FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
SEC Charges Four Insurance Agents in Securities Fraud Targeting Elderly Investors
09/26/2014 01:21 PM EDT
The Securities and Exchange Commission announced charges against four insurance agents for unlawfully selling securities in what turned out to be a multi-million dollar offering fraud targeting elderly investors.
The SEC previously charged a Colorado man who allegedly orchestrated the scheme and recruited active insurance agents to help him solicit investors in Colorado and several other states. The scheme raised approximately $4.3 million during a nearly 18-month period. The SEC’s investigation further found that the four insurance agents charged today solicited funds without registering with the SEC as a broker-dealer as required under the federal securities laws.
“When individuals act as a broker and sell securities to the public, they must comply with registration, supervision, and compliance requirements that exist to protect investors,” said Julie K. Lutz, Director of the SEC’s Denver Regional Office. “These insurance agents improperly operated outside of that regulatory framework and thereby placed their clients at risk.”
According to the SEC’s order instituting administrative proceedings, the scheme primarily targeted retired annuity holders by using insurance agents to sell interests in a company called Arete LLC, which was controlled by the Colorado man orchestrating the scheme: Gary Snisky. The insurance agents told investors that their funds would be used by Snisky to purchase government-backed agency bonds at a discount. However, Snisky did not purchase bonds or conduct any such trading, and he misappropriated approximately $2.8 million of investor funds to pay commissions and make personal mortgage payments.
The SEC’s Enforcement Division alleges that the following three brokers raised approximately $1.5 million for Snisky and received almost $90,000 in commissions:
Without admitting or denying the findings, Sorrells consented to an order finding that he violated Section 15(a) of the Securities Exchange Act of 1934. He agreed to be barred from the securities industry, cease and desist from future violations of Section 15(a), and pay disgorgement of $207,213.34. He also is subject to an additional financial penalty. The settlement reflects substantial assistance that Sorrells provided in the SEC’s investigation.
The SEC’s Enforcement Division alleges that Meissner, Scott, and Tomich violated Section 15(a) of the Exchange Act, and is seeking disgorgement, penalties, and securities industry bars in the matter, which will be litigated before an administrative law judge. The SEC’s case against Snisky, filed in November 2013, is still pending in federal court in Colorado.
The SEC’s investigation was conducted by Scott Mascianica, Kerry M. Matticks, and Jay A. Scoggins of the Denver office. The SEC’s litigation will be led by Polly A. Atkinson and Leslie Hughes. The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of Colorado, Internal Revenue Service, Federal Bureau of Investigation, and U.S. Postal Inspection Service.