Articles Posted in Investment Fraud

On April 17, 2019 the New Jersey Bureau of Securities issued a proposal to require that retail broker dealers use the “fiduciary rule” in their dealings with customers. The rule proposal will also codify the fact that investment advisors already operate under the fiduciary rule. This will mean that in New Jersey brokers will have to put the interests of their clients first and not their commissions.

Imposition of the fiduciary standard on retail broker dealers has been a controversial topic nationwide for the past several years. The SEC staff has recommended to the Commission that the fiduciary rule be incorporated in federal securities laws. They have not been successful. Several years ago the Department of Labor passed regulations requiring that the fiduciary standard be applied to individual IRAs and 401(k) plans. However, a federal appeals court overturned those regulations in September 2018.

The SEC staff has now proposed to issue Regulation Best Interest in an effort to further enhance customer protection. However, in announcing its rule proposal, the Bureau of Securities stated that Regulation Best Interest does not go far enough in protecting investors.

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.