The Financial Industry Regulatory Authority barred an ex-Signator Investors broker from association with any FINRA member in any capacity for engaging in undisclosed and unapproved private securities transactions totaling more than $1.77 million that included investments related to the Woodbridge Group of Companies Ponzi scheme, according to FINRA.
Without admitting or denying the findings, Dee Dee Brooks signed a letter of acceptance, waiver and consent April 15 in which she agreed to FINRA’s sanction. FINRA accepted the letter Friday.
Signator parent Advisor Group and Jeffrey Compton, a partner at law firm Markun Zusman Freniere Compton that represented Brooks in the dispute, didn’t immediately respond to requests for comment Wednesday.
From July 2015 through June 2018, Brooks was registered as an investment company and variable contracts products representative through Signator. On June 7, 2018, Signator filed a Form U5 notice, terminating her registration with the firm, according to FINRA. The Form U5 also disclosed an internal review by the firm to investigate Brooks’s involvement in the sale of unregistered securities, FINRA said. Signator filed an amendment to Brooks’s Form U5 Oct. 9, 2018, to disclose the completion of the internal review and the firm’s conclusion that Brooks “knowingly facilitated the sale of unapproved investments in violation of Firm policy,” FINRA said, quoting Signator.
In November 2018, Royal Alliance, part of Advisor Group’s broker-dealer network, announced the completion of its acquisition of Signator.
Between July 2016 and December 2017, Brooks solicited investors to buy more than $1.77 million in securities in Woodbridge and Future Income Payments, according to the regulator. Brooks, through a company that she worked with as an outside business, solicited nine investors, five of whom were Signator customers, to invest $906,497 in Woodbridge promissory notes, FINRA alleged. Brooks did not provide notice to Signator prior to participating in the transactions involving Woodbridge, nor did she obtain approval from the firm, according to the regulator.
The Securities and Exchange Commission found Woodbridge operated as a massive Ponzi scheme from July 2012 through December 2017. In October 2019, ex-Woodbridge CEO Robert Shapiro was sentenced to 25 years in prison by a federal judge in Miami for leading the $1.22 billion fraud scheme that hurt more than 8,400 unsuspecting investors across the U.S. through unregistered securities offerings.
The Woodbridge Ponzi scheme collapsed Dec. 4, 2017, when Shapiro caused Woodbridge and its many related companies to file for bankruptcy, according to the SEC.
Since then, there have been many actions taken by FINRA and the SEC to sanction agents and brokers tied to the Woodbridge scam.
“FIP represented itself as a structured cash flow investment, claiming to purchase pensions at a discount from pensioners and then selling a portion of those pensions as a ‘pension stream’ to investors,” FINRA said in the AWC letter. FIP typically promised investors a 7% to 8% rate of return on their investments, the regulator noted, adding Brooks personally owned a FIP contract before joining Signator. During the relevant period, Brooks sold $866,895 in FIP purchase agreements to seven investors, six of whom were Signator customers, FINRA alleged. Brooks did not provide notice to Signator prior to participating in the transactions involving FIP, nor did she obtain approval from the firm, the regulator said.
In April 2018, FIP ceased business, owing almost $300 million to investors, FINRA said. In a March 12, 2019 indictment, the United States charged FIP and its owner, Scott Kohn, with conspiracy to engage in mail and wire fraud related to FIP’s operations, FINRA said.
As a result of her behavior, Brooks violated FINRA Rules 3280 (governing private securities transactions of an associated person) and 2010 (governing standards of commercial honor and principles of trade), according to FINRA.
Brooks is no longer registered as a broker or RIA, according to her profile on FINRA’s BrokerCheck website. There are two disclosures on her profile: One regarding her voluntary resignation from Signator June 4, 2018, and the other a customer dispute in which a client claimed Brooks recommended the complainant invest her IRA monies in a “fraudulent Ponzi scheme.” The client requested $118,000 in damages, but the dispute was settled for $75,000, according to BrokerCheck.
— Check out SEC Stops $39M Investment Scam by Florida Advisor on ThinkAdvisor.