Among recent enforcement actions by the SEC were charges and a fine against H.D. Vest for violating supervisory and customer protection rules; charges against a so-called venture capital fund manager for a Ponzi scheme; and suspension of trading in 128 dormant shell companies to prevent their being used for microcap fraud.
SEC Fines H.D. Vest for Failing to Monitor Reps
The SEC has charged Irving, Texas-based H.D. Vest Investment Securities with violating key customer protection rules after failing to adequately supervise registered representatives who misappropriated customer funds. It has also fined the firm $225,000.
According to the agency, H.D. Vest has more than 4,500 registered representatives that typically work as independent contractors and also operate tax businesses outside of their securities businesses. H.D. Vest failed to have proper policies and procedures in place to monitor its representatives’ outside business activities, including email communications, and as a result some representatives used their outside businesses to defraud brokerage customers in such ways as transferring or depositing customer brokerage funds into their outside business accounts.
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In a settled administrative proceeding, in which H.D. Vest neither admitted nor denied the SEC’s findings, the agency cited in particular the instance of Lewis Hunter, who as part of a fraudulent scheme, “misappropriated approximately $300,000 from H.D. Vest brokerage customers by soliciting customers to invest in both foreign and domestic bank investments and promising guaranteed returns.”
Instead, the SEC said, Hunter used the money for his own personal and business expenses, and lied to his customers about what he had done, going so far as to fabricate bank documents to indicate investments that actually had never been made.
But Hunter wasn’t the only one. And not only did H.D. Vest fail to ride herd on these rogue representatives, according to the SEC, it failed to follow customer protection rules that required it to calculate how much money it needed to keep in a reserve account to make good on losses for customers harmed by the misconduct. It did neither.
SEC: Manager Used Fake Uber Fund to Pay for Twitter Ponzi Scheme
The SEC has charged Gregory Gray Jr. and obtained an emergency asset freeze to halt a Ponzi scheme in which Gray fraudulently used money from three investment funds to pay fictitious returns to investors in a different fund.