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Regulation and Compliance > Federal Regulation > SEC

SEC Slams Ex-Broker for Misappropriating $1.15M of Seniors’ Funds

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A former American Portfolios Financial Services rep misappropriated at least $1.15 million from at least five customers of the Holbrook, New York-based broker-dealer, according to the Securities and Exchange Commission.

In a complaint filed Friday in the U.S. District Court for the Eastern District of Michigan, the SEC said Mark L. Hopkins told clients he was investing the senior citizens’ funds in a local credit union’s investment program. However, that investment program never existed and Hopkins was instead depositing the clients’ funds into an account he controlled at the credit union and misappropriating them.

American Portfolios discovered that Hopkins was accepting customer funds for an investment not on the books of the broker-dealer without obtaining pre-approval from the firm, according to a disclosure on the Financial Industry Regulatory Authority’s BrokerCheck website. The firm told him to return the money, according to the SEC complaint. “Funds were returned to [that] customer,” American Portfolios indicated in the disclosure on BrokerCheck.

American Portfolios also alleged that Hopkins failed to provide an update on his outside business activities and also failed to report a judgment against him, according to the disclosure on BrokerCheck, which noted the firm permitted him to resign. He was also barred from acting as a broker or associating with a BD firm, according to FINRA.

In a statement provided to ThinkAdvisor on Monday, American Portfolios said: “As a firm we fully cooperated with the SEC’s investigation into Mark Hopkins but cannot comment any further because the matter is still pending.”

Hopkins violated the antifraud provisions of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, according to the SEC.

The regulator is seeking injunctive relief, disgorgement of ill-gotten gains and prejudgment interest, as well as civil money penalties, it said.

More Details

Starting in at least 2017, Hopkins began approaching his brokerage customers about the bogus investment program at the credit union, according to the complaint.

In August 2017, Hopkins approached three of his brokerage customers about the alleged investment program: a married couple in their mid-60s and an individual investor who was 87 years old, according to the complaint. Those customers agreed to invest $250,000 and $500,000, respectively, in the bogus program, according to the SEC.

“Rather than investing these funds in the nonexistent Investment Program, Hopkins deposited them directly into an account that he controlled at the local credit union,” the complaint said, adding Hopkins later provided the customers with falsified account statements.

In May 2018, Hopkins contacted a married couple also in their mid-60s and persuaded them to also invest in the scheme, according to the complaint. On June 1, 2018, “Hopkins facilitated the direct transfer of $400,000 from their brokerage account to the same account he controlled at the credit union,” the SEC said.

On June 12, 2019, Hopkins issued a check from that account to one of the initial investors for $267,500, which represented the principal and interest he was promised, according to the complaint.

However, his firm “became aware during July 2018 that the check from the second set of investors’ brokerage account was not sent directly to them, but rather was directed to the local credit union,” according to the complaint. The firm instructed Hopkins to return the funds directly to them, the SEC claimed.

On or about Aug. 2, 2018, “Hopkins presented those investors with a copy of a falsified cashier’s check for $400,000 made out to them” and he told them the firm wanted him to return that money to them, according to the complaint.

However, Hopkins instead “recommended keeping it invested in the credit union” and, “because they trusted him, these investors agreed to keep their money” invested in the bogus investment program, according to the SEC.

“At Hopkins’ direction, these investors signed a document falsely stating that he had repaid them the $400,000,” according to the complaint.

In the fall of 2018, those investors repeatedly asked Hopkins for documentation of their investment. On Jan. 10, 2019, Hopkins presented them with a falsified statement from the credit union, reflecting their $400,000 investment, according to the complaint. “When the investors expressed concern about the legitimacy of the statement, Hopkins told them his contact at the credit union was out of town, but that he would obtain additional documentation the following week,” according to the SEC.

Hopkins stopped responding to their requests after that conversation and he never returned their money, the regulator said, adding: “Around this same time, an initial individual investor who had given Hopkins $500,000 began contacting Hopkins about the return of her investment. Hopkins never returned that money or paid any interest on it.”


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