Kimberly Springsteen-Abbott, of Holiday, Florida, the chairman and chief executive officer of Commonwealth entities, including Commonwealth Funds, was fined $100,000.00 and barred from associating with any Financial Industry Regulatory Authority (FINRA) member firm in any capacity in connection with a FINRA National Adjudicatory Council Decision which affirmed findings that Springsteen-Abbott misappropriated investor funds. Department of Enforcement v. Kimberly Springsteen-Abbott, No. 2011025675501 (Aug. 23, 2016).
According to the Decision, between December of 2008 through February of 2012, Springsteen-Abbott, in her capacity as Commonwealth’s chairman and chief executive officer, mishandled funds from investors through the allocation of the investors funds to cover Springsteen-Abbott’s personal and other business expenses, when such use of funds did not correlate appropriately to the Commonwealth Funds’ operations.
The Decision stated that from December of 1993 through 2013, Commonwealth accumulated in excess of $240,000,000.00 from investors through thirteen private and public Funds. The purpose of the Funds, as stated in the Decision, was for the acquisition and maintenance of leased telecommunications, medical, and information technology based equipment. Springsteen-Abbott apparently took over Commonwealth’s operations in 2015, in which she became the owner and chief executive of Commonwealth companies, which included the Fund’s manager, Commonwealth Income and Growth Funds, Inc.
The Decision stated that the Funds’ General Partner were subsidiaries that were wholly owned by Commonwealth of Delaware, Inc., which itself was a subsidiary wholly-owned of Commonwealth’s parent entity – the sponsor of the Funds. The General Partner was responsible for arranging, executing, negotiating, and facilitating equipment leases. Expenses pertaining to the Funds, according to the Decision, were to be billed to the Funds and paid by the Funds, in part through an expense allocation procedure. Apparently, the expenses incurred by the General Partner or Parent were supposed to be reimbursed. However, administrative expenses were only supposed to be charged only when required for the Funds’ reasonable operations.
According to the Decision, a controlling person’s expenses, such as fringe benefits, expenses for traveling, and salaries, and administrative expenses were not allowed to be charged as Fund related expenses. FINRA found that Springsteen-Abbott, as a controlling person, was prohibited from charging such expenses as Fund expenses, and was prohibited to commingle funds with her own.
The Decision stated that Springsteen-Abbott had charged her personal expenses on an American Express credit card, which was issued to her solely for business expenses of Commonwealth. Apparently, between December of 2008 and February of 2012, Springsteen-Abbott was found to have charged, and allowed others to charge, 1,840 personal expenses and other non-fund expenses, in which such expenses totaled $208,953.75. The Decision stated that Springsteen-Abbott had approved Commonwealth Funds to be the payor of such expenses.
According to the Decision, Springsteen-Abbott made Commonwealth Funds pay for her children’s’ meals, home improvement, clothing, food, and other personal expenses. Additionally, FINRA noted that Springsteen-Abbott charged birthday celebrations, family events, and other birthday expenses totaling thousands of dollars, to the Commonwealth Funds.
Upon FINRA’s investigation into Springsteen-Abbott, it was discovered that Springsteen-Abbott had allocated to Commonwealth Funds expenses in an impermissible manner. Apparently, Springsteen-Abbott eventually testified to FINRA regarding the expenses, in which she admitted to have charged impermissible allocations.
FINRA’s Extended Hearing Panel found that Springsteen-Abbott’s conduct was violative of FINRA Rule 2010, and claimed that Springsteen-Abbott’s conduct was deliberately intended to use the monies of the Fund to the detriment of investors. Ultimately, the National Adjudicatory Council reviewed and affirmed the Hearing Panel’s decision, finding that Springsteen-Abbott’s arguments justifying her expenses were not convincing.
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