The Securities and Exchange Commission charged a New York-based investment advisor with defrauding a nonprofit charitable foundation out of $9 million.
The SEC alleges that John Rogicki, managing director and chief compliance officer of Train Babcock Advisors LLC, has been stealing funds from the charity for a dozen years to purchase real estate and pay for his own lavish lifestyle.
According to the SEC's complaint, the charitable foundation was established by an elderly woman to donate her estate to health and education causes. Rogicki has served not only as investment advisor to the charitable foundation but also as its president and a trustee, and he allegedly took advantage of his roles by liquidating securities positions in the foundation's advisory account and transferring the money for his personal benefit.
The SEC's complaint seeks a permanent injunction, disgorgement and prejudgment interest, and penalties against Rogicki.
In a parallel action, the Manhattan District Attorney brought criminal charges against Rogicki.
Massachusetts Advisor Charged With Fraud, Fiduciary Breach
Massachusetts' top securities regulator, Commonwealth Secretary William Galvin, charged a Waltham-based investment advisor and his firm with engaging in fraudulent conduct, acting dishonestly and unethically and breaching their fiduciary duties.
The complaint alleges that Nicklaus J. Moser and Moser Capital Management LLC routinely made false and misleading statements to current and potential investors.
While principal of Moser Capital Management, Moser set up venture capital funds for the sole purpose of raising capital for two Massachusetts startup companies. Moser raised capital for those funds – Moser Capital Fund LLC and Moser Capital Fund II LLC – in part by soliciting his own advisory clients. Moser frequently misled potential investors in an effort to entice them into investing, and continued to mislead investors in order to convince them to continue investing when the companies were unable to repay them, the complaint alleges.
The complaint goes on to claim that Moser, who was a sales representative of a company which sold products to the two startups, failed to disclose to investors his own financial incentives in keeping the businesses afloat. Moser earned a commission for product sales made to the companies.
"My Securities Division is the sole regulator of state registered investment advisors and we will not sit idly by while an advisor misleads investors to entice them to invest in a startup," Galvin said in a statement. "This is a troubling example of an abuse of trust and breach of fiduciary duty. An advisor who puts his interest ahead of his clients cannot continue to do business in the commonwealth."
According to the complaint, in addition to falsely claiming prominent technology businesses were customers of the companies and incorrectly stating that millions of dollars of funding was available to one of the companies, Moser also informed investors that funds were being used to build products for large contracts. In fact, the complaint states that those funds were used by the company to "pay off its business debts; to loan a [company] executive over $100,000; to pay over $45,000 of bonuses to [company] executives in 2016; and to spend over $76,000 on grocery deliveries, airfare, restaurants and hotels."
The complaint seeks a permanent cease and desist order, censure, revocation of investment advisor registration, disgorgement of all proceeds received as a result of the alleged wrongdoing, restitution to investors and an administrative fine.
Cetera to Pay Restitution for Failing to Provide Sales-Charge Waivers to Charities, Retirement Plans
Cetera Financial Specialists was censured and required to provide the Financial Industry Regulatory Authority with a plan to remediate eligible customers who qualified for, but did not receive, the applicable mutual fund sales-charge waiver, according to FINRA's October disciplinary actions.
As part of this settlement, the firm agreed to pay restitution to eligible customers, which is estimated to total approximately $572,000 (the amount eligible customers were overcharged, plus interest).
Cetera Investment Services was also censured and required to provide FINRA with a plan to remediate eligible customers who qualified for, but did not receive, an applicable mutual fund sales-charge waiver. As part of this settlement, the firm agreed to pay restitution to eligible customers, which is estimated to total approximately $1.4 million (the amount eligible customers were overcharged, plus interest).
Both firms will also ensure that retirement and charitable waivers are appropriately applied to all future transactions.
