(Editor's Note: The story below—stockbroker whipping around "mortgage-backs" for elderly nuns—makes me furious. And to think—the loss could have been averted by a visit to FINRA's BrokerCheck. Do you have a horror story to tell about financial advice? Send me an email.)
Not one week into the new year and the SEC has shut down another fraud scheme, this one targeting the Sisters of Charity, a congregation of mostly elderly nuns in Long Island.
The SEC charged Paul Chironis with churning two accounts owned by the nuns. The accounts were to be used for care of the nuns in assisted living facilities and for charity. Instead, Chironis used the money for his own self-declared charity—himself.
According to the complaint filed by the SEC, Chironis "virtually guaranteed the convent's accounts would lose money because of undisclosed and excessive" commissions. While admitting no wrongdoing, Chironis agreed to pay restitution of $350,000. He has also been barred from the securities industry.
The fraud took place in 2007 and 2008 when Chironis was employed by Capital Growth Financial, a Boca Raton based broker dealer. According to the Vermont Securities Division, Chironis was already under a regulatory order requiring "heightened supervision" at the time of fraud against the nuns.
Just a few years before that, Chironis was forced to pay $175,000 after a customer accused him of making unsuitable investment recommendations and churning. And a year before that he settled another customer complaint of unsuitable trading for $130,000. In fact, over the last few years he had 8 complaints lodged against him.
Ultimately, Chironis wound up at Capital Growth—a less than stellar broker dealer that was expelled by the Financial Regulatory Authority (FINRA) for failure to pay fines and sanctions. Before being forced to close its own doors, Capital Growth was sanctioned for violating anti-money laundering rules and not reporting suspicious transactions.
Evidently Chironis and Capital Growth were a perfect match.
Is there a lesson in all this? Always check out the person and the company where you keep your money. The information used to write this post was easily accessible from the SEC's and FINRA's BrokerCheck websites.