Stoltmann Law Offices, P.C. continues to investigate investor claims and reports involving former Invest and LPL Financial registered representative James T. Booth, of Norwalk, Connecticut, who was indicted on charges of securities fraud, wire fraud, and investment advisory fraud on September 30, 2019. According to the unsealed indictment, Booth is alleged to have executed a Ponzi scheme which effectively converted almost $5 million from forty clients. The unsealed indictment was filed in the United States District Court for the Southern District of New York, Case No. 19-CRIM-699, and can be viewed here. Although Booth operated his own company called Booth Financial Associates, he was at all time relevant to this scheme a licensed and registered representative with FINRA member brokerage firms Invest Financial Corporation and LPL Financial.
As we previously discussed on this blog, James Booth was terminated from LPL Financial on June 26, 2019 for allegedly converting $1 million from his clients. On July 1, 2019, Booth consented to a lifetime ban from the securities industry after FINRA investigated information provided to it by LPL established that Booth converted – or stole – $1 million from clients by depositing the funds into personal accounts for his own use. According to the FINRA Acceptance Waiver and Consent (AWC), Booth committed these alleged acts from approximately April 2014 to May 2019. Looking back, it appears that both LPL and FINRA underestimated the scope of this scam because the SDNY now alleges that Booth stole $4.9 million.
According to FINRA, numerous clients have filed complaints against Invest and LPL Financial to recover funds stolen by Booth. Some of these complaints have already been settled with full recoveries. FINRA Rules and securities industry regulations require brokerage firms like Invest Financial and LPL Financial to supervise their financial advisors. The foundation for this obligation to supervise to found in the Securities Exchange Act of 1934 which states:
“The Commission, by order, shall censure, place limitations on . . ., suspend . . . or revoke the registration of any broker or dealer if it finds . . .that such broker or dealer . . . (E) has failed reasonably to supervise, with a view to preventing violations, another person who is subject to his supervision.” 15 U.S.C. § 78o(b)(4).
Many states include regulations in their state securities act mandating that brokerage firms reasonable supervise their financial advisors. Further, courts have held that firms can be liable even to non-customers for damages resulting from Ponzi schemes executed by their registered representative. See McGraw v. Wachovia Securities, 756 F. Supp. 2d 1053 (N.D. Iowa 2010). This obligation and duty to supervise is ensconced in securities regulations, including FINRA Rule 3110.
If you or someone you know is a victim of James Booth’s Ponzi scheme, please contact Stoltmann Law Offices at 312-332-4200 for a free, no obligation consultation with an experienced securities attorney. Stoltmann Law Offices is a contingency fee firm, which means we do not get paid until you do!