Posted in: Senior Investors | SEC | Greedy Brokers | Breach of Fiduciary Duty |
Susan G. Slovak, a registered stock broker in Corsicana, Texas who had been employed by several large independent broker-dealers, was given a lifetime ban from the securities industry last week. According to the Securities and Exchange Commission, and Texas state regulators, Slovak committed Texas securities fraud by embezzling hundreds of thousands of dollars from at least three of her clients’ accounts.
Also named in the SEC’s civil action was Slovak’s supervisor, Beth Chapman, who was also completely barred from securities trading. Both had been employed by Commonwealth Financial Network, a Massachusetts-based firm that currently manages $50 billion in assets through independent advisors nationwide.
According to the SEC’s civil complaint, which can be read in full here, Slovak liquidated more than $330,000 worth of securities in her 83-year-old customer’s account from 2005 to 2008, and used the money to pay off personal expenses.
After she had allegedly used up the first customer’s money, Slovak then took $144,000 from two additional customers.
In August 2008, Slovak divulged all this to Chapman, who was then managing her firm’s branch office in Corsicana. The SEC claims Chapman instructed Slovak to repurchase the liquidated securities without customer knowledge, in an apparent attempt to whitewash the stockbroker’s misconduct.
In doing this, the two were perpetuating the securities fraud and were violating additional federal securities laws. This, from the SEC:
In order to obtain authorization for the repurchases of securities, Slovak made material misstatements and/or omissions to compliance staff and to one of the customers. In particular, she suggested that she had withdrawn the funds by mistake, rather than as a result of deliberate misconduct.
Slovak was discharged from Commonwealth Financial in January 2009, a week after the SEC formally opened its investigation into her past trades.
Slovak settled the SEC’s latest charges for only $25,000 because federal regulators deemed her current financial state to be dire. It is also clear that the supervisory system at Commonwealth Financial failed, since it failed to monitor such activity from a broker and supervisor under its authority.
Regardless of how the market is faring, elderly investors are common targets for financial abuse. Retirees-or those nearing retirement-typically focus more on short-term potential for investments, and thus are more susceptible to fraudulent sales pitches from bad stockbrokers.
Financial abuse should be faced with the same seriousness as any form of elder abuse. In the case of Slovak’s 83-year-old victim, who we can assume was singled out among other customers for her vulnerability, faces a tougher financial struggle in dangerous economic times.
