Leon Vaccarelli, a registered representative associated with The Investment Center, Inc. was charged by the United States Securities & Exchange Commission with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5 and 21F-17(a).
According to the Complaint, Vaccarelli, doing business as Lux Financial, misappropriated and misused investment funds he obtained from mostly elderly clients, including an 88-year old woman living in a nursing home in Connecticut. Vaccarelli also stole money from a trust fund for which he was the trustee.
On various occasions, to fund these purported loans and purported investments, Vaccarelli persuaded brokerage customers to sell investments in their securities accounts at The Investment Center, or to write checks payable directly to him. On other occasions, Vaccarelli persuaded customers to pay for their “investments” with money liquidated from other investments, such as pensions, 401(k) accounts and annuities.
Instead of investing customers’ funds as he represented, Vaccarelli deposited customer funds into his own personal and business bank accounts, commingled those funds with his own money and paid living and business expenses including home mortgage payments and expenses of Vaccarelli’s business, including mortgage payments in connection with Vaccarelli’s investment in an office building. In some instances, Vaccarelli also used customer funds to pay back prior investors.
In one case, on January 12, 2017, instructions were sent to The Investment Center, directing that $300,000 be wired to a customers local bank account. The wire transfer request bore a notary seal attesting that the customer signed the wire request in the presence of the Notary. However, the Notary who purportedly signed the signature verification was Vaccarelli’s office manager.
According to the Complaint, on or about July 3, 2017, Vaccarelli represented to customer’s daughter that the$300,000 was invested in a 30 month investment at 6%. In actuality, the money had not been invested. Indeed, it was not even segregated. Instead it was commingled with Vaccarelli’s personal and business accounts.
In another case, in September 2014, Vaccarelli became the trustee of a living trust, held for the benefit of a customer’s daughter. At the beginning of 2014, the trust held approximately $480,000 in assets, which were invested in a mixture of blue-chip equity securities and mutual funds.
Prior to formal transfer of trustee responsibility, the bank asked Vaccarelli for direction as to the disposition of amounts held in mutual funds. Vaccarelli directed the bank to sell the mutual funds for cash. Vaccarelli provided his personal bank account number as the account to which the money should be deposited. On March 27, 2014, the bank wired over $164,000 into Vaccarelli’s personal account. Also as part of the transfer of trustee responsibilities, on March 18, 2014, the bank transferred approximately $280,000 (market value) in blue chip equities into a brokerage account in the name of the Trust, at the Investment Center with Vaccarelli having sole trading and check writing ability.
By September 2016, the account had a $1400 balance. All the blue chip securities in the account had been sold and the bank transferred the last of the trust assets, approximately $21,000 in cash, into Vaccarelli’s personal bank account.
Vaccarelli, 40, resides in Waterbury, Connecticut. Ironically, Lux Financial is located at 49 Leavenworth Street in Waterbury. As stated above, from February 2011 to July 19, 2017, Vaccarelli, a registered representative associated with The Investment Center, Inc. On July 19, 2017, Vaccarrelli was terminated from The Investment Center because he “failed to comply with company policy regarding access to his office and computer during an examination.”
The Investment Center, Inc. is a registered broker-dealer with its principal place of business at 1420 Route 206 North, Suite 210, Bedminster, New Jersey 07921. The Investment Center also maintains a series of geographically dispersed “independent” or “franchise” branch offices consisting of approximately “330 Independent Representatives” in twenty-nine states. In substantial part, these offices are “franchise” offices wherein the broker pays all the expenses, in consideration for a higher commission pay-out. The Investment Center purports that its “entrepreneurial approach gives [representative] the flexibility to run [their] business the way [they] choose.” However, there is no on-site supervision at these geographically dispersed, remote locations.
As such, The Investment Centeris also substantially unable to directly supervise the sales practices or activities conducted at these “independent” offices, and since its inception, it has been subject to certain regulatory actions, and customer initiated, investment related complaints, or arbitrations, concerning, most notably, the failure to supervise.
As a general principle, under such circumstances, the broker-dealer, with whom Vaccarelli was associated, here The Investment Center may be held responsible for her conduct, i.e. stock broker theft, under common law agency principles, including respondeat superior, and as a “control person” pursuant to Section 20(a) of the Exchange Act of 1934. Courts and securities arbitration panels, in identical circumstances, have long held brokerage firms responsible for the conduct of their registered representatives in “selling away” cases based upon the broker-dealer’s failure to supervise.
Vaccarelli’s customers are urged to consult with qualified counsel to determine their rights and remedies.
Guiliano Law Group
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