A prospective client investigation was ordered on a company and its president, but the preliminary information was enough to reject this individual or any company under his control from the proposed business engagement. Initial court searches uncovered a 2003 criminal misdemeanor conviction for possession of a false identification to be used to defraud. The index did not provide much information and the file was destroyed by the court, so SI’s analyst turned to media sources to dig deeper. Sure enough, one article referenced guilty pleas entered by the subject and his business partner for hiring imposters to take the Series 7 securities brokers’ examination for them. Each was sentenced to a year of probation and fined $5,000. Articles from 2004 reported three civil cases for fraud in jurisdictions where the subject appeared to have no residential history. Follow-up research found that judgments in these lawsuits totaled more than $4.6 million. Several articles also linked the subject to a con artist who had admitted to defrauding ethnic organizations and individuals of $80 million during the late 1990s. And in 2007, the FDIC had executed a settlement agreement with the subject and (the same) business partner after they allegedly failed to seek FDIC approval before making an investment in an unregistered bank holding company. On the whole, this company president had been engaged in fraudulent activities for over a decade and no legal or regulatory action appeared to stop his mode of operation.
The Securities and Exchange Commission (SEC) today charged an Illinois-based investment adviser with offering to sell fictitious securities through social media sites. According to the SEC’s Division of Enforcement, Anthony Fields of Lyons, IL, offered more than $500 billion in fictitious securities, and in some instances, used LinkedIn discussions to promote fraudulent “bank guarantees” and “medium-term notes.”
The SEC’s order instituting administrative proceedings against Fields charges that he made multiple fraudulent offers through his two sole proprietorships – Anthony Fields & Associates (AFA) and Platinum Securities Brokers. Fields allegedly provided false and misleading information concerning AFA’s assets under management, clients, and operational history to the public through its website and in SEC filings. Fields also failed to maintain required books and records, did not implement adequate compliance policies and procedures, and promoted himself as a broker-dealer while he was not registered with the SEC.
Also today, in recognition that fraudsters are now turning to new and evolving platforms to peddle their scams, the SEC issued two alerts to highlight the risks investors and advisory firms face when using social media.
One of these alerts, a National Examination Risk Alert titled “Investment Adviser Use of Social Media,” provides staff observations based on reviews of investment advisers of varying sizes and strategies that use social media. The bulletin addresses issues that may arise from social media usage by firms and their associated persons, and offers suggestions for managing the antifraud, compliance, and recordkeeping provisions of the federal securities laws. The alert notes that firms need to consider how to implement new compliance programs or revisit their existing ones to align with the rapidly changing technology.
In the SEC’s second bulletin, an Investor Alert titled “Social Media and Investing: Avoiding Fraud” prepared by the Office of Investor Education and Advocacy, the aim is to help investors be aware of fraudulent investment schemes that use social media, and provide tips for checking the backgrounds of advisers and brokers.