Eric Schneiderman, the Attorney General for the State of New York, recently announced a lawsuit against a Queens-based investment adviser for allegedly defrauding elderly investors. Over the course of time, the adviser grew his business to over 120 advisory clients with over $11 million in assets under management.
The complaint asserts that, as an investment adviser, the defendant owed a fiduciary duty to his clients and was therefore obligated to recommend suitable investments to his clients consistent with their "investment objectives, risk tolerances and time horizons . . ." The Attorney General alleged that the adviser breached his fiduciary duty "by investing [his clients'] savings in wildly risky investments . . . without their knowledge and consent," and that he caused his clients to lose almost their entire investment.
Further complicating matters, the adviser's registration lapsed and therefore his firm was no longer registered to provide investment advice in New York or permitted to receive fees with respect to most client accounts.
The causes of action against the adviser alleged, among other things, violations of New York's Martin Act and Executive Law, including (i) schemes to defraud and other fraudulent practices, (ii) material misstatements and omissions with respect to client communications, (iii) unsuitable investments, (iv) common law fraud, (v) breach of fiduciary duty, (vi) unjust enrichment, and (vii) violation of New York's investment adviser registration requirements. In particular, with respect to such registration requirements, the Attorney General alleged that the adviser was unregistered, unlawfully collected advisory fees, and failed to properly maintain certain books and records. The facts alleged in this case are particularly egregious.
In announcing this lawsuit, New York's Attorney General warned that "New Yorkers deserve to know their investments are safe – and financial professionals who won't play by the rules will face consequences."
For a copy of the complaint, click here.