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Barred former Cetera advisor charged with securities fraud by SEC

A financial advisor from Cetera Advisors and the COO of his RIA misappropriated more than $780,000 in a fraud scheme involving a real estate investment fund, according to the SEC.

Daniel B. Vazquez Sr. used his clients’ money to pay for business expenses and credit card debt, as well as luxury cars and home improvements for himself and his staff, investigators said in a civil complaint filed earlier this month. At least 27 clients had invested about $2.2 million into the fund over four years.

Relatives who were clients of Vazquez’s have filed a FINRA arbitration claim of $500,000 in one of three pending cases involving his conduct, according to BrokerCheck. FINRA barred Vazquez from the industry in September 2016 after investigators said he failed to respond to its request for information.

Cetera Advisors’ parent, Cetera Financial Group, agreed to pay clients refunds of more than $5.7 million in unrelated settlements with FINRA last year. The company, formerly known as RCS Capital, emerged from bankruptcy in 2016 after the departure of onetime owner Nicholas Schorsch.

Vazquez, the founder of Irvine, California-based Hoplon Financial Group, and Gilbert Fluetsch, the firm’s COO, steered money out of an entity called New Economic Opportunities Fund I (NEON), according to the SEC. Vazquez had pitched the fund as an investment pool for purchasing and flipping residential properties.

“Vazquez and Fluetsch perpetrated this deception by raising money from investors with promises that investor money would be used to purchase and renovate real estate and that Hoplon’s compensation would be strictly limited, while in reality they were draining most of the money from NEON’s accounts for their own purposes,” SEC investigators said in the complaint filed in the Central District of California.

Efforts to reach Vazquez, 56, and Fluetsch, 52, were not successful.

Public databases listed no current phone numbers for Vazquez, and repeated calls to Hoplon Financial returned a busy signal. SEC investigators say Vazquez is “last known to have resided in Orange County.” A summons filed in the Central District of California did not list any attorneys for him.

Advisors should expect more regulatory requirements, enforcement actions and uncertainty in 2018, experts say.
December 11

The phone line at the office of the attorney listed for Fluetsch, Teresa Alarcon, has been disconnected. Calls to phone numbers that showed up for Fluetsch in public databases were not returned.

Vazquez resigned from Cetera in May 2016 after learning of the FINRA investigation, the SEC says. Representatives for Cetera, which was also the parent of Vazquez’s shuttered previous firm, Investors Capital, sent a statement in response a request for comment on the SEC case and the arbitration claims.

“Cetera expects its affiliated financial advisors to adhere to the highest professional and ethical standards at all times,” Cetera spokesman Joseph Kuo said. “Beyond this, and as a matter of policy, we don’t publicly discuss individuals no longer affiliated with our firm.”

Neither Vazquez nor Fluetsch face any criminal charges. A spokesman for the Los Angeles U.S. Attorney’s Office noted that federal prosecutors do not confirm or deny any current investigations.

The real estate investment fund purchased eight Southern California properties and earned a profit of $917,322 after reselling them, according to the SEC investigation. Yet Vazquez and Fluetsch transferred $968,436 to Hoplon and themselves, five times their maximum disclosed fees, investigators say.

Fluetsch knew about the misappropriation, the SEC says, because he maintained a ledger of the firm, the investment fund and a construction company they formed. He asked Vazquez to reimburse the investment fund, but Vazquez came up with excuses and never repaid it, according to investigators.

The construction firm received more than $65,000 from the fund for work on their homes, with nearly $60,000 worth of upgrades for Vazquez’s home, investigators say. Other money from the fund went to payments on a series of luxury cars for Vazquez, Fluetsch and other staff, according to investigators.

Outside of a single small payment, none of the investors received profits or even their principal, the SEC says. Fluetsch had assured one investor that the fund was performing well, and Vazquez gave excuses or didn’t respond at all when clients started asking to remove their money in 2015, according to the SEC.

Clients who later alleged unsuitable investments, negligence and other violations of FINRA rules received a $65,000 settlement in August 2016, BrokerCheck shows. Pending claims, including the one by Vazquez’s relatives, amount to requested damages of $880,000. He worked for 12 firms over 17 years.

The SEC is seeking full disgorgement in the case, according to the complaint. Vazquez and the firm face two counts of securities fraud and one count of operating an unregistered broker-dealer, while Fluetsch was charged with one count of securities fraud and one count of aiding and abetting securities fraud.

The Jan. 16 summons gave Vazquez and Fluetsch three weeks to file an answer to the SEC’s complaint.

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