Lawson Financial Corporation, as well as Robert Lawson (the firm’s president, chief compliance officer, and chief executive officer), and Pamela Lawson (the firm’s owner and chief operating officer) were charged by Financial Industry Regulatory Authority (FINRA) Department of Enforcement in a Complaint alleging securities fraud in the sale municipal revenue bonds. Department of Enforcement v. Lawson Financial Corporation, et al., No. 2014043854401 (May 16, 2016).

According to the Complaint, from 2013 through 2015, the firm and the Lawsons’ engaged in a mass securities fraud regarding sale of municipal revenue bonds. Apparently, the fraud was associated with the Decatur Bonds, Cullman Bonds, Destiny Bonds, and Hillcrest Bonds. The Complaint stated that the Hillcrest and Destiny Bonds funded an Arizona charter school. The Decatur and Cullman Bonds apparently funded two living facilities located in Alabama.

According to FINRA, the fraudulent Hillcrest Bond sales, which were effected by the firm and Robert Lawson, occurred both in the primary and the secondary markets. The Complaint alleged fraudulent sales regarding the Decatur, Cullman, and Destiny bonds to have occurred in the secondary bond market.

FINRA alleged in the Complaint that Lawson Financial Corporation was the underwriter for the aforementioned bond offerings. Apparently, the school and living facilities all sustained substantial financial troubles, and could not cover expenses associated with operations. The assisted living facilities, according to the Complaint, could not make the debt payments on the aforementioned Bonds unless funds were utilized from a charitable remainder trust held at Lawson Financial Corporation.

FINRA alleged that Lawson Financial Corporation and Robert Lawson were cognizant of the financial difficulties sustained by the assisted living facilities and the charter school, but omitted this material information to investors. FINRA claimed that the firm and Robert Lawson intended on concealing this information from investors in order to prevent them from becoming aware of the risks associated with the bonds purchased.

Additionally, the Complaint stated that investors were not informed by the firm and Robert Lawson that Robert Lawson served as co-trustee of the aforementioned charitable remainder trust. Further, investors were reportedly not informed that Pamela Lawson was also a co-trustee on the charitable remainder trust. Critically, FINRA alleged that the firm and the Lawsons had wrongly effected the transfers of several million dollars from the charitable remainder trust account to provide financial relief to the assisted living facilities and the charter school.

According to the Complaint, the funds coming from the charitable remainder trust belonged to WP, a Lawson Financial Corporation client. Apparently, the funds were originally held in the WP Trust, in which Robert Lawson was a trustee, where such funds were transferred to a charitable remainder trust upon WP’s death. FINRA alleged that by February 2012, Robert and Pamela Lawson were the only remaining trustees in the charitable remainder trust.

The Complaint stated that Robert Lawson directed $14,000,000.00 in funds to be transferred from the WP Trust to the assisted living facilities and the charter school in order to cover the debt of the Decatur and Cullman Bonds. The Complaint stated that the charitable remainder trust account’s assets were comprised mostly of municipal bonds, and severely depleted by such transfers. FINRA claimed that only $1,800,000.00 has been repaid to the charitable remainder trust.

FINRA alleged in the Complaint that the firm and Robert Lawson acted willfully in violating Securities Exchange Act of 1934 Section 10(b), Rule 10b-5, and violated MSRB Rule G-17. FINRA alleged (in an alternative cause of action) that the firm and Robert Lawson violated Securities Act of 1933 Section 17(a)(2) and (a)(3).

Further, the firm and Robert Lawson are alleged to have violated MSRB Rule G-19 as a result of the unsuitable recommendations made to investors concerning the municipal revenue bonds. Both Robert and Pamela Lawson are alleged by FINRA to have violated FINRA Rule 2010 in connection with their breaching of fiduciary obligations to the WP Trust. Further, the Lawsons are alleged to have violated FINRA Rule 2010 and 2150(a) for mishandling customer funds.

Public disclosure records reveal that Robert Lawson has been subject to eight disclosure incidents, six of which involve customer complaints. On September 1, 1995, Lawson settled a customer dispute for $25,000.00 amid allegations of misrepresentations concerning municipal bonds. On October 7, 1998, a customer was awarded $1,925.00 after alleging Lawson to have provided misleading and/or false information concerning municipal bonds.

On June 12, 2000, Lawson settled a customer dispute for $6,500.00 after a customer alleged investments purchased were unsuitable. On September 24, 2001, a customer was awarded $294,590.54 after alleging unsuitability, breach of fiduciary duty, and misrepresentations concerning municipal bonds.

On November 8, 2002, a customer was awarded $88,365.72 after alleging unsuitability and misrepresentation concerning municipal bonds. Finally, on October 19, 2009, a customer received an award of $237,500.00 after alleging negligence, misrepresentation, and suitability.

The information contained herein has been obtained from reliable sources however may not be accurate and is not guaranteed by us. Readers are encouraged to undertake their own independent investigation and evaluation of the relevant facts. All claims and allegations are subject to adjudication, decisions may be subject to appeal, and no inference is intended, nor should any inference be made from any information contained herein from any source.

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