After he misappropriated $734,000 from various customers, Joel W. Carlson, a former broker with Sagepoint Financial Inc., was permanently barred from the business by the Financial Industry Regulatory Authority (FINRA).
Carlson is also facing a civil lawsuit alleging $50,000 in damages stemming from fraudulent indexed annuity sales and misappropriation. The litigation is pending 2nd Judicial District Court in Minnesota, according to FINRA public disclosure records.
Sagepoint fired Carlson in February, after customer inquires led the firm to investigate his handling of funds. FINRA public disclosure records state that Carlson admitted at the time that he had misappropriated customer funds.
To settle the disciplinary action brought by FINRA, Carlson submitted a Letter of Acceptance, Waiver and Consent (AWC), through which he consented to the entry of findings by FINRA without admitting or denying the findings. As a condition of the AWC FINRA will not bring any future actions against Carlson based on same facts. FINRA accepted the AWC on April 10.
Registered with FINRA since 1997, Carlson began as an investment company and variable contracts products limited representative. He joined Sagepoint in 2005 and worked there until he was fired in February.
From about March 2010 to January 2012, Carlson received at least $734,000 from nine Sagepoint customers after he told them that he would invest their money in securities, a fraudulent misrepresentation. Carlson never invested this money, instead misappropriating it and converting it to his own personal use, the AWC said.
The nine customers were between the ages of 68 and 90 at the time Carlson took their money. Except for the youngest victim, all were retired, the AWC said. Save for one customer whose money was refunded with interest in January 2012, Carlson has not re-paid the customers.
Carlson instructed these nine customers to give him personal checks payable to an entity that he controlled. He then deposited the checks in a bank account that he controlled in the name of the entity, the AWC said.
One of the customers victimized by Carlson was a 90-year-old woman with an annual income of $80,000 who gave him $100,000. The largest so-called investment came from a 76-year-old woman, who gave Carlson a total of $213,580 in four installments from 2010 to 2012, the AWC said. She was single, retired, and had an annual income of $30,000 and net assets of $575,000 at the time.
Another victim was 85 when she gave Carlson $50,000 to invest, an amount equal to her annual income and also equal to her total net worth. The youngest person to give Carlson money was a 68-year-old public school teacher earning $50,000 per year, the AWC said. She gave Carlson $64,000.
Carlson led one so-called investor to believe that he would receive a 10 percent bonus if he withdrew funds from his existing account at Sagepoint to purchase an annuity.
In response to Carlson’s representations, this 80-year-old retiree withdrew $72,000 from his securities account and wrote a check for that amount payable to the entity controlled by Carlson, after Carlson told him the check had to be made payable this business entity – and not the issuer of the annuity — if the customer wanted to receive the bonus, the AWC said. Carlson deposited the $72,000 check in the account he controlled, but he never invested in the annuity.
Through the above described misconduct, Carlson willfully violated Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, the AWC said. Among other things, Section 10(b) prohibits the use of means or instrumentalities of interstate commerce to intentionally or recklessly employ a device, scheme or artifice to defraud, or to make an untrue statement of material fact or to engage in an act, practice or course of business that would operate as a fraud or deceit in connection with the purchase or sale of a security.
In addition, Carlson’s fraud violated FINRA Rules 2010 and 2020, and by misappropriating and converting the customers’ money to his own use, he violated FINRA Rules 2150(a) and 2010.
As a result, he has been permanently barred in all capacities from associating with any FINRA member, the AWC said.
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