Signator Investors, Inc. former stockbroker James R. Glover of White Hall, Maryland has been found, pursuant to a final order issued by the United States Securities & Exchange Commission, to have defrauded at least 125 clients or brokerage customers in connection with the sale of the securities of Colonial Tidewater Realty Income Partners, LLC.
Glover is alleged to have effected these sales through the dissemination of materially false and misleading statements regarding Colonial Tidewater, which he managed and which was an unregistered offering of securities in addition to misappropriating almost $1 million for himself.
Signator Investors is an independent broker-dealer headquartered in Boston, Massachusetts, and has approximately 1,555 representatives in 314 branches.
Investor Claims Against Signator Investors
At the present count, there are 79 customer initiated investment related claims totaling more than $10 million against Signator Investors based upon Glover’s conduct. Signator Investors, which claims that Glover’s conduct was unauthorized, and his investment recommendations not approved, is owned by the John Hancock Financial Network, and has been subject to more than a dozen regulatory actions involving in substantially the failure to supervise, and has paid out millions of dollars in customer initiated investment related claims based upon the conduct of its registered representatives.
The fact that Signator did not authorize Glover to defraud his customers is of little or no consequence. The Securities Exchange Act of 1934 imposes a duty on broker-dealers to supervise their registered representatives. 15 U.S.C. § 78(b)(4)(E)1 and (b)(6)(A)(2). Pursuant to FINRA Conduct Rule 3010(a): every broker-dealer must “establish and maintain a system to supervise the activities of each registered representative and associated person that is reasonably designed to achieve compliance with applicable securities law and regulations.”
Glover’s conduct, commonly referred to as “selling away,” takes place when the registered representative sells securities outside, or at least without the required approval of the broker-dealer, and is the most frequently committed violation by off-site registered representatives. NASD Notice to Members 86-85, Compliance with NASD Rules of Fair Practice in the Employment and Supervision of Off-Site Personnel (Sept. 1986).
NASD Notice to Members 86-65 (September 12, 1986) states that Firms that employ [off-site personnel] are responsible for monitoring their activities in a manner reasonably intended to detect violations. The obligations imposed upon the firm and the associated person under the rule are neither altered nor lessened in any way by the fact that the individual is compensated as an independent contractor .The fact that an associated person conducts business at a separate location or is compensated as an independent contractor does not alter the obligations of the individual and the firm to comply fully with all applicable regulatory requirements. See also SEC Notice Concerning Independent Contractors (August 25, 1982)(“Broker-dealers may not shift their obligation to control and supervise the activities of their independent contractor salespersons who are associated persons, and contractual terms that attempt to limit broker-dealer liability for the acts of such persons under the federal securities laws are of no effect”).
On July 30, 2015, the Financial Industry Regulatory Authority found that Gregory J. Mitchell Agency Compliance Specialist for the Vienna, Virginia office, where he was located, as well as the Towson, Maryland office from where Glover was supervised, among other things, failed to review all incoming mail and faxes from Glover and failed to establish procedures for review of outgoing correspondence. In addition, Glover was permitted to use a private fax machine provided by Signator but failed to adequately supervise Glover’s use of the fax machine, or review any incoming or outgoing faxes from that machine.
As a result Signator was fined $450,000.
Glover’s customers are urged to consult with an attorney or take legal action to preserve their rights.
Guiliano Law Group
Our practice 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 to 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.