The claim went on to explain that Smith failed to respond to the Finra notice because he was being hospitalized for his mental condition. Smith and his doctors informed Finra of this in a September 2022 letter, the claim said. Finra concluded its investigation in April and "made a determination to not seek any further action," McCardle said in a brief filed in the case.
The claim also stated that the criminal matter is ongoing and that Smith "maintains his innocence."
Smith's business associates took control of his book of business in March 2022, when Smith signed documents they had drawn up, according to the claim.
Smith, however, alleged in the claim that his mental condition at the time makes the transaction invalid.
"This was an illegal and hostile takeover ... by Respondents McAvoy, Tomisman and Selig because Smith did not have the mental capacity and/or cognitive function to enter into the agreement," the claim states. "As a result, any such agreement that Matt Smith allegedly entered into on or about March of 2022 is void due to lack of mental capacity and has no force or effect whatsoever."
The claim also alleged that McAvoy, Selig and Tomisman became concerned “for their own selfish reasons” and began informing Smith’s clients that he was abusing drugs and alcohol and needed professional rehabilitation. “At no time period has Matt Smith’s mental condition been the result of drug, alcohol or abuse of any illegal substance,” the claim said.
Smith’s customers were informed that he was no longer affiliated with Securities America and the firm. “Although we are sad to see him go, we certainly wish Matt nothing but continued success and happiness in his personal and business life,” the letter in part to customers read. “We had to take the step of changing the ownership and management of the firm because Matt decided to move on to new endeavors."
Securities America, the claim said, wrongfully transferred Smith’s customers that were in his joint rep account to McAvoy and Selig, whom the claim alleged have limited experience with CP Capital Management and are not qualified to handle Smith’s customers. The claim noted that at the time, Smith was the only one in the firm with a Series 7 license until 2020 when Selig came on board.
Smith’s more than two decades in the industry began in 1995 with Guardian Investor Services Corp. He left in 1996 for Nathan Lewis Securities and moved to Cadaret, Grant & Co. in 2003 before joining Securities America in 2018.