Hector May of New City, New York, a registered representative of Securities America was named in a customer initiated, investment related claim that May stole more than $3.4 million from at least nine of his public customers by misappropriating their assets in a Ponzi-style scheme.
May operated a “franchise” branch office of Securities America conducting business under the name Executive Compensation Planners. On March 9, 2018, or three months prior to the filing of the customer theft claims, May was terminated by Securities America that day after it received notice that May was under investigation by the U.S. Department of Justice was conducting an official criminal investigation of a suspected felony that May stole customer funds and is alleged to have used false and manufactured fake bond accounts, when in fact, May either converted these funds for his personal use, or like in any Ponzi scheme, used these funds to pay off other investors.
In light of the foregoing, it is reasonably expected that May, who has not been registered since March 2018, has or will be called upon to provide information to FINRA under Rule 8210. Given that Mr. May is under investigation by the U.S. Department of Justice, he will decline to provide information to FINRA and will be barred.
If the allegations are true, one might also reasonably expect that May will be ultimately charged by the United States Securities & Exchange Commission and will also be charged by the Department of Justice.
While brokers, like Mr. May, who steal money from their clients and are often judgment proof or on their way to jail, the brokerage firms who employ them are liable for the acts of their registered representatives, even though they did not “authorize” them to outright steal from their customers. Their liability arises from their unequivocal duty “to establish, maintain and enforce an adequate supervisory system to detect and prevent misconduct.”
“Irrespective of an individual’s location or compensation arrangements, all associated persons are considered to be employees of the firm with which they are registered for purposes of compliance with [FINRA]rules governing the conduct of registered persons and the supervisory responsibilities of the member. The fact that an associated person conducts business at a separate location or is compensated as an independent contractor does not alter the obligations of the individual and the firm to comply fully with all applicable regulatory requirements. Notice to Members 86-65 (September 12, 1986).
FINRA has consistently reminded its members with respect to the supervision of off-site personnel that: “The rule requires a member that approves an associated person’s involvement in private securities transactions for compensation to record the transactions on its books and records and supervise the individual’s participation “as if the transactions were executed on behalf of the member.” Id..
Accordingly, customers whom have had their funds stolen or misappropriated by their stockbrokers, or even by third parties, may be able to recover their funds by bringing an action against their brokerage firm. If you have been the victim of stockbroker theft or misappropriation, you should consult with a lawyer and seek to recover what was stolen.
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