Articles Posted in Investment Fraud

Hector May, a registered investment advisor and 40 years securities industry veteran, pled guilty in federal court in New York in December 2018 to two counts of securities fraud. These securities fraud charges included conspiracy to commit wire fraud and investment advisor fraud. The former investment advisor faces up to 25 years in prison for securities fraud.

May was president of Executive Compensation Planning, Inc. (“ECP”) in New City, NY. ECP was affiliated with Securities America, Inc., and investment advisory headquartered in La Vista, NE. The SEC has also barred May from serving as an investment advisor, who is from Orangeburg, NY, and from any affiliation with the securities industry.

The federal prosecutor alleged that May and his daughter, Vania Bell May, who also worked at ECP, operated a classic Ponzi scheme from the 1990’s until March 2018. May convinced 15 of his clients that they should transfer funds from their existing Securities America accounts to new accounts from which May would purchase bonds and other investments on their behalf. In reality, the funds were delivered into a consolidated ECP brokerage account controlled by May and his daughter. They used the funds deposited in the fake investment account for personal and business expenses including cars, jewelry, country club dues, etc. The government alleged that May and his daughter stole $11.5 million from their clients.

The rules governing registered investment advisors and their fiduciary obligation to retail investors is undergoing change in New Jersey. Roughly 2,100 broker-dealers and 205,000 licensed investment advisors are based in New Jersey. The new governor of New Jersey, Phil Murphy has an extensive background in the securities industry, working in finance at Goldman Sachs for over 20 years. He decided on the 10-year anniversary of the collapse of Lehman Brothers and the 2008 global financial meltdown to introduce a new fiduciary standard for registered investment advisors.

The rule would mirror the Department of Labor Fiduciary Duty Rule which was recently turned down in federal court. The 5th Circuit ruled that the Department of Labor exceeded its authority in enacting the fiduciary rule that would have made it mandatory for brokers to act in their client’s best interests when investing in retirement accounts. The Trump Administration has not decided to appeal the court ruling or enforce the fiduciary standard for brokers created during the Obama Administration.

Presently in New Jersey, as with most of the states in the union, there is no uniform standard for financial advisors and what many investors fail to realize is that not all financial professionals working in the securities industry have a fiduciary duty to act in their client’s best interest. Investment advisors who are registered with the Securities Exchange Commission have a fiduciary duty. This requires the investment advisor to put their clients interests above their own and disclose any potential conflicts of interests. This should include commissions and fees investment advisors are receiving on the products they recommend.

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