The Securities and Exchange Commission recently charged a former Edward Jones broker with stealing investor funds to pay for a home remodel job and fined a political intelligence firm for compliance failures around nonpublic information.

SEC Charges Ex-Edward Jones Broker With Stealing Investor Funds

The SEC has charged Bernard Parker, a former Edward Jones broker, with fraud after alleging that he used investor funds not to buy the investments he promised clients, but instead to remodel his Indiana, Pennsylvania, home, make car payments and pay bills for his father-in-law.

Edward Jones fired Parker in late 2014, according to the Financial Industry Regulatory Authority’s BrokerCheck database, after he admitted to misappropriating client money and making false statements about his outside business activity.

According to the SEC, Parker raised more than $1.2 million from his longstanding brokerage customers and others who were told they were buying legitimate real estate tax lien certificates, and that the investment would bring them returns of 6% to 9% per year.

But only a little of the money Parker brought in went to buy tax liens, which Parker told his clients were placed by municipalities on properties primarily in Florida, Arizona and Colorado.

The rest of the money went for personal purchases, the SEC said. Parker pooled investors’ money into several bank accounts, and when he cashed investors’ checks he routinely deposited a portion of the money into a bank account and took the remainder in cash.

The scale of the alleged fraud, which went on from 2008 to 2014 through his company Parker Financial Services, was impressive; he withdrew more than $650,000 in investor funds in cash from teller transactions, ATM withdrawals and checks cashed at local supermarkets. He also spent approximately $197,000 of investor money in point-of-sale transactions, $150,000 through personal checks, and $169,000 for online bill payments.

He also made approximately $188,000 in phony interest payments to earlier investors to try to keep from being found out, the SEC said.

“We allege that while Parker was using investor funds for his personal expenses, he provided investors with computer printouts of vacant lots or homes and falsely told them that his company held liens on those properties,” said Sharon Binger, director of the SEC’s Philadelphia regional office. “Once he gained their trust, investors gave Parker thousands of dollars apiece for purported investments, and he swiftly stole their money.”

In a parallel action, the U.S. Attorney’s Office for the Western District of Pennsylvania has announced criminal charges against Parker. The SEC’s investigation is continuing. SEC Fines Political Intelligence Firm for Mishandling Insider Information

Political intelligence firm Marwood Group Research LLC has agreed to admit wrongdoing and to pay a penalty of $375,000 for compliance failures after an SEC investigation found the firm failed to properly inform compliance officers about instances when analysts obtained potential material nonpublic information from government employees.

According to the agency, in 2010, when analysts sought and received information about policy issues or pending regulatory approvals at the Centers for Medicare & Medicaid Services and the Food and Drug Administration, the firm encouraged those analysts to maintain relationships with government employees. That increased the chances that Marwood Group employees would receive material nonpublic information as part of their work.

As part of its business, Marwood Group kept hedge funds and other clients updated about regulatory activities, as well as analysis about potential timing and developments for future government actions or rulemaking decisions. And despite the fact that its written policies and procedures expressly prohibited employees from sharing nonpublic information, and in fact required them to bring any confidential information to the attention of its compliance department, that didn’t happen.

Instead, not only did analysts fail to bring such information to the compliance department for vetting, and despite red flags raised by analyst activities, Marwood Group drafted research notes and distributed them directly to clients who could have used any material nonpublic information to inform securities trading decisions.

Not only did Marwood Group agree to admit wrongdoing and pay the financial penalty, it has also agreed to bring in an independent compliance consultant.

— Check out Currency Spoofing Is Said to Be in New York’s Crosshairs on ThinkAdvisor.