RIA Compliance Blog
On February 19, 2019, the United States District Court for the Southern District of Ohio granted a consent judgment against John Gregory Schmidt, a former Wells Fargo Advisors Financial Network (FINET) advisor. The Securities and Exchange Commission had filed a complaint against Schmidt in September 2018, alleging that Schmidt sold securities that belonged to some of his retail brokerage customers and covertly used the proceeds from those sales to conceal shortfalls in customer accounts. According to the SEC’s complaint, Schmidt sent his customers fake account statements which overstated their account balances in order to cover up his conduct. This case demonstrates the need for broker-dealers and registered investment advisers to adopt and enforce policies that effectively give them the ability to detect the use of such fraudulent statements.
Schmidt worked as a registered representative and the branch manager of a FINET office from about December 2006 through October 2017. By October 2017, he had about 325 retail brokerage customers, many of whom were retirees who were dependent on withdrawals from their accounts to pay living expenses. Continue reading ›