The Securities and Exchange Commission obtained a fraud judgment against an ex-RIA/broker who had been accused of defrauding three retired clients out of more than $1.85 million, it said Tuesday.
One day earlier, the U.S. District Court for the Middle District of Tennessee entered a final consent judgment in the SEC’s previously filed enforcement action against Jay Costa Kelter of Marietta, Georgia, according to the SEC.
According to his profile on the Financial Industry Regulatory Authority’s BrokerCheck website, the last FINRA-registered firm he worked as a broker for was Berthel Fisher, for six years ending in 2013. He later claimed to at least certain clients that he was working for TD Ameritrade despite not having any relationship with that firm, according to the SEC’s complaint against him.
Kelter and Berthel Fisher didn’t immediately respond to requests for comment Thursday.
The SEC’s action against him, filed Nov. 9, 2017, charged him with fraud and alleged that he made material misrepresentations to the three retired clients, including false guarantees concerning investor losses, and misappropriated client funds for his own use. The crimes were committed from 2013 to 2016, according to the suit.
During that time, he was serving as owner of BEK Consulting Partners, a Florida insurance and investment company, previously known as Kelter & Co., that filed for voluntary dissolution in February 2017 and is no longer active, according to the suit.
Kelter “defrauded one client and misappropriated $1.467 million of her funds by selling securities in her account, taking funds from her by forgery and fraud, and transferring the money to Kelter’s company without the client’s knowledge,” the SEC alleged in the suit.
The advisor “schemed to defraud a second client and misappropriated $200,000 of her funds by selling securities in her account and falsely and misleadingly claiming that he would invest her funds in a corporate certificate of deposit, without disclosing” to the client that the money was actually being transferred to Kelter’s own company and that he planned to use the funds for his own expenses, for trading and to repay another client, the SEC said.
Kelter used the funds of those two clients to buy luxury items, including a Bentley automobile, and to pay for a family vacation, rent on his home, his day-to-day living expenses, unauthorized business expenses and to satisfy prior debts to his clients, the SEC alleged. Kelter lost most of the remaining funds via risky futures and options trading, according to the SEC.
In a parallel criminal matter, Kelter pleaded guilty to one count of securities fraud and one count of wire fraud, the SEC noted Tuesday. He was sentenced to 29 months imprisonment and ordered to pay restitution of $1.467 million.
To resolve the SEC’s allegations, Kelter consented to the entry of the final judgment, enjoining him from future violations of the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, Section 17(a) of the Securities Act of 1933, and Sections 206(1) and (2) of the Investment Advisers Act of 1940, according to the SEC.
The judgment ordered Kelter to pay disgorgement of $1.467 million and prejudgment interest of $331,985, “deemed satisfied by the restitution ordered against him in the criminal case,” the SEC said. Kelter also consented to an order permanently barring him from the securities industry, it noted.
— Check out FINRA Bars Brokers Who Wronged Elderly Clients on ThinkAdvisor.