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Articles Tagged with Ponzis

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Bank of America’s Merrill Lynch brokerage unit agreed to pay $1 million for supervisory failures that allowed a former broker to use a Merrill Lynch account to run a Ponzi scheme, FINRA said on Tuesday.

The Financial Industry Regulatory Authority (“FINRA”), which oversees the U.S. brokerage industry, found that the brokerage failed to have an adequate supervisory system to monitor employee accounts for potential misconduct.

The wayward broker, Bruce Hammonds, has been sentenced to 57 months in federal prison for convincing 11 people to invest more than $1 million in a Ponzi scheme he ran as a Merrill branch representative in San Antonio, Texas.

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The FBI is reportedly investigating two former Edward Jones brokers based in South Dakota for their role in a “selling-away” case that involved raising money from clients who invested in an alleged Ponzi scheme.

A clientof Edward Jones, one of the largest brokerage firms in the country with more than 12,000 brokers, reportedly brought the matter of Gibraltar Partners Inc. to the firm’s attention in March. As a result of its investigation, during which the company learned that the Justice Department was in the middle of a criminal investigation of Gibraltar Partners, Edward Jones reportedly fired the brokers.

“Selling away” is one of the most common difficulties independent and franchisee broker-dealers face in their oversight of registered reps. Such reps typically operate in one- or two-man offices and have no branch manager looking over their shoulders on a day-to-day basis. Cases typically involve a broker selling a financial product that the broker-dealer did not approve or know about, with the investment vehicle blowing up and harming the client’s portfolio.

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