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Regulation and Compliance > Federal Regulation > FINRA

SEC Charges Ex-LPL Rep With Stealing $300K From Retired Client

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A broker stole more than $300,000 from a retired 73-year-old client by liquidating securities in the client’s investment account and transferring the proceeds to a bank account held jointly with the client, according to the Securities and Exchange Commission.

In a complaint filed Tuesday at the U.S. District Court for the District of Connecticut, the SEC said Matthew O. Clason of Cheshire, Connecticut, withdrew cash from the joint bank account on numerous occasions and at different bank locations as part of the fraudulent behavior that started in at least December 2018.

The complaint alleged that the client did not know of or approve the withdrawals and did not receive the cash that Clason withdrew.

According to the complaint, Clason “cultivated a personal relationship” with the client, driving her to appointments and running errands for her. He sometimes withdrew small sums of money at the client’s request, to help her cover monthly expenses.

Although the SEC did not name the firms that Clason was affiliated with at the time, a report summary at the Financial Industry Regulatory Authority’s BrokerCheck website indicates he was associated with LPL as a broker and Waltham, Massachusetts-based Integrated Wealth Concepts as an RIA.

LPL on Wednesday confirmed that Clason had been working for it. “Mr. Clason was terminated from LPL on Aug. 19, 2020, after we became aware of apparent misconduct,” LPL spokeswoman Lauren Hoyt-Williams told ThinkAdvisor. “We are cooperating with regulators and law enforcement on their investigations,” she added.

Integrated Wealth Concepts did not immediately respond to a request for comment. However, the SEC complaint said that, on Aug.13, Clason was “fired by the advisory firm for failing to comply with firm policies with respect to handling client funds.”

More Details

Since about 2015 or 2016, Clason provided investment services to the client, managing her investments in five accounts, according to the SEC. The total assets under management in the five accounts as of July 31, 2020 was about $482,000, the complaint said. As of August, however, the client believed she had about $1 million under management with Clason, according to the complaint.

Clason made several transfers from the client’s advisory accounts into the joint bank account, the SEC claimed, adding that to fund the transfers, Clason “repeatedly sold securities” and transferred the proceeds of those sales to the joint bank account.

From December 2018 to August 2020, there were 45 transfers out of the advisory accounts totaling $330,000, most of which were funded by the sale of securities in the client’s advisory accounts, the SEC alleged.

As of Aug. 13, Clason had at least $8,200 of the client’s money at his home, the SEC said, adding he remained a joint signatory on the bank account and, “unless restrained and enjoined, will still have access to” her money.

The SEC requested that the court enter an order freezing Clason’s assets and requiring an accounting. The SEC also seeks permanent injunctive relief, disgorgement plus prejudgment interest and civil penalties.

The complaint claimed Clason violated the antifraud provisions of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.

Separate Action

An ex-LPL rep was suspended from association with any FINRA member firm in any and all capacities for 15 business days and fined $5,000 for allegedly participating in private securities transactions without providing prior written notice to the firm, according to FINRA.

Without admitting or denying the findings, James Michael Rapisarda signed a FINRA letter of acceptance, waiver and consent Aug. 12 in which he agreed to the sanctions. FINRA accepted the letter on Friday.

LPL did not immediately respond to a request for comment on Wednesday. However, the FINRA AWC letter said Rapisarda was terminated by LPL in December 2018 for violating its private securities transactions policy after being a general securities representative and general securities principal there since November 2017. Rapisarda is no longer registered as a broker, according to FINRA’s BrokerCheck website.

Between February and March 2018, while registered through LPL, Rapisarda participated in private securities transactions involving a company in which he was a minority shareholder, according to FINRA.

Rapisarda recommended that four individuals, including one LPL customer, invest in the company, which FINRA did not name in the letter. “Three of those individuals subsequently paid a total of more than $10,000 to purchase shares” in that firm, FINRA alleged.

Rapisarda also assisted each of the individuals with executing their purchases of the company’s shares, according to the letter, which noted the rep’s participation in the securities transactions was “outside the regular course and scope of his employment with LPL, and Rapisarda failed to provide prior written notice to LPL of the transactions or of his role in the transactions.”

As a result of his actions, Rapisarda violated FINRA Rules 3280 (governing private securities transactions) and 2010 (governing standards of commercial honor and principles of trade), according to FINRA.


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