FINRA Bans Broker For Recommending Ponzi Scheme

The Financial Industry Regulatory Authority (FINRA) has banned Stuart G. Dickinson, a Dallas broker, from the securities industry for recommending that customers back a Ponzi scheme. At the time, Dickinson was with WFG Investments. The firm fired him in 2013.

In addition to the bar, Dickinson must pay seven customers $924K in restitution over the Texas securities fraud. According to FINRA’s default decision notice, Dickinson failed to perform the reasonable due diligence on ATM Financial services (ATMF) and did not detect the red flags indicating that it was a sham. As a result, said the self-regulatory organization, investors lost $1.02M.

It was in 2007 that Dickinson sold over $1M in limited partnership interests in ATM Alliance. He had formed contracts with the company to service and manage ATM machines in a number of locations. Dickinson established a general partnership to raise funds for the ATM investments and he became a 90% owner while his supervisor Trent W. Schneiter became a 5% owner. As part of the agreement, they would earn 20% off what the banking machines made.

The following year, the Dallas broker discovered that ATM Financial Services had not used ATM Alliance money to buy the machines. Instead, the funds were used to pay bogus returns to earlier investors.

FINRA believes that Dickinson should have detected the Ponzi scheme when he was given partially handwritten retail space lease agreements for the ATMs. Also, the third parties he spoke with to vet the company either did not know about ATM Alliance or the latter had referred them to him. The SRO said that not only did the former broker fail to properly vet the investment, but also he was reckless in performing his due diligence.

Before working at WFG investments, Dickson was employed at LPL Financial (LPLA) forerunner Linsco/Private Ledger Corp., in Boston, Bear Stearns, and Merrill Lynch.

Ponzi Scam

With a Ponzi scam, investors are not making money, they just think they are profiting. Usually, the “returns” paid to existing investors is the money put in by new investors. Ponzi scammers will typically promise high returns with minimal if any, risk. Because there are little or no actual earnings, a Ponzi scheme will fail if new investors do not continue to come in and invest or if too many existing investors decide to cash out their investment.

Our Texas securities fraud law firm represents investors wanting to recoup their losses. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Indie broker ordered to repay almost $1M for failing to vet limited partnership, AdvisorHub, October 25, 2016
FINRA barred WFG broker for selling customers a Ponzi scam, InvestmentNews, October 25, 2016