To pay for his mortgage and other personal expenses, an advisor defrauded his elderly clients of more than $1 million, the SEC charged Friday.

Leon Vaccarelli, 40, did not put client funds in conventional brokerage accounts as promised, the SEC claims. Instead Vaccarelli, who allegedly had some clients write checks payable directly to him, used the funds to pay for his expenses or to repay earlier investors.

One client, who had worked with Vaccarelli for over two years, invested an additional $100,000 with the broker in February 2016. Vaccarelli had suggested the client would get a guaranteed 3% return, but never actually invested the money, using it instead to make payments on his mortgage, according to the SEC.

In December, the client went to Vaccarelli for an explanation for why his IRA statement showed a balance of less than $500. Vaccarelli replied that it was a misprint, the SEC says. The broker then wrote "$90,476" on the account statement as a confirmation of the "actual" amount, the regulator claims. In reality, there was only $476 left in the client's account, according to the SEC's complaint.

New disclosure items on the SEC's revised Form ADV includes additional disclosure requirements for RIAs.
Bloomberg News

Vaccarelli, who was based in Waterbury, Connecticut, could not be reached for immediate comment.

At one point, Vaccarelli, needing to repay another client about $60,000, deposited an 88-year-old woman's $300,000 into a bank account he controlled instead of the client's account, according to the SEC. The elderly woman, who was living in a nursing home, never agreed to provide the broker with a loan or to change her investments without the input of her daughter and son-in-law, an attorney.

Vaccarelli told the elderly woman's daughter that her mother's money had been invested, but he instead used the funds to repay other clients, per the SEC.

Vaccarelli was previously affiliated with the Investment Center, an independent broker-dealer. The broker-dealer discharged Vaccarelli in July for failing "to comply with company policy regarding access to his office and computer during an examination," according to a note in his FINRA BrokerCheck record.

"Since being made aware of the situation with Mr. Vaccarelli we have been cooperating fully with the SEC’s investigation," the Investment Center’s CEO, Ralph DeVito, said in a statement. "We are outraged by Mr. Vaccarelli’s alleged behavior and continue to investigate the matter internally in order to aid ongoing investigations."

In 2015, FINRA fined Vaccarelli $7,500 and suspended him for one month because he allegedly exercised discretion in clients' accounts without their permission, according to the regulator's records. Without admitting or denying the charges, Vaccarelli consented to the sanctions and to the regulator's findings, according to FINRA.

The SEC is asking a federal judge in Connecticut for a temporary restraining order and an asset freeze, and disgorgement of allegedly ill-gotten gains, among other relief.

The commission said it received investigative help from the Connecticut Department of Banking's Securities and Business Investments Division.

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