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Advisor Admits to Stealing Nearly $2M From Elderly Clients

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The former president of Coastal Investment Advisors and its affiliated broker-dealer agreed Monday to settle Securities and Exchange Commission charges that he stole nearly $2 million from his elderly clients over a seven-year period.

According to the SEC’s complaint filed in federal district court in Philadelphia, Michael Donnelly, former president of Wilmington, Delaware-based Coastal Investment Advisors took money from elderly and unsophisticated investors and instead of investing it as promised, used it to pay for his own expenses, including rent, car payments, golf club membership dues, and his children’s private school tuition. 

Donnelly concealed his scheme from 2007 to August 2014 by providing investors with false account statements, trade confirmations, and other bogus information that purportedly reflected their investment holdings and repeatedly told investors that their fictitious “investments” were performing well. 

“We will aggressively pursue and prosecute industry professionals like Donnelly who abuse their positions of trust to take advantage of their unsuspecting clients,” Sharon Binger, director of the SEC’s Philadelphia Regional Office, said in a statement.   

In a parallel action, the U.S. Attorney’s Office for the Eastern District of Pennsylvania announced the same day criminal charges against Donnelly relating to the same misconduct.

Donnelly, who lives in Lecanto, Florida, admitted to defrauding his clients and consenting to a final judgment that permanently enjoins him from future violations of the antifraud provisions of the federal securities laws. He also agreed to disgorge his ill-gotten gains of $1.9 million and prejudgment interest of $365,723, which will be deemed satisfied upon the entry of an order of restitution in the parallel criminal case. He also consented to an SEC order permanently barring him from the securities industry.

— Check out How the Big Firms Are Training Their Advisors to Handle Elder Abuse on ThinkAdvisor.