Richard G. Cody, of Spring Lake, New Jersey, a stockbroker formerly registered Concorde Investment Services, LLC, was charged by Financial Industry Regulatory Authority (FINRA) Department of Enforcement in a Complaint alleging that he obstructed a FINRA investigation into allegations of his business activities which occurred while his FINRA securities registration was suspended. Department of Enforcement v. Richard G. Cody, No. 2016048538901 (Apr. 11, 2017).
According to the Complaint, Cody was previously fined $27,500.00 by FINRA and suspended from associating with any FINRA member in any capacity between January 7, 2013, and January 6, 2014, based upon findings that he made misleading account related documentation to customers, failed to disclose information to FINRA concerning his settlements of customer initiated investment related disputes, and made unsuitable investment recommendations to customers from both a qualitative and quantitative standpoint.
Apparently, FINRA received information in 2016 that securities business had been conducted by Cody throughout the period in which he was suspended, causing FINRA to launch an investigation into his alleged misconduct. Specifically, in August of 2016, Concorde Investment Services stated to FINRA that Cody was terminated following the firm’s investigation into his securities activity that occurred during a period of his suspension. The Complaint also noted that in September of 2016, Cody was terminated from his subsequent employer, IFS Securities, based upon allegations that he committed forgery and tried to engage in securities business away from his firm.
Further, a customer reportedly notified FINRA regarding Cody’s activities as the customer’s broker which occurred while he was suspended. Following up in this regard, FINRA discovered that another Concorde registered representative, JT, reportedly controlled Cody’s customer base while Cody was suspension, where JT engaged in activities on Cody’s behalf by corresponding with customers, effecting trades and making securities recommendations.
The Complaint alleged that customers in 2013 were deprived of the fact that Cody was suspended. Particularly, Cody purportedly informed customers that JT joined the firm and would provide assistance to Cody, causing customers to conclude that JT was merely Cody’s assistant. Critically, Cody was alleged by FINRA to have engaged customers in conversations regarding investment strategies, conditions of the market, as well as the customers’ investment performance details. Cody was further alleged to have facilitated transactions for customers, personally met with them, and made recommendations concerning the customers’ investments.
In the course of investigating Cody’s misconduct, the Complaint stated that misleading and false information was continuously asserted by Cody to FINRA personnel. Cody allegedly informed FINRA on February 12, 2016, that no securities business had been conducted by him during his suspension. The Complaint further stated that Cody provided recorded testimony before FINRA personnel on November 15, 2016, where he continued to deny his involvement with customers; particularly his discussions with customers during suspension. Cody also allegedly denied representing to customers that he was a broker while suspended or engaging in activities for Concorde aside from paying bills.
The Complaint indicated that Cody was then called upon by FINRA to hand over information and documentation consisting of, inter alia, loan documentation, tax returns, bank statements and cell phone records. Cody reportedly failed to provide FINRA personnel with the documentation requested. FINRA apparently made additional requests for information and documentation in late 2016 to early 2017, where Cody continuously failed to provide FINRA personnel with legitimate responses. Cody was subsequently called upon by FINRA to make another appearance before FINRA to provide recorded testimony. According to the Complaint, FINRA received a response from Cody in January of 2017, where he stated, without explanation, that was not able to appear. FINRA ultimately alleged that Cody’s failure to cooperate in the investigation into his misconduct was violative of FINRA Rules 2010 and 8210.
The Securities and Exchange Commission (SEC) filed a complaint, on December 12, 2016, in federal court in Boston charging investment adviser and broker representative Richard G. Cody, a former resident of Massachusetts and current resident of New Jersey, with defrauding his retired clients. The Commission has asked the court to consider whether to impose certain preliminary relief against Cody and the legal entity through which Cody holds out his investment adviser and brokerage services business, Boston Investment Partners, LLC, including an asset freeze.
The SEC alleges that Cody, an investment adviser and broker representative, defrauded at least three of his clients for years by concealing the fact that their retirement accounts had suffered extensive losses and that the monthly payments they were receiving were exhausting their retirement savings. Cody concealed their substantial losses by making materially misleading statements, leading the clients to believe that their investments were maintaining steady value and that their monthly withdrawals were being financed by investment gains. All the while, Cody concealed the material fact that the clients’ account values were actually being rapidly depleted.
By mid-2014, two of these clients’ accounts had essentially run out of funds. To prevent his clients from detecting his longstanding fraud, Cody continued his scheme by engaging in various deceptive acts aimed at concealing from the clients that their money was gone. These acts included: (1) making wire transfers of monthly deposits to his defrauded clients’ bank accounts from sources other than their own retirement accounts so that they would not know their retirement funds had run out; (2) responding to requests from a client for a withdrawal of retirement funds by falsely representing that the client’s funds had been invested in an annuity and then sending the client a fraudulent document to create the appearance that a well-known financial firm held an annuity for that client; and (3) sending clients fabricated tax forms which purported to show retirement account distributions and tax withholding in order to disguise the fact that the clients’ accounts were essentially empty.
As recently as March 2016, Cody lied to a third client by telling a husband and wife that they had $1.28 million remaining in their investment accounts when, in fact, their retirement accounts held only approximately $162,560. Cody’s deceptions caused these clients to believe that their retirement savings were secure when, in fact, they were not. The sheer duration of Cody’s deception deprived these clients of any opportunity to take measures to decrease or to stop their losses or even to work longer to make up those losses. With their prime working years now well behind them, Cody’s deceptive scheme has irreparably damaged their financial security, causing immense anxiety and fear and creating the real possibility that they may suffer further dire consequences.
By virtue of his fraudulent conduct, Cody has engaged and is still engaged in: (i) fraudulent or deceptive conduct upon an advisory client in violation of Sections 206(1) and 206(2) of the Investment Advisors Act of 1940 (“Advisors Act”); and (ii) fraudulent or deceptive conduct in connection with the purchase or sale of securities, in violation of Section 10(b) of the Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder.
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