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Is Your Broker Selling Investments Approved By the Broker’s Firm?

Is Your Broker Selling Investments Approved By the Broker’s Firm?

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The SEC’s Office of Investor Education and Advocacy and Retail Strategy Task Force Warn Investors About Red Flags that a Broker May Be Running a Side Business Offering Investments Not Approved for Sale Through the Broker’s Firm

The SEC advises investors to always check the registration status and background of anyone recommending or selling an investment.  Click here to research your investment professional.

Importantly, even if you are investing with a registered broker that you have known for years, make sure that your investments are approved for sale through the broker’s firm.

Ask your broker for an explanation and follow up with the firm’s compliance department if you encounter any of these potential red flags:

Your broker asks you to make out a check, or to wire money, to any person or to a different firm;

Your broker tries to sell you an investment without any paperwork about the investment;

Investments or deposits you made through your broker do not appear on your account statement from the firm; or

You receive an account statement that does not appear to be from the firm.

Investors: Use caution if your broker asks you to sign a letter that you consent to an investment that is not purchased through the firm. If you believe a broker is offering investments that may not be approved for sale through the firm, or to report other problems with a broker, submit a complaint to the firm and to the SEC or FINRA. Anytime you invest through a broker, confirm that the broker is registered and look out for signs that may indicate your investments are not being made through the broker’s firm.

SEC Charges Investment Professional in $8 Million Scam Targeting Long-Term Brokerage Customers

According to the SEC’s complaint, Steven Pagartanis (“Pagartanis”), who was affiliated with a registered broker-dealer, told some investors – including retirees who had been Pagartanis’s customers for many years – that he would invest their funds in either a publicly-traded or private land development company.  He promised that the funds would be safe and also promised guaranteed monthly interest payments on the investments.  At Pagartanis’s direction, his investors wrote checks payable to a similarly-named entity that was secretly controlled by Pagartanis.  In all, the customers invested approximately $8 million, which Pagartanis used to pay personal expenses and make the guaranteed “interest” payments to his customers.  To conceal the scam, which unraveled earlier this year when Pagartanis stopped making the so-called interest payments to customers, Pagartanis created fictitious account statements reflecting ownership interests in the land development companies.

The Suffolk County District Attorney’s Office has filed criminal charges against Pagartanis.  The SEC’s complaint, filed in United States District Court, Eastern District of New York, charges Pagartanis with violating the antifraud provisions of the federal securities laws.  The SEC is seeking a judgment ordering Pagartanis to disgorge his allegedly ill-gotten gains plus prejudgment interest, and to pay financial penalties.

Marc P. Berger, Director of the SEC’s New York Regional Office, said, “Regardless of how long investors have worked with their brokers, they should always confirm that recommended investments are approved for sale by their brokerage firm before transferring funds.”

Investors: The SEC’s enforcement action is an important cautionary reminder to be aware that even if you are investing through a broker you have known for years, you should be cautious if your broker asks you to make out a check or to wire money to an individual or to a different firm. 

Source: SEC.gov and Investor.gov.

Kehoe Law Firm, P.C.