Four Brokers Charged with Defrauding Federal Employees
This week, the Securities and Exchange Commission charged four brokers from a firm in Alpharetta, Georgia with fraud, alleging the men fooled senior federal employees into moving large amounts of money from their Thrift Savings Plan (TSP) into investments with hefty fees.
The men charged were part of the Federal Employee Benefits Counselors and specifically targeted federal employees who were near retirement with significant amounts money invested in their TSP accounts.
According to LeapRate, “The brokers allegedly fostered the misleading impression that they were in some way affiliated with or approved by the federal government. In some instances, investors were led to believe that their funds would be invested in a product that was offered, vetted, or specifically selected by the TSP.
“According to the SEC’s complaint, the brokers sent investors incomplete or modified transaction forms as well as written materials they devised that obscured that the investment was a privately issued variable annuity with no connection to the TSP and would be processed through a private brokerage firm with which the brokers were associated.”
The scam allegedly involved $40 million worth of variable annuities, which netted the brokers $1.7 million in commissions.
On the heels of the charges being filed, the SEC issued an investor alert to the more than 5 million current and former federal employees who participate in the TSP, stating that “Federal government agencies, including the SEC, do not endorse or sponsor any particular securities, issuers, products, services, professional credentials, firms, or individuals,” and that “The TSP will not contact federal employees about investment opportunities and does not authorize third parties to provide counseling or investment-related services to anyone.”
The SEC is “seeking disgorgement of the alleged illegal gains plus interest and penalties and permanent injunctions,” according to numerous reports.
LeapRate also points out that the charges are in keeping with the SEC’s recent efforts, in which the agency “has been focusing more specifically on brokers’ and advisers’ interactions with senior investors, and others investing for retirement, through the ReTIRE initiative of the agency’s national exam program and the work of the Broker-Dealer Task Force in its Enforcement Division.”
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