The US Securities and Exchange Commission has secured a final judgment by default in its broker fraud case against Demitrios Hallas. The former broker was charged by the regulator in April for allegedly trading unsuitable investment products in five customers’ accounts. The customers were unsophisticated investors with not much, if any, experience in investing. Their net worth and income levels were modest enough that risky investments were not a good fit for their portfolios.
According to the regulator’s complaint, in a period of a little over a year, Hallas traded 179 daily leveraged exchange traded funds and exchange traded notes in these accounts. (Both ETFs and ETNs products are considered high-risk, volatile, and only suitable for sophisticated investors.)
The SEC said that Hallas had no reasonable grounds for recommending these investments to customers. Meantime, the latter were charged fees and commissions of about $128K. The net loss sustained over all the positions was about $170K.
Also, the SEC is accusing Hallas of misappropriating over $170K from a truck driver who was his customer. Rather than investing the funds, Hallas allegedly put the money in his own accounts to pay for his own expenses, including rent, restaurant bills, and student loans.
Now, Hallas must pay $550K in disgorgement, prejudgment interest, and civil penalties.
Hallas Had Been Cited in the Past for Making Unsuitable Recommendations
The SEC’s ETN/ETF fraud case is not the only one naming Hallas. For example, according to his BrokerCheck record, FINRA brought a regulatory action accusing him of recommending that a customer give up her fixed annuity and invest the money in a bond fund while he was working as a Chase Investments Services Corp. broker.
Hallas purportedly did not try to determine whether the customer would have to pay a surrender charge for selling the fixed annuity and he had no grounds for thinking that the bond would be a better choice financially for her and it was riskier than her original investment. After the customer followed his recommendation, not only did she have to pay sales and surrender charges but also, she was subject to “adverse tax consequences” from changing investments. FINRA said that the new investment was unsuitable for the customer.
The same regulatory action accuses Hallas of recommending, again while at Chase Investments Services, that a different customer partially liquidate a unit investment trust (UIT) and use the money to invest in a bond fund. Like her UIT investment, the bond fund exposed the customer to municipal bonds and provided tax-free income.
However, because she had agreed to Hallas’s recommendation, the customer was forced to pay a sales charge. Hallas is again accused of having no grounds for thinking that the bond fund would be more profitable for the customer.
Hallas, who is no longer registered as a broker, worked at a number of other financial firms. He was previously registered with Santander Securities (SAN) Aegis Capital Corp., Chase Investment Services Corp., PNC Investments (PNC), PHX Financial Inc., Ameriprise Financial Services, Inc. (AMP), Sorrento Pacific Financial LLC, McDonald Investments, HSBC Brokerage, Forefront Capital Markets LLC, and First Union Securities. He also was employed by Sovereign Bank and JPMorgan Chase Bank (JPM).
In 2016, after not responding to the Financial Industry Regulatory Authority’s request for information, Hallas was suspended. The following year, he was barred.
Broker Fraud Cases
Our broker fraud lawyers are here to help investors in recovering their losses sustained because of unsuitable recommendations made to them by a financial representative and/or a brokerage firm. Contact Shepherd Smith Edwards and Kantas, LTD LLP today if you sustained investment losses by recommendations made to you by Mr. Hallas or another broker that you suspect may not have been suitable for you.
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