Three individuals from Maryland agreed to settle SEC charges that they had defrauded investors in a company owning and operating commercial and residential real estate, in violation of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5, where at least one of the individuals violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, and another of the individuals Hill violated Section 20(b) of the Exchange Act. In a separate action, Signator Investors of Boston, MA, and one of Signator’s supervisors settled charges of failing to adequately supervise 2 men working in the firm’s Maryland office connected to the scheme.
The SEC Complaint
According to one of the SEC Complaints, the SEC alleged that from May of 1998 through May of 2012, James R. Glover of Whitehall, MD, had defrauded a minimum of 125 investors for roughly $13.5M via the sale of unregistered securities of Colonial Tidewater Realty Income Partners, LLC (“Colonial Tidewater”), which was an entity Glover controlled with friend and co-defendant Sherman T. Hill of Whitehall, MD. Colonial Tidewater invested in commercial and residential real estate. The Complaint indicates that Glover, in his capacity of investment adviser representative and registered representative for Signator Investors, Inc. (“Signator”), sold fraudulent offerings to the firm’s clientele. SEC v. Colonial Tidewater Realty Income Partners, LLC, et al., No. 1:15-cv-2401 (D. Md. Filed Aug. 13, 2015).
The SEC Complaint indicates that Glover would attract investors via a private placement memorandum among oral representations which had falsely overstated Colonial’s financial condition, the investments’ liquidity, and expected returns. The SEC further states that Glover took advantage of his clients’ trust in him in his capacity as financial advisor, where some of the individuals (described as unsophisticated investors) were at one point friends with Glover from a local church and referred to him as part of their family.
According to the Complaint, the SEC alleged Glover defrauded investors by raking in roughly $839,000 from investors via unjustified fees and the taking of undisclosed commissions. Hill was alleged to have furthered the fraud in the preparation of false valuations for the Colonial properties and by omitting material facts concerning other properties in written materials used for solicitation of the investments.
The SEC Order
A separate SEC Order concerned Cory D. Williams of Monkton Maryland, a former investment advisor and registered representative at Signator Investors, Inc., where Williams consented to the SEC’s findings that he assisted Glover in managing Signator’s client portfolios which contained clients investing in Colonial – a security not approved for sale by Signator reps. In the Matter of Cory D. Williams, File No. 3-16754 (Aug. 13, 2015).
The SEC Order indicates that Williams accepted undisclosed fees from Colonial that came from the monies invested in Colonial, in turn violating his fiduciary duty as investment advisor to disclose material conflicts of interests to his clients. Further, the SEC Order indicated that Williams engaged in this act despite knowing that a considerable number of his clients were investing in this Colonial offering to which Williams knew practically nothing about, and where Williams ignored problems voiced by his clients regarding such investments. The SEC indicated that Williams was willful in violating Sections 206(1) and 206(2) of the Advisers Act.
Another SEC Action
In another SEC action, Gregory J. Mitchell of Leesburg, VA, and Signator Investors Inc., consented to SEC’s findings that Mitchell and Signator failed to adequately supervise Glover and Williams conduct for the purposes of detecting and preventing Williams’ and Glover’s violations of the aforementioned federal securities laws. In the Matter of Signator Investors, Inc. and Gregory J. Mitchell, File No. 3-16753 (Aug. 13, 2015). According to the SEC Order, Mitchell, the former director of compliance for both Signator’s Vienna, VA, and Townson, MD, offices, was responsible for various supervisory functions including reviewing client files and acting as designated supervisor for Glover and Williams concerning their advisory and brokerage practices. Mitchell, according to the SEC Order, failed to adequately implement the firm’s procedures and policies for conducting such client file reviews. The SEC Order further indicates that had Mitchell acted reasonably to implement his firm’s policies, he would have likely detected the fraud concerning transfers of funds from Signator investments to Colonial.
Colonial Tidewater, Glover, and Hill have all agreed to settle the SEC’s charges, which include consenting to a receiver to take over control of Colonial. According to the SEC, Colonial Tidewater’s settlement would involve Colonial Tidewater paying over $527,000 in disgorgement, over $66,000 in prejudgment interest, and $725,000 penalty. Glover, according to the SEC, agreed to be barred from the securities industry along with having to pay over $839,000 in disgorgement, nearly $65,000 in prejudgment interest, and a $450,000 penalty. The SEC indicates that Hill has agreed to pay a $75,000 penalty. Williams, in a separate SEC order, consented to charges he violated the Investment Advisers Act along with agreeing to be barred from the securities industry, in addition to paying over $94,000 in disgorgement, nearly $10,000 in prejudgment interest, and roughly a $94,000 penalty. Signator, according to the SEC settlement, has agreed to pay a penalty of $450,000 and be censured, while Mitchell would pay $15,000 and be suspended from supervisory capacity for 1 year.
FINRA Public Disclosure Records
Public disclosure records reveal that James R. Glover has been subject to 79 disclosure events (the majority of which are customer disputes that occurred from 2012 through 2015) and settled with aggrieved parties for over $12.5M in the aggregate. The vast majority of Glover’s allegations primarily focus on Glover’s conduct of misrepresenting the nature of real estate investments which were outside business activities, unapproved, and unsuitable. The majority of clients have alleged that Glover advised clients to invest in such activities without disclosing to clients that the investment was not disclosed or approved by Signator. Glover, according to FINRA’s BrokerCheck, was terminated (permitted to resign) on May 11, 2012, after being alleged to have failed to disclose outside business activities, converted client funds, and other potential representative misconduct. Glover was permanently barred by FINRA on January 18, 2013, after failing to respond to FINRA’s request to appear for testimony regarding investigation into the aforementioned conduct addressed by the SEC. FINRA Letter of Acceptance, Waiver, and Consent No. 2012032782401 (Jan. 18, 2015).
Public disclosure records reveal that Cory D. Williams has been subject to 6 disclosure events, including a few customer disputes and regulatory issues. On September 7, 2012, Williams settled a customer dispute for $250,000 after a client alleged inappropriate allocation in a managed account resulting in market losses. On March 7, 2013, Williams was discharged by Signator after the firm alleged he failed to disclose and receive approval for an outside business activity. Subsequent to Williams’ discharge, he settled a customer dispute for $12,500 on May 15, 2013, after a client alleged that he should have informed her that a distribution check she requested was made payable to an investment not approved by Signator. On August 13, 2015, Williams was permanently barred by FINRA regarding his aforementioned conduct addressed by the SEC. FINRA Letter of Acceptance, Waiver, and Consent No. 2012032782403 (Aug. 13, 2015).
Guiliano Law Group
If you have been the victim of securities fraud and you have a complaint, you should consult with an attorney. The practice of Nicholas J. Guiliano, Esq., and The Guiliano Law Group, P.C., is limited to the representation of investors in claims for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.