Harry John Buckman Jr. (also known as Chip Buckman), of Little Silver, New Jersey, the senior vice president at Buckman Buckman & Reid Inc. and Chief Executive Officer (CEO) and Chief Investment Officer (CIO) of Buckman Advisory Group LLC, has been ordered by the United States Securities and Exchange Commission to cease and desist from violating federal securities law and to pay a $75,000.00 fine because he failed to supervise an investment advisor representative who engaged in a fraudulent “cherry-picking” scheme. In the Matter of Buckman Advisory Group and Harry J. Buckman, Administrative Proceeding File No. 3-21069 (September 13, 2022).
The Securities and Exchange Commission found that from January of 2012 until June of 2017, an investment advisor representative, Scott Adam Brander, engaged in a fraudulent scheme where he disproportionately allocated profitable trades to himself and unprofitable trades to the accounts of certain customers. This scheme often involved the use of risky and highly-leveraged exchange-traded funds (ETFs), which were not suitable for the affected customers, most of whom sought more conservative investments.
Buckman Advisory Group LLC failed to implement effective policies and procedures to prevent violations of Investment Advisers Act and its rules. The firm did not conduct thorough reviews of Brander’s trading activities, even though these reviews were required by its compliance manual. Furthermore, Buckman, in his role as Chief Investment Officer (CIO), was responsible for ensuring customer accounts were not systematically disadvantaged, but he failed to effectively carry out these responsibilities.
Buckman failed to supervise the investment advisor representative in a way that could prevent their violations of Securities Act of 1933 Section 17(a), Securities Exchange Act of 1934 Section 10(b), SEC Rule 10b-5, and Investment Advisers Act Sections 206(1) and 206(2).
Therefore, Buckman caused Buckman Advisory Group’s violation of Investment Advisers Act Sections 206(2) and 206(4).
In addition to the fine and order to cease and desist, Buckman was ordered not to work in a supervisory capacity with any broker or investment advisory for one year.
This is not the first time that Buckman has been the subject of a regulatory action concerning his conduct in the securities industry. Buckman has been suspended for three months and fined $20,000.00 by Financial Industry Regulatory Authority (FINRA) because he failed to create and maintain a reasonable supervisory system and enforce written supervisory procedures in compliance with FINRA’s suitability rules. Letter of Acceptance, Waiver, and Consent No. 2018058266301 (April 25, 2019).
According to the AWC, from January of 2013 through April of 2017, while at Buckman Buckman Reid Inc., Buckman Jr. failed to establish a supervisory system and enforce procedures that were reasonably designed to supervise activities of stockbrokers and ensure compliance with securities laws and regulations. Buckman did not perform suitability reviews, claiming reliance on the firm’s compliance department.
Additionally, Buckman failed to identify who was responsible for reviewing exception reports and alerts, which are important for identifying excessive trading and unsuitable concentration levels in customer accounts.
The securities broker dealer received automated exception reports and alerts relevant to detecting excessive trading and unsuitably concentrated positions, but no one at the firm reviewed these reports prior to May of 2017. Buckman also did not review the exception reports or ensure their review by someone else. The firm’s reliance on the Active Account Report, manually prepared by an administrative assistant, was not adequately designed to detect excessive trading.
FINRA Public Disclosure additionally shows that on October 23, 2003, a customer initiated investment related FINRA securities arbitration claim involving Buckman’s conduct resulted in the customer being awarded $75,000.00 in compensatory damages because Buckman and Buckman Buckman Reid Inc. were held jointly liable for sales practice violations. FINRA Arbitration No. 02-05054. The Statement of Claim alleged that Buckman engaged in excessive trading and made unsuitable recommendations.
On July 25, 2016, another customer filed an investment related complaint involving Buckman’s conduct in which the customer requested compensatory damages based upon alleged unsuitable trading in corporate bonds during the time that Buckman was associated with Buckman Buckman Reid Inc. The complaint was closed with no further action taken by the customer.
Buckman has been associated with Mayhill Agency LLC in Little Silver, New Jersey since January 10, 2024. He has been associated with Buckman Buckman Reid Inc. in Little Silver, New Jersey since September 12, 1994, and with Buckman Advisory Group LLC in Little Silver, New Jersey since October 7, 2004. Mayhill Agency LLC though JTC Holdings is owned and controlled by Harry J. Buckman and Thomas P. Buckman, and operates from the address formerly associated with Buckman Buckman & Reid Inc.
