Finra arbitrators have ordered Capitol Securities Management to pay two retired school teachers nearly $2 million for the misdeeds of a registered rep who killed himself after he got caught.

The representative, identified in documents only as Mr. T, committed suicide after the scheme came to light in 2017. He wrote a confession letter to Capitol Securities, a financial services firm in the Washington, D.C., area, admitting he had used $200,000 of the clients’ money for himself and that he lost the rest in risky trading, the panel records said. He also wrote confession letters to the two complainants, Janis Lakin and Beryl Patin.

Lakin, who is in her mid-80s and a resident of Louisiana, and Patin, a resident of Virginia and former neighbor of Lakin, placed investments with Capitol Securities through the registered representative, who was Lakin’s nephew. The two investors were characterized by the arbitration panel as unsophisticated investors who trusted the representative.

The arbitration panel found that Mr. T engaged in a pattern of fraudulently selling securities of both Lakin and Patin in order to illegally transfer cash into other accounts. In March 2017 Capitol fired Mr. T, who shortly after mailed letters to each party confessing to years of thefts from their accounts. In his confession letter to Capitol Securities, Mr. T stated that he began by trying to make up losses in a customer’s account, lost more, transferred funds from others’ accounts, and lost that in risky trading. All along, he targeted victims whom he “could take money from without them noticing,” the panel said.

The panel said activity in the accounts resulted in numerous trading alerts flagged by automatic monitoring programs. Many of the trades were coded so that even more alerts were not generated. Although the accounts were coded long-term growth with a moderate risk level, the accounts were “replete with short-term trading, high-margin balances, transfers out to other Capitol accounts and excessive commissions”, the panel said.

Capitol Securities said required securities industry procedures were in place and that they were carried out by the firm with reasonable diligence. Capitol Securities “argues that problems now glaringly apparent in hindsight, were not so during the regular course of business,” according to panel records.

The panel decided Capitol Securities has to pay Lakin $1,046,329 in compensatory damages and has to pay Patin $716,656 in compensatory damages. Capitol Securities also has to pay attorneys’ fees and hearing costs for both claimants totaling more than $600,000.