Kimberly Pine Kitts of Palmer Massachusetts a stockbroker formerly registered with Royal Alliance Associates Inc. was sentenced by a federal district court judge to more than seven years in prison, three years of supervised release and required to pay restitution of $3,085,939.00 according to the United States Attorney’s Office based upon Kitts pleading guilty to Information which charged her of committing wire fraud (4 counts), investment adviser fraud and identify theft. Criminal Action No. 18-cr-10325 (D. Mass Mar. 20, 2019).
The United States Securities & Exchange Commission reports that on June 3, 2019, a federal court judge entered a final judgment against Massachusetts resident and Cape Cod-area investment adviser Kimberly Pine Kitts in an SEC case that charged Kitts with defrauding multiple clients by stealing over $3 million from their investment and retirement accounts.
The United States Attorney’s Office indicated that in 2011, a scheme was executed by Kitts that involved Kitts’ misappropriation of the assets belonging to her customers. Evidently, in one case, assets of customers had been unlawfully directed by Kitts to a bank accounts set up for one of Kitts’ entities, Marquis Consulting. Kitts reportedly engaged in a second scheme where she leveraged her investment adviser status to illegally transfer money from the customers’ investment accounts to accounts controlled by her. Those funds were apparently taken by Kitts for her own benefit rather than invested for the benefit of her customers. Moreover, Kitts reportedly liquidated annuities owned by customers; liquidated portions of customers’ individual retirement accounts; and effected monetary transfers from customers’ brokerage accounts, misappropriating a total of $3,085,939.00.
In a Complaint filed by Securities and Exchange Commission (SEC), Kitts was charged with forgery and misappropriation. Case No. 1:18-cv-11507 (D. Mass July 19, 2018). According to the SEC, over a six year period ending in 2017, customers’ investment and insurance account withdrawal requests had been forged by Kitts to initiate the transfers of funds from their accounts into those accounts controlled by Kitts. The Complaint alleged that the customers were induced by Kitts into transferring the funds so that their taxes could somehow be paid; those tax payments were apparently bogus. SEC also alleged that a total of eighty-two withdrawals had been executed from the customers’ accounts for Kitts to accumulate the $3,085,939.00. Subsequently, customers were provided phony accounts statements by Kitts to keep the fraudulent scheme going. Supposedly, the funds were utilized by Kitts to buy luxury vehicles and pay for lavish vacations. SEC alleged Kitts’ conduct in this regard was violative of Securities and Exchange Act of 1934 section 10(b); SEC Rule 10b-5; and Investment Advisers Act of 1940 Section 206(1) and 206(2).
Financial Industry Regulatory Authority (FINRA) Public Disclosure reveals that Kitts has been identified in five customer initiated investment related disputes containing allegations of her misconduct while employed with Royal Alliance Associates. Specifically, on December 17, 2008, a customer filed an investment related complaint involving Kitt’s conduct in which the customer requested $180,000.00 in damages founded on allegations that Kitts failed to follow the customer’s mutual fund liquidation instructions. On June 22, 2010, another customer filed an investment related complaint pertaining to Kitt’s activities where the customer sought $44,000.00 in damages based upon allegations of unsuitable variable annuities being sold to the customer.
Then, on April 10, 2012, a customer filed an investment related complaint involving Kitts’ activities where the customer sought $24,778.00 in damages supported by accusations that the customer was provided bad investment advice concerning the investment strategy utilized for the customer’s account. On May 11, 2018, another customer initiated investment related complaint concerning Kitts’ activities was settled for $1,969,086.67 in damages founded on allegations that the customer’s funds had been misappropriated or converted by Kitts while she was associated with Royal Alliance. Finally, on November 13, 2018, a customer filed an investment related complaint regarding Kitts’ activities in which the customer requested $215,523.55 in damages based upon accusations that while Kitts was associated with Royal Alliance, she defrauded the customer through the transactions she effected with the customer’s funds.
Kitts was discharged by Royal Alliance on November 15, 2017 supported by the firm’s allegations of Kitts’ misappropriation or conversion of funds belonging to customers of the firm.
In addition to its liability for the failure to supervise, Royal Alliance is responsible for Kitts’ conduct under common law agency principles, including respondeat superior, and as a “control person” pursuant to both Section 20(a) of the Exchange Act of 1934, 15 U.S.C. §78(t).
