SagePoint Financial have agreed to pay over $9.5M to resolve Securities and Exchange Commission charges accusing them of guiding clients toward expensive mutual fund share classes so that the firms could garner additional fees. The brokerage firms were formerly under the AIG Advisor Group umbrella.
According to the regulator, the firms put clients in share classes that charged 12b-1 fees for distribution and marketing even though they were eligible to purchase shares that didn’t come with these added fees.
Because of the placement in the costlier fund classes, the firms collected an additional $2M in fees and did not disclose their conflict of interest in choosing the share classes that would make them more money.
The AIG affiliates are accused of not monitoring advisory accounts quarterly to make sure that churning didn’t take place. The SEC order is claiming breach of fiduciary duty and numerous compliance failures.
California Businessman Allegedly Stole Investor Money, Covered Up Fraud
Daniel R. Nase is accused of stealing investor assets and then trying to conceal the theft once the SEC discovered his scam. The regulator claims that the California businessman raised funds from investors via an unregistered offing of common stock in his Bic Real Estate Development Corp. He then used the funds to cover his own bills.
The Commission said that Nase, who was not registered with any state regulator or the SEC to sell investments, told investors that his company would invest in promissory notes and real estate. Instead, he improperly placed those under his name, his wife’s name, of the name of their family trust. He allegedly tried to hide his fraud by investing the assets that he stole back into BIC to make it look like he was raising his equity stake in the company.
California Water District Accused of Misleading Investors in $77M Bond Offering
The SEC is charging Westlands Water District with misleading investors about its financial state while issuing a $77M bond offering. The agricultural water district is the largest one in the state of California.
According to the SEC, Westland, in prior bond offerings, consented to keep a 1.25 debt service coverage ratio but discovered in 2010 that a lower water supply and drought conditions would keep it from making enough money to keep up that ratio, which measures an issuer’s ability to make future bond payments. To meet the ratio without upping customer rates, Westlands reclassified the funds.
Banc de Binary Ltd. has settled a fraud lawsuit by the Commodity Futures Trading Commission and the SEC accusing the Cypriot financial trading company of illegally signing American investors to join its binary options trading program. According to the regulators, from 2011 and 2013, Banc de Binary pursued and took orders from U.S. customers on contracts connected to currency, commodity, and stock prices. By doing this, the company purportedly got around a ban in the US that prohibited off-exchange binary option contracts and received net deposits of $11M from over 6,000 U.S. customers
As part of the settlement, the financial trading company has agreed to pay $7.1M in disgorgement and restitution and $2M in penalties to the CFTC. It will pay the SEC $1.95M in civil penalties. $9.05M of the settlement will go toward paying back the U.S. customers who suffered harm in this matter. Oren Laurent, who is the founder of Banc de Binary, will pay $150K in the settlement.
Banc de Binary is considered the biggest binary options operator. Binary options offer all or nothing payouts according to price moves. They remain unregulated in a lot of the world.
The U.S. Securities and Exchange Commission is barring Nicholas Rowe, the former owner of registered investment advisor Focus Capital Wealth Management, from the industry. The charges come in the wake of parallel proceedings in New Hampshire where state regulators barred him from being licensed as an investment adviser. The New Hampshire Bureau of Securities Regulation also said he had to pay $20K.
Rowe and his RIA are accused of using inverse and leveraged exchange-traded funds in a way that was not suitable for clients. They also purportedly made misrepresentations regarding the fees that the clients would be charged.
Focus Capital had been registered with the SEC until 2012 when it registered with New Hampshire instead. The state launched a probe into the RIA’s investment practices, which allegedly included placing the assets of older investors into unsuitable strategies without notifying them that was what was happening. A number of elderly clients, including three widows, allegedly lost close to $1.M.
Securities Fraud: Ex-Broker Jerry McCutchen Under Investigation for REIT Sales, Hedge Fund Manager Must Pay $18M to SEC, and NASAA Steps Up Fight Against Elder Financial Fraud
Former Broker Is Subject of Numerous Securities Claims
If you are an investor who sustained losses after purchased real estate investments trusts with the help of former broker Jerry McCutchen, you may have grounds for a securities claim. According to the Financial Industry Regulatory Authority’s BrokerCheck Report, McCutchen is accused of making unsuitable investment recommendations and he has been the subject of over a dozen broker fraud claims alleging negligence, misrepresentations, and other claims.
In one case, McCutchen, while registered with Berthel Fisher & Company Financial Services, Inc., is accused of placing a couple’s retirement funds in speculative, illiquid, alternative investments that he misrepresented as safe investments in line with the husband and wife’s investment goal to keep their money safe. In reality the Tier REIT, the Icon Leasing Fund Twelve LLC, and others, did not have proper diversity or allocation and were not suitable for the couple.
McCutchen is not registered with any firm at this time nor is he a licensed broker at the moment. He was registered with Berthel Fisher & Co., Bay City Securities, Next Financial Group, First Funds Inc., FSC Securities Corp, Central Brokerage Services, Commonwealth Equity Services, MML Investors, Proequities Inc., and Walnut Street Securities.
NY Hedge Fund Manager Ordered to Pay $18M
Moazzam “Mark” Malik, and his American Bridge Investment Group LLC are facing SEC charges accusing them of bilking 19 clients of over $1M through the sale of limited partnership interests in a fake hedge fund that was run under different names. The SEC said that Malik claimed that the fund held $100M when that amount was never more than about $90,000. Now, the regulator is ordering Malik to pay $18M.
The Securities and Exchange Commission is pursuing a securities fraud case against American Growth Funding II, LLC. The regulator contends that the company, which raises money for business loans, lied to investors that bought high-yield securities. Also subject to charges is brokerage firm Portfolio Advisors Alliance, Ralph Johnson, Kerri Wasserman, and Howard Allen III.
In its complaint, the regulator said that AGF II sold about $8.6M AGF II units to at least 85 investors through Portfolio Advisers Alliance. The sales occurred in a private placement between 3/11 and 12/13.
However, investors were purportedly not told that AGF II’s principal asset had significantly dropped in value, which lessened the chances that investors would be repaid in full let alone make the12% interest yearly they were promised.
In private placement memoranda that were put out in ’11 and ’12, Johnson is accused of misrepresenting that the lending company’s financial statements had been audited and would continue to be audited periodically. The statements for ’11 and ’12 were not audited until 2014.
The SEC believes that Johnson, who played a central part in preparing the private placement memoranda, knew and acted in reckless disregard and was aware that misrepresentations were made to investors. He also is accused of causing investors to get an email in 2013 that contained false statements noting that an accounting firm was working on an audit, which was not, in fact, the case, and issuing monthly statements that concealed the company’s financial woes. Investors were not made aware that because most of AGF II’s loans were likely uncollectible, the firm wouldn’t be able to pay the account balances that were noted in the statements.
SEC Cautions Mutual Funds That They May be Misdirecting “Sub-Accounting Fees” And Impacting Investor Returns
The Securities and Exchange Commission’s Division of Investment Management has put out a guidance on its website cautioning mutual fund directors to more closely scrutinize the money that is paid to brokers and certain other intermediaries. The warning comes following a sweep exam, which found that fees that should be going toward record-keeping and other administrative services are instead being directed toward encouraging fund sales. A number of mutual funds, brokerage firms, investment advisers, and transfer agents were examined prior to the issuance of this guidance.
SEC rules stipulate that sub-accounting fees cannot go toward finance distribution. These fees should only go toward record-keeping and shareholder services. However, there is an issue with mutual fund-maintained omnibus accounts in which all the fees can be placed together. In such instances, payments made to brokers for selling certain funds may get buried in these administrative fees.
Now, the Commission wants fund directors to watch out for fees that intermediaries selling the funds are getting for account services. It wants these directors to establish processes to assess whether a sub-accounting fee is being harnessed to increase sales. It also is calling on fund service providers and advisers to explain distribution and servicing specifics to fund directors.
The Securities and Exchange Commission is charging Edward Durante with bilking investors once again. Durante, who already served a 10-year sentence for a previous securities fraud conviction, is accused of using different aliases to defraud even more investors of millions of dollars and hiding his criminal past.
According to the regulator, Durante sold shares of a shell company that he was secretly in control of and told investors that stock sale proceeds would support the company’s operations. Instead, he allegedly used the funds for his own spending while the company's stock was worthless.
The Commission contends that Durante started planning this scam while in prison. He purportedly used the name Anthony Walsh to acquire VGTel Inc. He scammed at least 50 inexperienced investors of at least $11 million by selling them this shell company’s stock. (Financial Advisor magazine places the number of investors bilked at closer to 100 investors.)
Securities Fraud Cases: Investment Adviser Faces SEC Charges, Woman Pleads Guilty to $1.1M Financial Scam, and NJ Man is Accused of $13M Pump-and-Dump Scam
Connecticut Firm Accused of Conflict of Interest Involving $43M Fraud
The Securities and Exchange Commission is filing fraud charges against Atlantic Asset Management LLC (AAM). The regulator says that the Connecticut-based investment advisory firm got clients involved in certain bonds that resulted in an undisclosed financial benefit to a brokerage firm whose parent company is part owner of AAM.
The firm is accused of investing over $43M of investor money in illiquid bonds that were issued by a Native American tribal corporation. The sales provided the brokerage-firm with a private placement fee.
The SEC says that investors should have been notified of the financial gain that resulted and the firm violated its obligation to them when it placed its own financial interests before client’s interests.
In its complaint the SEC says that it was a representative from BFG Socially Responsible Investing Ltd., which partially owns AAM, who suggested that the investment advisory firm buy the illiquid bonds for clients. AAM purportedly knew that the bond sale proceeds would to go toward an annuity that the parent company provided.
The Commission says that after finding out that their money had been placed in the bonds, several AAM clients demanded that the investments be unwound but their requests were unsuccessful.
Ex-Investment Adviser Pleads Guilty to Securities and Annuities Scam
Janet Fooshee has pleaded guilty to 31 charges related to a $1.178M financial scam involving securities and annuities. The 63-year-old former New Jersey investment adviser admitted to fraudulently servicing over 100 financial account statements that increased 14 client accounts by about $818K collectively. She also admitted to stealing about $151K from clients, keeping over $190K in unlawful fees, defrauding another investor of almost $81K, and stealing the identities of about eight corporations. Fooshee said that she illegally took funds from over two dozen retirees and others over a period spanning a decade.
Fooshee also used the names Janet Katz and Janet Gurley. As part of the plea deal she must pay $415K in restitution. A seven-year prison term is recommended for her.