The Securities and Exchange Commission today charged Irving, Texas-based HD Vest Investment Securities with violating customer protection rules after failing to adequately supervise Lewis J. Hunter, a registered representative.
In September 2010 and February 2011, Hunter, of Detroit, Mich., advised two separate elderly clients to invest a total of approximately $300,000 in a Canadian bank and guaranteed them monthly interest payments of 15 percent for two years, the SEC said. In reality, the SEC charges, Hunter used the funds to pay for personal and business expenses and concealed his actions by fabricating bank documents and used the client’s own funds to make the interest payments.
According to the SEC, HD Vest failed to have proper policies and procedures in place to monitor its registered representatives.
The SEC also found that HD Vest did not deposit funds into a reserve account for the benefit of customers who were defrauded by the representative as required by customer protection rules.
HD Vest settled the charges by agreeing to pay a $225,000 penalty and retain an independent compliance consultant to improve its supervisory controls. HD Vest could not be reached for comment.
“Firms like HD Vest do face greater challenges in supervising their representatives in numerous small branch offices spread across the country, but that doesn’t excuse the firm from establishing adequate policies and procedures to address those challenges,” said David R. Woodcock, director of the SEC’s Fort Worth regional office.