New York Securities Fraud Lawyers Blog
Last week, Malecki Law filed an amended FINRA arbitration complaint against Securities America on behalf of victims claiming that the broker-dealer’s inadequate supervision over its registered representative, Hector May, permitted his alleged Ponzi Scheme to happen. Securities America failed to act as Hector May sold fictitious “tax-free” corporate bonds from his New City Securities America office with his Securities America approved Registered Investment Advisory business, Executive Compensation Planners. The amended complaint adds two pension plans as additional plaintiffs joining the original nine victims specified in the June 18th filing. Our announcement of the filing to the press piqued the interest of the media including a reporter who interviewed attorney Jenice Malecki for an article in Lohud, as well as an article in Financial Planning magazine.
Hector May was formerly a Securities America registered representative, who reportedly managed more than $18 million in assets according to his Form ADV. Before the alleged Ponzi scheme surfaced, Hector May was an influential community member who donated to charities and political candidates. Claimants alleged that Hector May simply used his community status to issue, solicit and sell these non-existent securities products. Now, Hector May is being investigated by multiple government agencies for alleged fraud resulting in millions of dollars bilked from unsuspecting investors. Of course, Hector May refuses to provide answers regarding the whereabouts of the invested funds or any further details about the transaction activities in dispute.
The amended complaint now alleges that Hector May also stole money from two New York company’s pension plans while running his Securities America branch office. The newly added pension plans’ beneficiaries were allegedly sold fictitious “tax-free” corporate bonds. Hector May allegedly told company beneficiaries not to worry since their invested money would be in “safe places” under his RIA with Securities America. Hector May’s reassuring comment could not be further from the truth, hidden by his falsely produced employee benefit plan and annual reports. Consequently, company employees have been defrauded out of millions of dollars that had been intended to be their income upon retirement.
As a FINRA- registered brokerage firm, Securities America, Inc. is required to adequately supervise and audit all registered members per industry rules. FINRA rule 3110 requires that registered broker deals provide an equal level of supervision of branch offices as in main offices. Furthermore, member firms must review office activities as well as periodically examine customer accounts to detect and prevent irregularities and abuse. During Hector May’s employment under Securities America, Both SEC and FINRA have repetitively emphasized the importance of firms closely supervising small dispersed offices. FINRA and the SEC even jointly issued Regulatory Notice 11-54 to guide broker-dealers with performing required supervisory duties in broker-dealer branch inspections.
Clearly, Securities America Inc was informed of their obligations to actively find and react appropriately to red flags that could indicate fraudulent business activity. Nonetheless, Securities America is alleged to have failed to perform the simplest of checks into Hector May’s business activities, bank accounts and office that would have exposed his sale of manufactured investments. Securities America appears to have inadequately performed their proper supervisory duties before, based on industry records posted on BrokerCheck. The records include five matters in relation to a branch office representative selling fraudulent promissory notes. Investor fraud attorney Jenice Malecki Law sincerely believes that the scheme could have been prevented had Securities America Inc performed thorough audits of Hector May’s office.
Investors should not have to incur investment losses as a result of unscrupulous financial professionals and brokerage firms with supervisory shortcomings. Any former clients of Hector May, Securities America, or Executive Compensation Planners should pursue legal action to recoup any unfair losses. Our securities lawyers have experience with helping defrauded investors recover millions of dollars against brokerage firms for failing to supervise an unscrupulous registered representative adequately. Contact our top-rated investment fraud attorneys for further information about this case and assistance with upholding your investor rights.