Less than 24 hours ago we wrote a story about securities fraud and the need for brokerage firms to protect clients against advisers who rip off clients by “selling away.” Today the SEC announced it charged a former LPL Financial stockbroker, Blake Richards, with securities fraud after accusing him of stealing $2 million in client funds. (Richards employer, LPL Financial, was not accused of any wrongdoing.)
Richards apparently would work to gain his clients trust in order to get them to invest. The SEC says in one instance, he visited a man suffering from cancer and delivered pain medications during a snowstorm. The complaint also says that many of his victims were elderly.
According to the complaint, Richards had clients write checks to him or “BMO Investments” instead of LPL, a classic red flag for securities fraud. Although not named in the complaint, LPL could still find itself liable to the clients who lost their money.
There are several lessons that should be learned from this newest securities fraud case.
First, whenever an adviser or stockbroker writes to you from a personal or non brokerage firm email address, be very concerned. Fraudsters try to convince clients that they are working with a reputable brokerage firm in order to gain trust and credibility. Suspicions should arise, however, when the broker uses a personal email account or asks customers to make checks payable to a third party.
Writing checks to 3rd parties is a classic form of securities fraud called “selling away.” This occurs when an adviser sells an investment without his employer’s blessing or knowledge.
The SEC says that many of the defrauded investors did not receive statements. Although one investor allegedly received a forged statement, the lack of confirmations, statements and tax documents coming directly from the brokerage firm is another indicator of securities fraud and selling away.
Whether or not LPL is on the hook for the investor losses remains to be seen. If the customers thought they were dealing with LPL, the firm may have some liability. The brokerage firm probably will deny claims, however, and try to claim that Richards was operating outside the scope of his authority.
Holding the broker dealer responsible is critical since the individual fraudsters typically have little assets left when sued. Often the brokerage firm is the only “deep pocket” capable of paying a judgment.
The complaint was just filed. Allegations in a complaint do not indicate guilt or innocence. Richards was one broker out of 13,000. There are no allegations in the SEC complaint suggesting LPL was involved in the fraud.
If you lost $100,000 or more because of a stockbroker, investment adviser or other financial professional, give us a call. The securities fraud lawyers at Mahany & Ertl have helped many investors get back their hard earned money. We also take cases involving other frauds including legal and accounting malpractice and Ponzi schemes. Most cases can be handled on a contingent fee basis meaning no legal fees unless we recover money for you.
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. Fraud recovery available in many jurisdictions.
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Post by Brian Mahany