Ex-Wells Fargo Brokers Barred Over Unsuitable Energy Securities Sales
The Financial Industry Regulatory Authority has barred brokers Charles Lynch and Charles Frieda for making unsuitable recommendations to investors, resulting in substantial financial losses to the latter. Lynch and Frieda are former Wells Fargo (WFC) representatives who were based in Southern California. Both Lynch and Frida were fired from the firm. Previous to working at Wells Fargo, both men worked at Citigroup (C) and Morgan Stanley (MS).
According to the self-regulatory organization, between 11/12 and 10/15, the former brokers recommended an investment strategy revolving around certain speculative energy stocks to over 50 customers. These securities were volatile. Because investors became very concentrated in these energy securities, they were placed at risk of substantial losses.
FINRA contends that the two brokers did not do a proper job of making sure these investments were suitable for the customers to whom they were recommending these securities.
Pennsylvania Rep. Accused of Broker Fraud
The US Securities and Exchange Commission has filed civil charges against Paul W. Smith, a Pennsylvania-based broker, for allegedly committing investment advisory fraud. Smith has consented to the regulator’s injunction against him and he will pay nearly $363K in disgorgement plus prejudgment interest. He also pleaded guilty in a parallel criminal securities case.
According to the SEC, Smith told about 30 investors—mostly his brokerage customers—that he would invest their funds in publicly traded securities through a partnership that he established called The Haverford Group, and he promised consistent returns—a promise that the SEC referred to as “fiction.” This allegedly scam is said to have taken place over 25 years.
Smith raised about $2.35M from investors. However, contends the Commission, he never told the brokerage firm where he worked about these activities. Also, he is accused of mostly using investors’ funds to for his own use and to pay back earlier investors in Ponzi Scam-like fashion. He also allegedly did not make many investments for these customers.
Smith investment advisory scam failed last year after an investor reached out to police.
Addressing the broker fraud case against Smith, SEC’s Philadelphia Regional Office Associate Director Kelly L. Gibson said that this was an example of why retail investors, older customers, and retired individuals need to be “skeptical” when an investment seems “too good to be true.”
Earlier this year, FINRA permanently barred Smith from the securities industry when he didn’t provide the information and documents they asked for related to his sale of private securities. He consented to that case but did not deny or admit to wrongdoing.
Digital Display Ad Company Are Accused of Bilking Investors of Over $2M
The SEC is charging Digi Outdoor Media Inc., ex-CEO Donald MacCord Jr., and former CFO Shannon Doyle with wrongfully taking over $2M from investors. Parallel criminal charges have also been brought against the two of them.
According to the regulator, Doyle, MacCord, and Digi Outdoor Media raised almost $4.5M in promissory notes by telling investors that their funds would go toward setting up digital signs for commercial ads in the Washington DC area. The regulator contends that rather than use investor money as promised, MacCord and Doyle diverted millions of dollars for their own use, including paying $20K/rent on a mansion, nanny services, and unrelated business expenses.
The Commission claims that the two of them tried to conceal their fraud by generating bogus invoices and fake loans. They are accused of suggesting to investors that they change their promissory notes to common stock. They allegedly submitted falsified financial statements to the regulator in an effort to go public rather than pay back investors.
Now, the regulator wants permanent injunctions, disgorgement plus interest, penalties, and penny stock and officer-and-director bars.
At Shepherd Smith Edwards and Kantas, LTD LLP, we help retail investors, senior investors, and other individual investors in trying to recoup their investment fraud losses. Contact us today.
Finra bars two former Wells Fargo reps over unsuitable energy securities, InvestmentNews, December 11, 2017
The SEC Complaint in the Smith Case (PDF)
The SEC Complaint in the Digital Outdoor Media Case (PDF)
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Westport Capital Markets LLC is Accused of Undisclosed Markups as Investors Lose Over $1M, Stockbroker Fraud Blog, December 11, 2017
Ex-Financial Adviser Settles Private Equity Fund Fraud Charges in Texas, Stockbroker Fraud Blog, December 8, 2017
Credit Suisse Resolves NY Regulator’s Forex Rigging Probe for $135M, Institutional Investor Securities Blog, November 15, 2017