Focus Capital Wealth Management and its owner Nicholas Rowe are now barred from having a license to serve as either an investment adviser or a broker-dealer in New Hampshire. Rowe and his financial firm are accused of elder financial fraud. Per the settlement with the state, they must pay $2.4 million in client restitution.
The Bureau of Securities Regulation acted against Rowe last year following complaints from clients claiming they’d lost significant amounts of money in risky investments of leveraged exchange-traded funds, which are also known as ETFs. According to the bureau, these investments are not for clients who have a low or medium tolerance for risk. Rowe also allegedly misrepresented his credentials and charged investors unreasonable fees, claiming that these were going to third parties with close Wall Street ties, when, actually, he was keeping part of that money.
Rowe eventually consented to FINRA arbitration over claims filed by a number of his former clients, who alleged civil fraud and negligence. One of the arbitrator’s panels ruled against him for $1.8M in restitution.
Following the ruling, Rowe and Focus Capital Wealth Management filed for Chapter 11 bankruptcy.
Inverse and Leveraged ETFs
Leveraged and inverse ETFs comprise about $28 billion of the $1.2 trillion US ETF market. These types of exchange-traded funds are meant to enhance short-term returns via the use of derivatives and debt. They tend to be more appropriate for professional traders, rather than long-term retail investors. In 2009, regulators began to issue warnings over concerns that brokers were selling these instruments to buy-and-hold investors-a strategy that is more than likely to end in serious losses for a customer.
Senior Financial Fraud
Unfortunately, seniors are a favorite target of those seeking to commit securities fraud. Many elderly investors are not investment savvy and/or due to health and/or aging issues may lack the ability to fully comprehend what they are agreeing to by investing. For seniors, becoming the victim of investment fraud can mean the loss of their retirement and life savings, which can adversely affect their life and care during their later years.
Questions to Ask About Financial Products (From the SEC)
Regardless of your age or whether you are a seasoned or novice investor, there are key questions you need to ask your financial representative, including:
• Is the investment product registered with state and federal regulators?
• Is this investment in line with your investment objectives? Is it suitable/appropriate?
• What makes this investment profitable?
• Are there any accompanying fees and what are they for?
• Is the investment liquid?
Make sure you document what is said to you. Also, you shouldn’t only base your decision to invest on the word of the financial adviser. Ask to see financial statements, the most current annual report, or the prospectus. You can even go online for information about a prospective investment.
N.H. Advisor Ordered To Pay $2.4M In Restitution For Client Losses, Insurance News, March 15, 2013
Questions You Should Ask About Your Investments … and What To Do If You Run Into Problems, SEC
N. Hampshire investment adviser must pay $1.8 mln in ETF case, Reuters, December 3, 2012
More Blog Posts:
Financial Industry Representatives Settle FINRA Cases Over Securities Fraud, Stockbroker Fraud Blog, March 12, 2013
Financial Representatives Settle with FINRA Over Allegations Related to Excessive Commissions, Elder Financial Fraud, and Funneling Client Funds for Personal Gain, Stock, Stockbroker Fraud Blog, March 8, 2013
Two Oppenheimer Investment Advisers Settle for Over $2.8M SEC Fraud Charges Over Private Equity Fund, Institutional Investor Securities Blog, March 14, 2013