Scott Newsholme, of Farmingdale, New Jersey, a stockbroker formerly registered with SII Investments, Inc. who also worked as a tax preparer and investment adviser for MVP Financial LLC, was charged by the Securities and Exchange Commission (SEC) in a Complaint alleging that Newsholme, inter alia, misappropriated funds from investment advisory customers and made misrepresentations to them about their account values. Securities and Exchange Commission v. Scott Newsholme, Case 3:17-cv-06813 (Sept. 6, 2017).
According to the Complaint, $1,000,000.00 of investment advisory customer funds were misappropriated by Newsholme to finance his gambling lifestyle. Apparently, most of his customers were his friends and initially sought his tax preparation services before subscribing to his investment advisory services. SEC alleged that in 2012, Newsholme began a misappropriation scheme, where he deposited customer checks into his personal banking account and pocketed funds that were supposed to be invested. Newsholme reportedly attempted to dissuade or otherwise delay liquidating assets after some customers made requests, and when the liquidations occurred, funds came directly from the personal banking accounts that Newsholme owned.
The Complaint alleged that the nature of these payments constituted a Ponzi scheme, wherein customers’ funds, unbeknownst to them, had been utilized by Newsholme to pay other customers who sought liquidations, utilizing the remainder to finance his gambling ventures. Newsholme allegedly played off of his customers’ trust to provide fabricated account documentation to them and faulty assurances to allay their concerns; conduct which the SEC claimed enabled Newsholme to prolong his fraudulent scheme.
The Complaint further alleged that Newsholme disseminated false account statements to customers regularly, wherein he made bogus references to valuations on annuities that customers purchased through him. Newsholme reportedly acknowledged his conduct in that regard when probed in 2015 by New Jersey Bureau of Securities. The SEC additionally alleged that Newsholme forged promissory notes that he passed off as bonds, and altered customers’ stock certificates. The Complaint alleged that Newsholme’s conduct was violative of Investment Advisers Act of 1940 Sections 206(1) and 206(2); Securities and Exchange Act of 1934 Section 10(b), SEC Rule 10b-5, and Securities Act of 1933 Section 17(a).
Financial Industry Regulatory Authority (FINRA) Public Disclosure reveals that Newsholme has been barred from associating with any FINRA member in any capacity based on allegations that he failed to provide FINRA with information concerning his business activities. Letter No. 2014042041701 (Dec. 30, 2014).
Additionally, he has been identified in two customer initiated investment related disputes containing allegations of his misconduct while employed with Royal Alliance Securities and SII Investments, Inc. In particular, on July 22, 2014, a customer filed an investment related written complaint regarding Newsholme’s activities, in which the customer requested $140,000.00 in damages based upon allegations that Newsholme took a customer’s funds intended for an individual retirement account investment and made false representations to the customer about her account status.
Further, on February 23, 2015, a customer initiated investment related written complaint involving Newsholme’s conduct was settled for $55,000.00 in damages based upon allegations that he misappropriated the customer’s funds, and committed fraud in handling the customer’s variable annuity investments.
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