John C. Maccoll a stockbroker registered with UBS Financial Services in Birmingham, Michigan was charged by the United States Securities & Exchange Commision with the theft of over 4 million from his clients.
Maccoll purportedly solicited his brokerage customers to invest in a purported private, alternative, hedge-type fund that Maccoll claimed was highly-profitable. The purported fund investment would allow them to diversify their portfolios, receive annual investment returns as high as 20%, and give them investment growth potential that was better than the growth they received in their brokerage accounts.
As alleged in the SEC’s Complaint, Maccoll’s statements to his customers were false. He did not invest the customers’ money but stole it for his own personal use. In total, the customers invested nearly $4 million in the fraudulent scheme.
To conceal the scheme, Maccoll allegedly instructed his customers not to tell others about the purported fund investment, provided some of his customers with fake account statements reflecting fictitious returns, and paid over $400,000 in Ponzi-like payments to certain of the customers to keep the scheme alive.
According to the SEC Complaint, “most of the customers targeted by Maccoll were elderly, retired, and from working-class or middle-class backgrounds. Maccoll had long-standing relationships with these customers, who trusted him completely to manage their investments.”
One customer account included the customer’s life savings and money from her deceased husband’s life insurance payout, which she intended to use to pay for college expenses for her three children. Maccoll knew that the funds invested in his customers’ accounts were intended for their retirement and for college expenses.
When touting his fictitious fund investment, Maccoll used the name of a real family of alternative investment funds to cloak his fraudulent securities offering with legitimacy. Certain customers were aware of and took comfort from the fact that an alternative fund investment in the name used by Maccoll actually existed. But, in reality, Maccoll had nothing to do with the real, established fund family.
FINRA Public Disclosure reveals that there are more than a dozen customer initiated investment related complaints against UBS for Maccoll’s misconduct.
Such conduct is not new, and brokerage firms that discover their brokers are stealing money or obtaining unauthorized loans from customers often seek to conceal these acts from regulators and customers for fear that they may have to pay the customers back, or that they are legally responsible for the conduct of the brokers.
While brokers who steal money are often judgment proof or on their way to jail, the brokerage firms who employ them are liable for the acts of their registered representatives, even though they did not “authorize” them to outright steal from their customers. Their liability arises from their unequivocal duty “to establish, maintain and enforce an adequate supervisory system to detect and prevent misconduct.”
Accordingly, customers whom have had their funds stolen or misappropriated by their stockbrokers, or even by third parties, may be able to recover their funds by bringing an action against their brokerage firm. If you have been the victim of stockbroker theft or misappropriation, you should consult with a lawyer and seek to recover what was stolen.
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