More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
Massachusetts securities regulator William Galvin on Monday charged a former broker with defrauding four of his former elderly clients, transferring nearly $500,000 of their assets to his personal and family accounts without their consent.
The administrative complaint against John Michael Babiarz of Peabody, Mass., seeks a full accounting and return to the investors of their losses, a permanent bar from the securities business in Massachusetts and an administrative fine.
Babiarz worked for three broker-dealers in Massachusetts between 2004 and September 2011 when he was terminated from one as a result of customer complaints that he had misrepresented the features of a certificate of deposit, the Massachusetts Securities Division said in a statement. He has not been registered with the Massachusetts Securities Division since then.
“This case is an egregious example of senior financial abuse, the sort of abuse my office is determined to root out in the securities industry,” Secretary Galvin (right) said in the release.
The complaint charges that Babiarz told the defrauded clients — in their 70s and 80s — after September 2011 that he had become a broker-dealer agent of Fidelity Brokerage Services, but the address he gave was a place that rents out corporate office space at One International Place in Boston.
“Babiarz created multiple Fidelity accounts for a 72-year-old Boston woman, a 75-year-old Peabody man, an 81-year-old Swampscott man and an 83-year-old Danvers man. The accounts were opened in the victims’ names but with Babiarz’s contact information,” the Massachusetts Securities Division says.
The complaint details how Babiarz shifted money from the investors’ accounts to his, often the next day. “Some went to Babiarz’s E*TRADE account he had opened with the investment objective of ‘speculation.’ No one else had trading authorization over that account.”
The complaint also describes the cash withdrawals and spending from Babiarz for day-to-day purchases at stores, pharmacies, fast food outlets and restaurants, supermarkets, and service stations on the North Shore. “One check was for $1,000 for school tuition, another was $2,000 for his bankruptcy attorney, and a third was $1,000 for taxes to the City of Peabody.”
The compliant also states that there were also a significant number of large cash withdrawals.
Upon receiving a complaint from one of the elderly victims, the Registration, Inspections, Compliance and Examinations Section of the Massachusetts Securities Division opened its investigation at the end of August. Babiarz was subpoenaed to appear before the Division on Sept. 12, but failed to appear.
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