In the wake of recent market turbulence, it is important to remember that some investment losses are not “investment” losses at all, but rather losses that are the result of stockbroker theft, fraud, Ponzi schemes, and otherwise.
Silver Law Group continues to investigate cases of stockbroker theft nationwide. Unfortunately, FINRA continues to report multiple cases of brokers improperly taking money from clients, taking improper loans or deceptively selling investments directly controlled by a stockbroker or financial advisor.
For example, we currently represent victims of permanently barred broker Leonard V. Fox, Jr., who is the subject of several fraud and misappropriation-related customer complaints on his BrokerCheck Report, published by the Financial Industry Regulatory Authority (FINRA). Fox’s former employing firm, Morgan Stanley, has settled several disputes arising out of his misconduct, but the scope of Fox’s misconduct is likely wider, affecting customers of his more recent employing firm, FSC Securities Corporation.
Fox was permanently barred from the securities industry in 2016, but the type of misconduct he was accused of engaging in—stealing funds from customers—remains prevalent in the securities industry, especially with respect to vulnerable and elderly investors.
Unfortunately, when FINRA, state or federal regulators, or law enforcement uncover that a broker was stealing from a client, it is often the case that the broker was engaging in more widespread misconduct and likely stealing from and/or defrauding multiple customers.
How Do Brokers Steal Customers’ Money?
Some brokers funnel their customers’ money into their own pockets by “recommending” unregistered investments. This form of fraud is often referred to in the industry as “selling away.” This is when a broker recommends an investment that has not been registered or approved by the broker’s employing firm. These unapproved “investments” are in fact illegitimate or entirely fake business ventures and/or Ponzi schemes.
Brokerage firms have a responsibility to supervise their representatives so as to prevent these types of schemes. This includes taking steps to ensure that representatives follow all securities rules and regulations as well as internal policies and procedures. Failure to uphold these standards could render the brokerage firm liable for the losses suffered by customers.
Misappropriation of Customer Funds
Another way a broker can steal from a customer is by writing himself checks or wiring funds straight from the customer’s brokerage or bank account. Sometimes customers who grant brokers the authority to withdraw funds from their accounts for various reasons such as payment of bills, fees etc. may not realize that the broker is directing funds to his own personal account.
Brokers have access to a variety of personal private financial information including social security numbers and bank account numbers and wiring information. Armed with this data, brokers can impersonate their customers and steal funds or simply withdraw funds without the customer noticing.
Borrowing Money from Customers
Brokers also steal money from customers by convincing customers to lend them money with no intent of ever paying back the borrowed funds. While not necessarily “theft” in the legal sense, brokers sometimes take advantage of the trusting relationship they develop with customers and convince them to lend the broker money.
FINRA rules prohibit brokers from borrowing money from customers unless permitted by the firm and written firm procedures are followed. These rules are designed to protect investors—particularly those who are elderly or vulnerable—from being taken advantage of.
Silver Law Group Represents Victims Of Stockbroker Theft
Silver Law Group has extensive experience representing victims of broker theft in FINRA arbitration claims against broker-dealer firms.
For example, Silver Law Group is investigating the misconduct of former FSC Securities Corporation registered representative Leonard V. Fox, Jr. Prior to joining FSC Securities Corporation, Fox was registered with Morgan Stanley and Janney Montgomery Scott LLC. Fox was conducting business as Fox Wealth Management Group, LLC.
After more than 30 years in the securities industry, Fox was permanently barred from participating as a broker failing to respond to FINRA’s requests for documents and information related to an investigation into allegations that he borrowed and misappropriated client funds. Brokerage firms that formerly employed Fox have settled claims involving both misappropriation of funds and other misconduct by Fox, including unauthorized and excessive trading (“churning”) and improper borrowing of customer funds.
Are You Or Someone You Know The Victim Of Stockbroker Theft?
Silver Law Group specializes in fighting for clients who lost money to brokers and financial advisors who take advantage of their positions as trusted financial professionals. Silver Law Group operates on a contingency-fee basis, so the firm does not profit unless we recover funds for you.
If you believe you may have been the victim of broker fraud or broker theft, contact us at 1-800-975-4345 for a confidential consultation. We may be able to help you recover your losses.