John William Rafal, of Essex Connecticut, former president and chief executive officer of Essex Financial Services, Inc., has been barred by the Securities and Exchange Commission (SEC) from acting as an investment adviser, broker or associating with entities that sell securities or advise the investor public according to an Order Instituting Administrative Proceedings Pursuant to Securities Exchange Act of 1934 Section 15(b) and 4C, Investment Advisers Act of 1940 Sections 203(k) and 203(f), and Investment Company Act of 1940 Section 9(b), and Commission’s Rules of Practice Rule 102(e)(1)(iii), in conjunction with Rafal’s Offer of Settlement which contained findings that he engaged in a fraudulent scheme to solicit customers. In Re John Rafel, File 3-17760 (Jan. 9, 2017).
According to the Order, between 2011 and 2013, while Rafal was registered with Essex Financial Services, Inc., he concocted a fraudulent scheme with an attorney based in Connecticut, where he compensated the attorney in return for solicitation of wealthy customers. Apparently, the illegal arrangement, as well as conflicts of interest concerning the compensation arrangement, had been not been made known to a customer who held $100,000,000.00 worth of investments in accounts through the firm.
The Order revealed that the attorney created bogus invoices for legal services which mischaracterized the attorney’s services in order to conceal the compensation for solicitation deal. Rafal evidently lied to existing and prospective customers after they received word that Rafal had been investigated for violations of securities laws. Particularly, from May of 2013 to March of 2014, Rafal claimed to the existing and prospective customers that he was cleared of any wrongdoing by both the SEC and his own firm, and that he was not found liable by regulators for committing any violations of securities laws. The SEC found that fraudulent misrepresentations had been made by Rafal in this regard; conduct violative of Investment Advisers Act of 1940 Sections 206(1), 206(2), 206(4), and Rule 206(4)-3.
FINRA Public Disclosure reveals that on January 18, 2005, a customer filed an investment related written complaint involving Rafal’s conduct, in which the customer requested more than $5,000.00 in damages based upon allegations that Rafal, while associated with Raymond James Financial Services, Inc., breached his fiduciary duties to the customer concerning the customer’s investment in an annuity, and made misrepresentations and omissions to the customer regarding mutual fund products.
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