The Securities and Exchange Commission charged a former registered representative and investment advisor with operating a long-running offering fraud.
The SEC’s complaint alleges that Douglas Simanski raised more than $3.9 million from approximately 27 of his brokerage customers and investment advisory clients by telling them that he would invest their money in either a “tax-free” fixed rate investment, a rental car company, or one of two coal mining companies in which Simanski claimed to have an ownership interest.
“Simanski convinced some of his most trusting and vulnerable clients, many of them retired or elderly, to invest their money while knowing the investments were not legitimate, that he would make virtually no securities investments on their behalf, and would instead use their money for personal expenses or to repay other investors,” the complaint states.
To conceal his fraudulent activities, Simanski placed investor funds in brokerage and bank accounts that Simanski opened in his wife’s name, according to the SEC.
The complaint alleges that instead of investing the money as he promised, Simanski largely used the money to repay other investors and for his personal use.
According to the complaint, Simanski’s scheme collapsed in May 2016 when one of his clients contacted the Financial Industry Regulatory Authority (FINRA) and Simanski admitted his scheme to his employer. Shortly thereafter, according to BrokerCheck, Simanski was discharged from his employer at the time, Next Financial Group. FINRA then barred Simanski from acting as a broker or otherwise associating with a broker-dealer firm in June of 2016.
“This matter highlights the need for retail investors – and retirees and elderly individuals in particular – to remain skeptical of investments that sound too good to be true and confirm that investments recommended by brokers and investment advisers are approved for sale by their respective brokerage or advisory firms before transferring funds,” said Kelly Gibson, associate regional director for enforcement in the SEC’s Philadelphia Regional Office.
The SEC’s complaint charges Simanski with violating antifraud provisions of the federal securities laws. Simanski has agreed to settle the SEC charges against him. The settlement, which is subject to court approval, orders injunctive relief and disgorgement of ill-gotten gains plus interest.
Simanski also agreed to the entry of an SEC order that, when entered, will bar him from the securities industry for the rest of his life.
In a parallel action, the U.S. Attorney’s Office for the Western District of Pennsylvania announced that Simanski pleaded guilty to criminal charges.
Citibank to Pay $38.7 Million for Improper Handling of ADRs
Citibank N.A. agreed to pay $38.7 million to settle charges of improper handling of “pre-released” American Depositary Receipts (ADRs), the SEC says.
ADRs – U.S. securities that represent foreign shares of a foreign company – require a corresponding number of foreign shares to be held in custody at a depositary bank.
The practice of “pre-release” allows ADRs to be issued without the deposit of foreign shares provided brokers receiving them have an agreement with a depositary bank and the broker or its customer owns the number of foreign shares that corresponds to the number of shares the ADR represents.
According to the SEC’s order, Citibank improperly provided ADRs to brokers in thousands of pre-release transactions when neither the broker nor its customers had the foreign shares needed to support those new ADRs.