The US Securities and Exchange Commission has filed civil charges against a former broker and investment adviser. According to the regulator’s investment adviser fraud complaint, Jay Costa Kelter defrauded three retirees of over $1.856M. Meantime, prosecutors in Tennessee have filed a criminal case against him related to one of the clients. A federal grand jury indicted him on multiple counts of wire fraud, mail fraud, and security fraud.
The SEC contends that from 9/2013 through last year, Kelter, who owns insurance and investment firm BEK Consulting Partners LLC (known in the past as Kelter & Company LLC), made misrepresentations to the older investors, whom he’d persuaded in 2013 to transfer their accounts to TD Ameritrade (AMTD) after he left his former employer. The former broker had access to their new accounts and was authorized to keep giving them investment advice and make trades on their behalf while, meantime, he allegedly used the funds for himself.
For example, Kelter is accused of misappropriating $1.467M from a 75-year-old widow who was nearly totally financial dependent on her investments by engaging in fraud and forgery. The SEC’s complaint said that the client had told him she was only interested in making conservative investments.
Kelter engaged in about 124 transactions that mainly involved options and bond trading in her account. He is accused of fraudulently taking money out of her TD Ameritrade account either by forging her signature or having her execute the requests but without letting her know that the money was going to BEK. He eventually admitted to her that he had taken her money and he promised to pay her back.
He allegedly misappropriated $200K from another client after using her account to sell securities and, instead of investing the money in a corporate CD, he transferred the funds to his company so he could cover his own spending and trades, as well as pay back another client. Not only did he have access to the accounts of the client, who thought that he was officially affiliated with TD Ameritrade, but also, he didn’t need her consent to trade for her.
Kelter is accused of using two of the clients’ funds to buy a Bentley, pay for a family vacation, and cover living costs, rent, “unauthorized business expenses,” as well as previous debts owed to clients. The SEC said that whatever remained of the funds he misappropriated he lost by making high risk trades.
Kelter allegedly also used client funds to trade in options and futures in accounts that had nothing to do with the investors involved. After telling one client that he could guarantee coverage on trading losses of up to $200K covered, the client let him continue trading in his account even though no such coverage existed.
Now, the regulator wants civil penalties, disgorgement of ill-gotten gains, prejudgment interest, ad injunctive relief.
Elder Financial Fraud
At Shepherd Smith Edwards and Kantas, LTD LLP, our senior investor fraud lawyers work with retirees and other older investors that have suffered investment losses due to the negligent, careless, reckless, or intentionally wrongful actions of financial firms and/or representatives. Contact our broker fraud law firm today.
The SEC’s Complaint (PDF)
More Blog Posts:
FINRA Bars NY Broker For Excessive Trading in Blind Senior Investor’s Accounts, Stockbroker Fraud Blog, November 9, 2017
Texas Securities Fraud: Houston Investment Advisor Gets Five Years for Defrauding Investors and Prison Sentences are Rendered in $6.4M Diamond Investor Fraud Case, Stockbroker Fraud Blog, November 10, 2017
UBS to Pay $3.5M Penalty To Settle Allegations that It Disadvantaged Retirement and Charity Accounts During Mutual Fund Transactions, Institutional Investor Securities Blog, November 6, 2017
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