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Regulation and Compliance > Federal Regulation > SEC

SEC Gets Final Judgment Against Ex-Morgan Stanley, Wells Fargo Rep

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The Securities and Exchange Commission on Wednesday announced the entry of a final consent judgment against Elias Herbert Hafen, a former investment advisor at Morgan Stanley and Wells Fargo who was charged with misappropriating client funds. He is barred from the industry.

The SEC had filed a complaint Sept. 4, 2019, in U.S. District Court for the Southern District of New York in Manhattan, charging the Connecticut-based advisor with securities fraud for scamming his advisory clients out of more than $1.6 million by promoting a fraudulent investment opportunity.

Hafen had instructed his clients to withdraw their money, including liquidating stock holdings and personal retirement accounts, deposit that money into their personal bank accounts, and then transfer or wire the money to Hafen’s personal bank account, according to the SEC complaint. The SEC further alleged that, once Hafen received his clients’ money, he did not invest it as promised, but instead used it for his own personal purposes, including paying house, car and credit card expenses for himself and family members.

The court entered a final judgment against Hafen based upon his consent to resolve all claims, the SEC said Wednesday. The final judgment enjoins Hafen from violating the antifraud provisions of the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940, according to the SEC.

The SEC also entered an order barring Hafen from associating with any broker, dealer, investment advisor, municipal securities dealer, municipal advisor, transfer agent or nationally recognized statistical rating organization, and from participating in any offering of a penny stock, it said.

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York had filed criminal charges against Hafen, who agreed to plead guilty to the criminal charges. Hafen was sentenced Feb. 4 to 30 months in prison. He was also ordered to pay restitution of $745,000 and forfeit $806,750.

Hafen was affiliated with Morgan Stanley from 2009 to 2018, and then joined Wells Fargo in 2018, according to his profile on the Financial Industry Regulatory Authority’s BrokerCheck website. Wells Fargo, however, terminated him Aug. 21, 2018, after Hafen “admitted to entering into financial arrangements with clients that were not approved by the firm,” according to a disclosure on his BrokerCheck profile.

— Check out Ex-Rep for Morgan Stanley, Wells Fargo Sentenced to 30 Months for Fraud on ThinkAdvisor.


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