BOSTON (HedgeWorld.com)–Massachusetts’ securities regulator filed an administrative complaint against a broker it alleges fraudulently was selling shares of a hedge fund.
The broker, Gerald F. Stonehouse, allegedly broke the rules of his employer, Wachovia Securities, Norwell, Mass., to sell shares of Futronix Futures Fund through a company Mr. Stonehouse had founded for that purpose, Affirmed LLC.
Mr. Stonehouse couldn’t be reached for comment.
Massachusetts’ Securities Division, which operates under Secretary of the Commonwealth William F. Galvin, already filed charges against the managers of the Futronix Fund as part of a sweep involving the hedge fund industry. In August, Massachusetts sued Michael F. Payne, principal of a Bahamas-domiciled company also called Futronix that operated out of Reston, Va., according to the state’s complaint against the company .
The recent complaint seeks to fine Mr. Stonehouse an unspecified amount, to deny him his registration as a broker and to prevent him from selling any more shares. Massachusetts noted in a statement that US$350,000 was invested in the fund through Mr. Stonehouse.
The complaint alleges he sold shares of the Futronix fund without Wachovia’s approval and introduced his clients to losses almost immediately. In June 2002, shortly after Mr. Stonehouse’s first three clients invested, about 70% of the total invested was lost, “in what was described as a keypunch error by [Mr.] Payne,” the complaint states.