Jeffrey Paul Schwebach of Dell Rapids South Dakota a stockbroker formerly registered with Independent Financial Group LLC has been suspended for eight months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon consenting to findings of Schwebach selling Woodbridge promissory notes away from Independent Financial Group LLC. Letter of Acceptance Waiver and Consent No. 2018058910001 (June 26, 2019).
According to the AWC, from October of 2016 to October of 2017, investors had been solicited by Schwebach for purposes of Schwebach inducing their purchases of promissory notes linked to a supposed real-estate investment fund, Woodbridge Group of Companies LLC. The AWC stated that thirteen customers of Independent Financial Group along with five non-firm investors were solicited by Schwebach. Eventually, customers purchased $895,000.00 of Woodbridge-linked notes, prompting Schwebach to make commissions totaling $19,534.00.
The AWC stated that while Schwebach was employed by Independent Financial Group, he was subject to the firm’s restrictions on solicitation of customers for purchases of promissory notes. The AWC stated that Schwebach notified the firm in regards to Woodbridge; however, this disclosure was only referenced by Schwebach as an outside business activity. Evidently, Independent Financial Group had been led to believe that it was only first position mortgage transactions that Schwebach was involved with through Woodbridge. The firm was reportedly unaware at that time that Schwebach’s involvement with Woodbridge amounted to him effecting securities transactions away from the firm.
The AWC additionally stated that in the compliance questionnaires which had been administered to Schwebach between 2016 and 2017, Schwebach revealed that there were no securities transactions that he placed outside of the firm’s confines. Schwebach further indicated that there were no products which had been offered by him that were been approved by the firm, which was a lie. FINRA found Schwebach’s conduct violative of FINRA Rules 2010 and 3280.
This is not the first time Schwebach has been sanctioned by a securities regulator for engaging in misconduct in the securities industry. In particular, Schwebach was subject of a South Dakota Division of Insurance Consent Order for Imposition of Monetary Penalty and Order to Cease and Desist based upon allegations that Schwebach, inter alia; effected securities transactions not placed on Independent Financial Group’s records or books; neglected to procure authorization from the firm prior to participating in outside business activities and private securities transactions; and attempted to participate in securities transactions while lacking registration in the State of South Dakota. In the Matter of Jeffrey Schwebach Case No. 3021 (Apr. 26, 2018). Schwebach was reportedly fined $20,000.00 for conduct violative of ARSD 20:08:03:06(2), ARSD 20:08:03:06(3) and SDCL §47-31B-402.
The AWC revealed that a bankruptcy petition has been filed by Woodbridge in December of 2017. Evidently, a final judgement had been obtained by SEC against Woodbridge Group of Companies and its owner, Robert H. Shapiro, mandating that Shapiro pay a fine of $100,000,000.00 and hand over $18,500,000.00 in unlawful gains from the Woodbridge promissory notes sales. SEC v. Shapiro Case No. 17-24624. Allegedly, a $1,300,000,000.00 Ponzi Scheme had been concocted in part by Shapiro as he ran Woodbridge. SEC claimed that an estimated eight thousand four hundred investors had been defrauded, the majority of whom were elderly investors.
Schwebach was discharged by Independent Financial Group LLC on June 20, 2018 supported by accusations that outside business activities failed to be accurately disclosed by Schwebach in regards to Woodbridge; and Schwebach failed to disclose to Independent Financial Group LLC that a customer filed an investment related complaint.
