James David Goodland, of Plymouth, Indiana, a stockbroker formerly registered with Cambridge Investment Research, as well as president and chief compliance officer of Securus Wealth Management, LLC, has been fined $30,000.00 and barred by the Securities and Exchange Commission (SEC) from working in a compliance or supervisory capacity with any brokerage firm or investment advisory according to an Order Instituting Administrative and Cease-and-Desist Proceedings containing findings that Goodland failed to supervise a Securus investment advisor who engaged in a market manipulation scheme. In the Matter of James Goodland, and Securus Wealth Management, LLC, File No. 3-16878 (Sept. 30, 2015).
According to the Order, between January of 2010 and July of 2013, Goodland was the direct supervisor of Howard Richards – an investment advisor with Securus Wealth Management, LLC that manipulated the market price of Gatekeeper USA, Inc. common stock (GTKP) in order to assist Gatekeeper with the financing of its operations.
Particularly, the Order stated that Richards utilized the accounts of his customers to sustain Gatekeeper’s market price, as Gatekeeper’s manufacturing and sales of Container Automated monitoring System depended on its ability to accumulate between ten and twenty million dollars, and Gatekeeper’s financing depended on GTKP stock price having been sustained.
Apparently, Securus customers’ accounts were utilized by Richards to support his scheme, where Richards exercised discretion to purchase the shares in his customers’ accounts so that he could prevent stock declines and drive up the price of GTKP. Moreover, Richards precluded sales of Gatekeeper from being executed when he concluded that those sales could negatively affect the GTKP price. The Order revealed that he even spoke with shareholder and advised them to maintain their positions. In situations where sales were inevitable, he reportedly effected orders for his other customers to buy the same amount as the amount having been sold to prevent a decline in Gatekeeper’s market price.
The Order stated that Richard’s manipulative activities also included marking the close of the Gatekeeper stock, where he executed the final Gatekeeper stock transaction on the days he traded.
The Order stated that at certain times, customers of Richards paid one-hundred percent more than customers trading immediately before them. Evidently, he led ninety-seven of his customers to pay about $1,100,000.00 to obtain five-hundred and fifty thousand GTKP shares.
Richards reportedly failed to apprise Securus customers about his conflicts of interests; customers did not know that he engaged in a scheme with a Gatekeeper insider or that he had personal investments in the company. Additionally, the Order stated that Richards misled customers about Gatekeeper, claiming that there was a realistic demand for the stock even though he omitted that his transactions dominated the movement of the Gatekeeper stock price. The SEC stated that Richard’s activities were violative of the antifraud provisions of the Securities and Exchange Act.
SEC concluded that Richards’ communications were inadequately reviewed by Goodland despite the firm’s policies calling for required monitoring. Apparently, Goodland failed to review e-mails that were flagged by the firm’s system, and delegated this responsibility to a non-supervisor employee. The Order stated that if e-mails had been reviewed by Goodland in a reasonable and timely manner, he would have detected that Richards was in close communications with a Gatekeeper insider, and would have identified that Richards was pursuing manipulative activities.
The Order revealed that Securus did not adequately implement procedures and policies to review trades for possible market manipulation. Evidently, Richards was permitted to keep trading Gatekeeper shares even though conflicts of interest were present and atypical trades were executed by Richards on a discretionary basis. Goodland reportedly failed to impose any heightened procedures in regard to Richards’ trading.
Securus evidently failed to create and implement adequate procedures and policies to review conflicts of interest and make sure that any conflicts of interests were made known to the firm’s customers. SEC concluded that Goodland failed to reasonably take action concerning Richards’ atypical trading on behalf of customers as well as Richards’ conflicts of interests.
SEC also found that Goodland only took action to restrict Richard’s activities regarding Gatekeeper stock after a customer lodged a complaint against him concerning the customer’s Gatekeeper stock position. Once Gatekeeper stock ceased to be purchased by Richards, its stock price plummeted from eighty cents to as low as around fifteen cents a share in October of 2013.
Consequently, Goodland was found by SEC to have aided and abetted violations of Investment Advisers Act of 1940 Sections 206(4) and 206(4)-7. He was ordered by SEC to cease and desist causing future Advisers Act violations.
Financial Industry Regulatory Authority (FINRA) Public Disclosure confirms that a customer initiated investment related arbitration claim involving Goodland’s conduct was settled for $250,000.00 in damages founded on allegations of suitability and misrepresentation in regard to tenants in common investments. The customer additionally alleged that Cambridge Investment Research, Inc. failed to supervise Goodland’s activities.
Goodland was associated with Cambridge Investment Research, Inc. throughout the period in which he committed Advisers Act violations subject of SEC’s Order. Since July 1, 2015, Goodland has been associated with Spire Securities, LLC.
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