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Regulation and Compliance > Federal Regulation > SEC

SEC Says Former Advisor Stole $2.4M From Elderly Clients

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Businessman hiding cash in his jacket pocket. (Photo: Thinkstock)

The Securities and Exchange Commission has charged a former dually registered advisor with defrauding elderly clients out of $2.4 million in investments that didn’t exist.

According to the SEC complaint, beginning in April 2013, Edward Matthes began stealing from certain of his retail brokerage customers, three of whom were also his investment advisory clients, and misappropriated approximately $2.4 million from 26 of his customers and clients between April 2013 and March 2019.

During that time, Matthes worked as a registered rep with Mutual of Omaha Investor Services, according to BrokerCheck (he was registered as an IAR with the firm from 2014 to 2019, according to the SEC.)

On March 22, 2019, the Financial Industry Regulatory Authority permanently barred Matthes from association with any FINRA member. On May 10, 2019, the Wisconsin Department of Financial Institutions Securities Division permanently barred Matthes from obtaining a securities license in the state.

Matthes “lied to his customers and clients in order to convince them to invest in what he described as a safe investment” that would earn a guaranteed minimum yield of 4% per year, the order states.

He then convinced his customers and clients to transfer approximately $1.4 million to him to fund the investments. “Matthes’ statements were false. In reality, the purported investment did not exist,” the complaint says, adding that he did not invest his customers’ and clients’ money but “instead stole it for his personal use.”

To cover up his fraud, Matthes provided several of his customers and clients with fake account statements.

Matthes stole an additional $1 million from his brokerage customers by making unauthorized sales and withdrawals from variable annuity contracts that they held in accounts with him, according to the complaint.

The misappropriated funds were spent on personal expenses, including home renovation expenses, car payments and luxury items. Matthes also used approximately $170,000 to make Ponzi-like payments to certain investors to keep his fraudulent scheme alive, the SEC said.

— Check out FINRA Suspends 2 Reps Who Blundered With Elderly Clients on ThinkAdvisor.


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