A former Merrill Lynch broker agreed to pay more than $5 million to settle charges with the Securities and Exchange Commission that he schemed to increase his personal income by obtaining excessive commissions and fees from investors.
According to the SEC's complaint, Merrill paid financial advisors a portion of the commissions, fees or other revenue they generated in customer and client accounts. The SEC alleges that Thomas Buck represented to certain customers with commission-based accounts that the total annual commissions they paid would not exceed certain limits, and then he traded in those accounts and generated commissions that exceeded the amounts he promised.
According to the SEC's complaint, Buck received more than $2.5 million in excessive commissions and fees from at least 50 retail customers and investment advisory clients in a scheme that lasted at least three years.
The SEC alleges that Buck failed to inform the customers that their total annual commissions were exceeding the promised limits and falsely represented to several customers that their total annual commissions were within the promised limits.
According to the SEC's complaint, Buck also intentionally failed to inform the customers that a fee-based option could be cheaper compared to the total annual commissions being paid based on trades executed in an account. The SEC also alleges that Buck impermissibly exercised discretion by placing trades in the accounts of certain customers without authorization.
In the SEC settlement, Buck agreed to pay disgorgement of $2.56 million in ill-gotten gains plus interest of $297,000 and a penalty of $2.23 million.
In a parallel action, the U.S. Attorney's Office for the Southern District of Indiana unsealed criminal charges against Buck. Any restitution amount paid in the criminal case would be subtracted from the disgorgement amount owed in the SEC settlement.
'Hamilton' Ticket Ponzi Schemer Pleads Guilty to Securities Fraud
On Tuesday, Joseph Meli of New York City pleaded guilty in federal district court in Manhattan to securities fraud in connection with a Ponzi scheme involving purported resale of tickets to popular Broadway shows including "Hamilton" and concerts for artists such as Adele and Metallica. The criminal case arises from the same conduct alleged in two SEC parallel civil enforcement actions filed against Meli earlier this year.
Meli was arrested on fraud charges in January. Meli had provided investors with fake agreements containing fraudulent signatures that claimed to show Meli's company had agreements with various production and management companies to purchase large blocks of tickets.
Meli is scheduled to be sentenced in January 2018.
In January and September, the SEC filed two enforcement actions against Meli in federal district court. The first complaint was also fied against Matthew Harriton of New York. According to the SEC, Meli and others solicited investments for the bulk purchase and resale of tickets to events including the Broadway musical "Hamilton," Adele and Metallica concerts, a concert festival known as Desert Trip (featuring The Rolling Stones, Bob Dylan, Paul McCartney and other artists), and the Broadway play "Harry Potter and the Cursed Child."
The majority of the more than $97 million raised from investors was allegedly used to make Ponzi payments to prior investors and to enrich Meli, Harriton, and Meli's wife and mother. Meli's wife and mother are both named as relief defendants, along with three of Meli's companies and two of Harriton's companies, based on these parties' alleged receipt of investor funds.
Day Trader Charged in Brokerage Account Takeover Scheme
The SEC charged a day trader based in the Philadelphia area with participating in a scheme to access the brokerage accounts of more than 100 unwitting victims and make unauthorized trades to artificially affect the stock prices of various companies.
The SEC alleges that Joseph Willner generated at least $700,000 in illicit profits by trading in the same securities in his own accounts and taking advantage of the artificial stock prices that resulted from the unauthorized trades placed from the victims' accounts.
