{"id":4484,"date":"2022-02-24T09:00:55","date_gmt":"2022-02-24T15:00:55","guid":{"rendered":"https:\/\/blogs.luc.edu\/compliance\/?p=4484"},"modified":"2022-02-24T09:00:55","modified_gmt":"2022-02-24T15:00:55","slug":"the-financial-services-industry-and-its-regulatory-landscape-2021","status":"publish","type":"post","link":"https:\/\/blogs.luc.edu\/compliance\/?p=4484","title":{"rendered":"The Financial Services Industry and Its Regulatory Landscape: 2021"},"content":{"rendered":"

Jeffrey Hymen<\/em><\/p>\n

Associate Editor <\/em><\/p>\n

Loyola University Chicago School of Law, JD 2023<\/em><\/p>\n

Every year, hundreds of financial advisors and brokers across the country are convicted of a host of bad acts, which include conducting Ponzi schemes, misappropriating client funds and forging customer signatures. 2021 was no exception. Here are ten recent examples of how the legal system as well as regulators in the financial services industry, respond to allegations of fraud, misappropriation, improper hiring practices, and criminal activity.<\/p>\n

Cases of fraud and misappropriation <\/strong><\/p>\n

10. Former Merrill Lynch broker, Marcus Boggs<\/a>, was sentenced to forty-two months in prison after he misappropriated $3 million in client funds. According to prosecutors, Boggs informed clients that he planned to invest their money in securities; however, Boggs instead misappropriated nearly $3 million from numerous clients in order to cover his own mortgage payments and credit card debt. Boggs additionally misappropriated funds from one client<\/a> who received compensation from the State of Illinois after being wrongfully convicted and imprisoned for the 1991 sexual assault, kidnapping and murder of a teenage girl, also known as the \u201cDixmoor 5<\/a>\u201d case. Boggs misappropriated at least $800,000 from the wrongfully-convicted man after his release from prison, according to prosecutors.<\/p>\n

9. Daryl Bank<\/a>, a former investment advisor at Capitol Securities Management, was sentenced to thirty-five years in prison in connection with his role in an investment fraud scheme. Between January 2012 and July 2017, Bank fraudulently convinced at least 300 investors, including several elderly clients, to invest in entities which were owned and operated by Bank. Bank and several co-conspirators<\/a> misappropriated nearly $25 million in client funds in order to fund the investment scheme as well as cover Bank\u2019s personal expenses, according to court documents<\/a>.<\/p>\n

8. The Securities and Exchange Commission (SEC) obtained a temporary restraining order (TRO<\/a>) and an asset freeze against John Woods in connection with his orchestration of a Ponzi scheme. The SEC\u2019s complaint<\/a> alleged that Woods convinced at least 400 investors to invest in Horizon Private Equity, in which Woods purportedly guaranteed<\/a> a six or seven percent return for two to three years. Woods informed investors that the funds would only be invested in government bonds and small real estate development; however, Woods\u2019 scheme<\/a> generated $110 million from harmed investors, according to the SEC.<\/p>\n

7. William \u201cDoc\u201d Gallagher, 80, recently pleaded guilty<\/a> to his role in conducting a ten year Ponzi scheme, which defrauded at least 190 investors out of nearly $32 million. Gallagher, also known as the \u201cMoney Doctor\u201d, was sentenced<\/a> to three lifetimes in prison and has been ordered to pay more than $10 million in restitution. The SEC originally charged<\/a> Gallagher in 2019 and subsequently halted the scheme, which primarily targeted elderly investors. According to court documents<\/a>, Gallagher guaranteed a five to eight percent return to investors seeking a stable retirement fund rather than volatile investment recommendations.<\/p>\n

6. The Financial Industry Regulatory Authority (FINRA<\/a>) has barred a former broker at Northwestern Mutual Investment Services, Roderick Whited<\/a>, after he allegedly misappropriated $44,170 in charitable donations. According to FINRA, Whited collected the donations between August 2017 and February 2018 and transferred the funds to his personal bank account rather than the appropriate pediatric cancer charity. The Certified Financial Planner Board of Standards (CFP Board) joined FINRA in suspending<\/a> Whited, which prohibits Whited from utilizing the CFP certification mark pending the results of further investigation.<\/p>\n

5. Brian McQuade<\/a>, formerly an investment advisor for Columbia Financial Advisors, received wire fraud charges in connection with his scheme<\/a> to misappropriate $750,000 from a nonprofit organization. The nonprofit, which primarily provides services to military veterans, was informed that McQuade would manage their brokerage account on their behalf. However, McQuade failed to open any brokerage account and instead used the nonprofit\u2019s funds to cover personal expenses including country club dues as well as luxury car and mortgage payments, according to the complaint<\/a>. McQuade faces a maximum prison sentence of twenty years for his role in the scheme, which lasted from June 2018 to August 2021.<\/p>\n

Cases of improper hiring practices and criminal activity <\/strong><\/p>\n

4. RBC Capital Markets terminated<\/a> Scott Matalon after his arrest in Parkland, Florida. Matalon was charged with kidnapping\/inflicting bodily harm, false imprisonment, and domestic battery, for allegedly beating a woman and holding her against her will. Matalon was also arrested<\/a> three weeks beforehand for allegedly battering another woman; however, Matalon pleaded not guilty and was released on a $10,000 bond, according to the Broward Couty Sheriff\u2019s Office. Prior to his arrest, Matalon\u2019s BrokerCheck<\/a> profile reported no disclosures after eighteen years in the industry at nine separate firms, according to the FINRA.<\/p>\n

3. LPL Financial terminated investment advisor Eileen Cure in August 2021 after allegations surfaced<\/a> that Cure had refused to interview Black applicants for an opening at her Nederland, Texas office. LPL Financial learned of the allegations after videos posted on TikTok that revealed Cure was informing employees<\/a> that she would not interview Black applicants. While Cure referred<\/a> to the TikTok videos as \u201cfalse and defamatory,\u201d the video in question displays Skype messages sent by Cure telling her staff, \u201cI specifically said no blacks,\u201d after an interview with a Black applicant.<\/p>\n

2. Gregory Estes, who has been a registered sex offender since 2002, was charged<\/a> with aggravated sexual assault and indecency with a child. Estes, 56, joined the Texas-based Stone Wealth Management in 2012 and was charged with continuous sexual abuse of a child in 2013; however, the charges were dismissed<\/a>. Estes\u2019 BrokerCheck<\/a> profile lists eight disclosures, including one from 2001 where Estes was charged with four counts of attempted sexual assault. Even though Estes was convicted, he received ten years of probation and a $1,000 fine.<\/p>\n

1. Anthony Turner was charged in connection<\/a> to the killing of Michelle Avan, who was a Bank of America executive as well as Turner\u2019s former colleague and girlfriend. The Los Angeles County District Attorney\u2019s office charged Turner with felony murder and first-degree residential burglary, but Turner pleaded not guilty<\/a> to Avan\u2019s murder this past August. Avan<\/a> worked at Merrill Lynch for twenty-two years as a managing director prior to her June 2021 promotion to head of Bank of America\u2019s global women\u2019s and underrepresented talent strategy, according to prosecutors.<\/p>\n","protected":false},"excerpt":{"rendered":"

Every year, hundreds of financial advisors and brokers across the country are convicted of a host of bad acts, which include conducting Ponzi schemes, misappropriating client funds and forging customer signatures. 2021 was no exception. Here are ten recent examples of how the legal system as well as regulators in the financial services industry, respond to allegations of fraud, misappropriation, improper hiring practices, and criminal activity.<\/p>\n","protected":false},"author":83,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[26],"tags":[324,369,543,863,906,1205,1788],"class_list":["post-4484","post","type-post","status-publish","format-standard","hentry","category-finance-banking","tag-broker-dealer","tag-cfpb","tag-criminal","tag-finra","tag-fraud","tag-journal-of-regulatory-compliance","tag-sec"],"_links":{"self":[{"href":"https:\/\/blogs.luc.edu\/compliance\/index.php?rest_route=\/wp\/v2\/posts\/4484","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.luc.edu\/compliance\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.luc.edu\/compliance\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.luc.edu\/compliance\/index.php?rest_route=\/wp\/v2\/users\/83"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.luc.edu\/compliance\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=4484"}],"version-history":[{"count":0,"href":"https:\/\/blogs.luc.edu\/compliance\/index.php?rest_route=\/wp\/v2\/posts\/4484\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.luc.edu\/compliance\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=4484"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.luc.edu\/compliance\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=4484"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.luc.edu\/compliance\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=4484"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}