Curtis Stephen Ridlon, of Bedford, New Hampshire, a registered representative formerly associated with Waddell & Reed, was fined of $3,235,000.00, and disgorged of $1,513,711.09 by The State of New Hampshire Bureau of Securities Regulation pursuant to an Order to Cease and Desist containing findings that he concocted a scheme to defraud investors via the assessment of management fees. In the Matter of Curtis S. Ridlon, C—2015000011 (May 2, 2017).
According to the Staff Petition for Relief, the Bureau of Securities Regulation became informed about a customer initiated investment related complaint containing allegations of Ridlon’s conduct, wherein customers were assessed $8,000.00 to $10,000.00 in fees on an annual basis for services that were not accurately represented by RIdlon. Apparently, this prompted the Bureau of Securities to investigate the allegations via an extensive interview of more than eighty customers who transacted with Ridlon. The Petition stated that through the investigation it was uncovered that $2,800,000.00 in fees were accumulated by Ridlon from customers on a fraudulent basis; most victims were elderly.
The Petition further revealed that since customers engaged Ridlon for financial advice; Ridlon’s operating model required that he undertake his responsibilities as a fiduciary to act in his customers’ best interests. Yet, a total of two-hundred and eight customers were reportedly defrauded by Ridlon; they were made to believe by Ridlon that an annual fee was required to be paid for their accounts to be managed. In actuality, according to the Petition, customers were duped into signing up for bogus planning services that they did not need.
Apparently, a Financial Planning Services Agreement was signed by customers who were told by Ridlon that products and services relating to financial planning came as part of the fees that customers paid annually. The Petition stated that most customers of Ridlon were assessed fees in high frequency for unnecessary financial planning, and they paid the fee under the impression that it was required of them if they wished to maintain assets with Waddell & Reed. Critically, customers alleged that the fees would not have been paid if the services were represented as optional.
The Petition additionally stated that customers were assessed substantial 12b-1 fees and commissions in connection with their investments via Waddell & Reed; however, they were told by Ridlon that the only fees for management of their investments was the annual fee. Moreover, customers were not provided with several parts of the Financial Planning Services Agreement that Ridlon prompted customers to enter into.
The Petition further stated that Ridlon made an appearance before the Bureau of Securities Regulation on January 18, 2017; however, he declined to answer questions regarding his business activities. Particularly, he neglected to answer whether he informed customers about annual fees having been mandatory, and whether customers were given all of the documentation in connection with the services provided via the firm. The Bureau of Securities Regulation alleged that Ridlon’s conduct collectively amounted to misrepresentations and the sale of excessive services to unknowing customers. Accordingly, the Director of the Bureau of Securities Regulation ordered Ridlon to cease and desist violations of N.H. RSA 421-B.
Financial Industry Regulatory Authority (FINRA) Public Disclosure reveals that on February 23, 2017, a customer filed an investment related arbitration claim involving Ridlon’s conduct, in which the customer requested $250,000.00 in damages based upon allegations that Ridlon, between October of 2012 and May of 2015, failed to abide by the customer’s investment instructions, and failed to manage the customer’s mutual fund investment portfolio properly.
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