The SEC has initiated an administrative proceeding against an advisor who allegedly misappropriated around $2 million of investors' funds in a scheme dating to 2008.
The SEC's internal review of Blake Richards of Buford, Ga., follows on a civil action the commission brought against Richards last year that ended in a settlement and a permanent injunction against future violations of securities law.
Richards' attorney in that case, Nathaniel Cochran, did not immediately respond to a request for comment.
In its complaint, the SEC alleged that Richards bilked at least six clients, including two who were elderly, by transferring money through one of two entities he ran while associated with large broker-dealers. During the period that the alleged fraud occurred, Richards had been working with H&R Block Financial Advisors and then LPL Financial.
The commission's complaint alleged that the majority of the funds that Richards had misappropriated from clients were retirement savings or payouts from life insurances policies that had covered a deceased spouse.
When clients would approach Richards with assets they were looking to invest, he would instruct them to make payments to one of two d.b.a. entities he oversaw -- Blake Richards Investments and BMO Investments -- and then pocket much of the funds once the transfer was completed.
"Richards, whose production at LPL Financial has been virtually nonexistent over the past few years, began siphoning off funds from clients, and converting them for his personal use," the SEC alleged.
The commission cited one instance when Richards was said to have issued a bogus statement that appeared to be printed on LPL letterhead, and another case when he allegedly told a client that funds had been placed in a policy with Jackson Life Insurance, when no such policy existed.
When LPL inquired into the status of the funds, Richards purportedly said that he had cleared the transactions through Goldman Sachs, though Goldman had no record of Richards or his clients.
LPL terminated Richards in May 2013.
In its administrative case, the SEC is seeking to determine whether, in fact, Richards committed the fraud and misappropriation the commission described, and, if so, what remedial action should be taken.
Once he is served with the order, Richards will have 20 days to respond, and an administrative law judge will hear arguments in a public hearing at a date to be determined.
Kenneth Corbin is a Financial Planning contributing writer in Washington.
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