Securities Industry Commentator by Bill Singer Esq

Financial Adviser Sentenced to Three and a Half Years in Prison for Swindling Millions From Clients (DOJ Release)

New York Investment Adviser Charged With Defrauding Clients And Misappropriating Their Money / Martin Ruiz Targeted Elderly Clients in New Mexico in Long-Running Scheme (DOJ Release)

SEC Obtains Court Order to Stop Investment Adviser's Alleged Ongoing Offering Fraud (SEC Release)

FINRA Bars Rep for Falsification, Impersonation, and Forgery

In the Matter of Alexis Cooke, Respondent (FINRA AWC)

FINRA Fines and Suspends Rep for Undisclosed Outside Brokerage Account With Customer
In the Matter of Nancy A. Munro Gaumer, Respondent (FINRA AWC)

FINRA Fines and Suspends Rep for Using Discretion Without Customers' Prior Written Authorization
In the Matter of Jason L. Seale III, Respondent (FINRA AWC)

To Err Is Human. To Fine And Suspend Is FINRA (BrokeAndBroker.com Blog)

Morgan Stanley Raises Serious Questions in Failed TRO Against Former Employee (BrokeAndBroker.com Blog)

FINRA AWC Did Not Require Acceptance of Findings But Why Does Regulator Publish Denials? (BrokeAndBroker.com Blog)

represented to clients and his employer, an investment advisory firm, that he would use client funds to buy and sell securities.  In reality, Boggs spent more than $3 million of his clients' funds over a ten-year period to pay his personal credit cards and the mortgage on his residence.  His credit card purchases included international vacations, expensive dinners at restaurants, and rent for multiple apartments that Boggs leased in Chicago. 

One of the defrauded clients was wrongfully imprisoned for several years after being convicted of a 1991 sexual assault, kidnapping, and murder of a teenage girl.  After DNA testing exonerated the client and led to his release from prison, he received approximately $5 million from the State of Illinois and retained Boggs to manage and invest some of the money.  Boggs instead stole approximately $800,000 of the client's funds.

From at least in or about March 2011 through in or about the present, RUIZ induced multiple individual investment advisory clients of CBWM, many of whom are elderly, to retain RUIZ and CBWM to advise them on how they should invest their retirement savings.  While ostensibly acting in his fiduciary capacity as their investment adviser, RUIZ instead induced more than a dozen such clients to invest more than $10 million in an investment fund called RAM Fund through the purchase of limited partnership interests.  RUIZ did not disclose to those clients that RUIZ controlled RAM Fund and that he planned to misappropriate their funds.  

In fact, rather than invest the funds in legitimate investment projects and real estate, as he represented to clients, RUIZ misappropriated more than $8 million of client funds from the RAM Fund, transferred those funds through a series of entities RUIZ also controlled, and spent the vast majority of the funds on personal expenses, including the purchase of a home, rent payments on several apartments, and the payment of his personal credit card bills.  In so doing, he violated his fiduciary duty to act in his clients' best interest and avoid self-dealing.

[R]uiz induced at least 56 investors, many of whom are elderly clients of Ruiz's New Mexico-based investment adviser Carter Bain, to invest at least $10.6 million in RAM by falsely claiming that their funds would be used to acquire real estate and to make commercial loans. According to the complaint, however, Ruiz misappropriated the vast majority of the investors' funds to support his lavish lifestyle by, among other things, paying for his residences in Manhattan and Santa Fe, covering millions of dollars in credit cards bills, and making student loan payments. The complaint also alleges that Ruiz hid the fraud from investors by making Ponzi-like payments, and providing investors with false valuations concerning their RAM investments.

On July 13, 2018, NYLIFE filed a Form U5 disclosing that Cooke resigned in June 2018 during an internal investigation into allegations that Cooke "submit[ed] insurance and annuity applications for customers without the customers' full knowledge or consent . . . for the purpose of meeting production requirements." In June 2018, Cooke became associated with another member firm as an IR. On July 12, 2021, that member firm filed a Form U5 stating that Cooke was voluntarily terminated as of June 24, 2021.

Between May 2017 and February 2018, while associated with NYLIFE, Cooke engaged in falsification, impersonation, and forgery with respect to two variable annuity applications involving two firm customers, and falsification with respect to two fixed annuity applications also involving those customers. With respect to the variable annuity applications, Cooke falsely indicated that the customers had authorized submission of the applications and consented to the issuance of the policies. Cooke also created fake email addresses for the two customers, which she used to electronically forge their signatures on the variable annuity applications via DocuSign. Cooke falsified the two fixed annuity applications by untruthfully stating in the applications that she had met with the customers, witnessed their signatures, and verified their respective identities. Finally, Cooke failed to respond truthfully to FINRA staff's questions during testimony. Based on the foregoing, Cooke violated FINRA Rules 2010, 4511, and 8210.  

Gaumer was a close friend of Customer A's family since at least 2011. She attended family events, ran errands for them, drove family members to medical appointments, and performed other tasks on a weekly basis. 

On August 22, 2012, while registered through Signator, Gaumer assisted Customer A, who was then 64 years old, in opening the Outside Brokerage Account. The account was funded with Customer A's assets and was opened as a joint account for Customer A and Gaumer. Gaumer did not provide written notice of the account to Signator at any time. 

Gaumer became associated with BestVest in August 2017. According to Gaumer, she tried to remove her name from the Outside Brokerage Account in 2017, in connection with her move to BestVest, but did not receive confirmation that this had been done. Gaumer did not obtain the written consent of BestVest to maintain the Outside Brokerage Account. Gaumer did not provide BestVest with written notification about the Outside Brokerage Account until April 5, 2019, after which time she was removed from the account. 

Gaumer never notified the executing member of her association with Signator or BestVest. 

Therefore, Gaumer violated NASD Rule 3050(c), FINRA Rule 3210, and FINRA Rule 2010.

. . .

[F]rom August 2012 to September 2017, Gaumer maintained the Outside Brokerage Account with Customer A, who was not immediate family. From January 2014 through September 2017, Gaumer also accepted POA designations for customers not immediate family, Customer A and his mother. 

Between December 2012 and February 2017, Gaumer circumvented Signator's procedures by completing and submitting to the firm six questionnaires that contained material omissions. Gaumer failed to disclose the Outside Brokerage Account on all six forms and failed to disclose her POA designations on four of the forms. 

By maintaining a joint account with a customer not immediate family, accepting POA designations for customers not immediate family, and submitting questionnaires containing inaccurate responses as described above, Gaumer circumvented firm procedures and violated FINRA Rule 2010. 

In July 2008, Seale entered into an AWC (Nos. 20050026360 and 20060061015) for sending letters and sales literature to customers that had not been reviewed and approved by his member firm and which contained misleading information, unbalanced statements, lacked required disclosures, and failed to provide information necessary to make a sound evaluation of the proposed investments. Seale's conduct violated NASD Rules 2210 and 2110 and IM-2210-1. Seale consented to a suspension from associating with any FINRA member in all capacities for 10 business days and a fine of $7,500.

From February 2016 through December 2018, Seale exercised discretionary trading authority to effect more than 60 transactions in four customers' accounts. None of the four customers provided written authorization for Seale to exercise discretion in their accounts and American Wealth Management did not accept any of the four accounts as discretionary accounts in writing. 

In October 2016, Seale also completed and submitted to the firm a compliance questionnaire in which he inaccurately stated that he did not and would not exercise discretion in any customer accounts without the firm's written authorization. 

Therefore, Seale violated NASD Rule 2510(b) and FINRA Rule 2010.

• Securities Industry Commentator
• Bill Singer