On November 30, The Securities and Exchange Commission made moves to stop what it is calling an “ongoing $2 million fraud” against the elderly by filing an emergency action in the U.S. District Court for the Eastern District of New York. The SEC says that Peter Dawson and his two companies, Ethan Thomas Co., Inc. and BMG Advisory Services Inc., misappropriated investor funds and fraudulent solicitations from elderly investors, including an 85-year old woman, an Episcopal priest, and a retired, legally blind NY City firefighter.
The commission says that Dawson acquired over $2 million from no less than seven investors, and that he told his elderly clients that they should mortgage their home, surrender their variable annuity policies, and transfer the proceeds to Ethan Thomas, where Dawson could manage these assets through BMG. The SEC is accusing Dawson of making misleading and false statements to these clients regarding their funds and of promising each of them a 12-15% return on every investment.
The SEC says that Dawson authorized-to himself and his wife-payments of up to $17,378.08 from a BMG account between March and April 2006. Later that year, he authorized an additional $53,326 to himself and an additional $68,015 to his wife. He neglected to pay his clients’ mortgages, and when some of his clients found out, they called him to find out why. Dawson closed down his BMG office and unsuccessfully tried to commit suicide.
The SEC is asking for a temporary restraining order to impose an injunction for violating securities laws and freeze the defendants’ assets. The SEC also says that it is seeking disgorgement and wants the defendants to pay a fine. In addition, the commission wants permanent injunctions against future violations of federal securities laws, the assessment of civil penalties, and the disgorgement of ill-gotten gains.
The U.S. Securities and Exchange Commission
The role of the SEC is to protect investors, facilitate capital formation, and maintain market integrity. That’s because unlike the banking world, where the federal government can guarantee deposits, the value of bonds, stocks, and other types of securities can never be guaranteed.
The SEC oversees securities brokers, dealers, mutal funds, securities exchanges, and investment advisors. Every year, the SEC brings several hundred enforcement actions against companies and individuals for violating securities lawswith infractions such as accounting fraud, providing false information, and insider trading. The commission is committed to maintaining fair dealing, the disclosure of important market-related information, and protecting against fraud.
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