Attorney General Gurbir S. Grewal and the Division of Consumer Affairs announced that the Bureau of Securities (“the Bureau”) today revoked the registrations of a Morris County investment advisory firm and its owner, and assessed them $500,000 in civil penalties for fraudulently selling at least $6.1 million in unregistered securities to elderly and retired New Jersey investors.
Officials say Richard Belott, the managing member and investment adviser representative of Financial Planning Advisors, LLC, sold unregistered securities to at least eight investors, including elderly and retired clients of FPA, then used at least $1.55 million of investors’ funds on personal expenses, including his daughter’s college tuition, extravagant trips for himself and his wife, and mortgage payments on the couple’s beach house.
The Bureau’s action comes on World Elder Abuse Awareness Day, a day when individuals and organizations from around the globe participate in activities and events to raise awareness about the physical, emotional, and financial abuse of elders.
“Preventing the financial exploitation of seniors is a top priority for New Jersey’s Bureau of Securities, not just on World Elder Abuse Awareness Day, but every day,” Attorney General Gurbir S. Grewal. “The enforcement action announced by the Bureau today underscores our ongoing efforts to protect elder investors from financial predators in the securities market.”
According to authorities, in a Summary Penalty and Revocation Order issued today, Bureau Chief Christopher Gerold found that between 2008 and 2015, Belott and FPA offered and sold at least 24 promissory notes purportedly issued by local diners and a developer. Belott represented to investors that their funds were investments in those businesses.
In reality, instead of receiving promissory notes from the diners or developer, investors received personal promissory notes from the owners of those businesses, who had undisclosed business relationships with Belott. In at least one instance, the promissory note was issued by Belott.
According to authorities, the promissory notes had a term of one year or more with stated interest rates ranging from 5 percent to 18 percent annually. Interest and principal payments to the promissory note investors were paid from the bank accounts of various entities, including the diners, developer and FPA, Gerold found.
In offering and selling the promissory notes, Belott failed to disclose to investors that: the diners and developer purportedly issuing the promissory notes were clients of his accounting firm, that he had outside business relationships with the owners of the businesses, or that he was a co-owner of some of the diners. Belott also failed to disclose that he received a commission on the sale of certain promissory notes he sold, or that he would use the investors’ funds for his personal benefit.
As set forth in the Summary Penalty and Revocation Order, Bureau Chief Gerold found that:
Belott and FPA violated New Jersey’s Uniform Securities Law through the following activities, among others:
· offering and selling unregistered securities;
· engaging in fraud or deceit upon FPA’s advisory clients and others;
· engaging in dishonest and unethical practices in the investment advisory business; and
· failing to maintain written investment advisory contracts.
Belott violated New Jersey’s Uniform Securities Law by:
· acting as an agent without registration;
· making untrue statements of material fact and/or omitting to state material facts; and
· making false and misleading statements to Bureau investigators during an investigative deposition.
FPA violated New Jersey’s Uniform Securities Law by:
· failing to make and keep required books and records;
· failing to maintain minimum capital or the required bond while having custody of clients’ funds.
According to the North American Securities Administrators Association, seniors remain a top target of investment fraud, and the problem of elder financial abuse continues to grow.
To minimize the risk of financial exploitation, New Jersey seniors who are interested in investing are encouraged to follow these tips BEFORE handing over any money:
· Contact the Bureau to find out if the investment professional and security they are selling are registered.
· Review all information regarding the investment with a trusted relative or friend.
· Allow time for careful consideration - scam artists will often try to rush people into making an investment decision.
· Understand the risks, restrictions and costs of the investment. Never buy without fully understanding every aspect of the transaction.
More information for both elderly investors and their caregivers can be found on the Bureau’s website at http://www.njconsumeraffairs.gov/bos/Pages/investormaterials.aspx or at www.ServeOurSeniors.org.
The Bureau is charged with protecting investors from investment fraud and regulating the securities industry in New Jersey. It is critical that investors “Check Before You Invest.” Investors can obtain information, including the registration status and disciplinary history, of any financial professional doing business to or from New Jersey, by contacting the Bureau toll-free within New Jersey at 1-866-I-INVEST (1-866-446-8378) or from outside New Jersey at 973-504-3600, or by visiting the Bureau’s website at www.NJSecurities.gov.