NEWARK, NJ – A Warren resident and his company, a Morris County investment advisory firm, were fined $500,000 in civil penalties and barred from selling securities for fraudulently selling at least $6.1 million in unregistered securities to elderly and retired New Jersey investors, Attorney General Gurbir S. Grewal announced on Friday.
The Bureau of Securities (“the Bureau”) revoked their registrations and assessed the $500,000 in civil penalties on June 15, a day that has been designated as “World Elder Abuse Awareness Day”, when individuals and organizations from around the globe participate in activities and events to raise awareness about the physical, emotional, and financial abuse of elders.
Richard Belott of Warren, the managing member and investment adviser representative of Financial Planning Advisors, LLC (“FPA”), with an office in Chatham, sold unregistered securities to at least eight investors, including elderly and retired clients of FPA, then used at least $1.55 million of investors’ funds on personal expenses, including his daughter’s college tuition, extravagant trips for himself and his wife, and mortgage payments on the couple’s beach house, authorities said.
“Elderly clients of FPA trusted Belott, as their financial advisor, to guide them in making wise investments. Instead, he lured them into a fraudulent investment scheme to enrich himself,” said Paul Rodríguez, Acting Director of Division of Consumer Affairs. “These investors, some of whom risked their entire retirement savings on Belott’s scheme, had no idea that he was using their funds to subsidize his lavish lifestyle.”
“Preventing the financial exploitation of seniors is a top priority for New Jersey’s Bureau of Securities, not just on World Elder Abuse Awareness Day, but every day,” said Grewal. “The enforcement action announced by the Bureau today underscores our ongoing efforts to protect elder investors from financial predators in the securities market.”
Bureau Chief Christopher Gerold found that between 2008 and 2015, Belott and FPA offered and sold at least 24 promissory notes purportedly issued by local diners and a developer, when in reality, instead of receiving promissory notes from the diners or developer, investors received personal promissory notes from the owners of those businesses who had undisclosed business relationships with Belott, or from Belott himself.
A partial payment from one of the promissory notes to an investor bounced, the revocation order states.
The promissory notes had a term of one year or more with stated interest rates ranging from 5 percent to 18 percent annually. Interest and principal payments to the promissory note investors were paid from the bank accounts of various entities, including the diners, developer and FPA, Gerold found.
In offering and selling the promissory notes, Belott failed to disclose to investors that: the diners and developer purportedly issuing the promissory notes were clients of his accounting firm, that he had outside business relationships with the owners of the businesses, or that he was a co-owner of some of the diners. Belott also failed to disclose that he received a commission on the sale of certain promissory notes he sold, or that he would use the investors’ funds for his personal benefit.
As set forth in the Summary Penalty and Revocation Order, Bureau Chief Gerold found that:
Belott and FPA violated New Jersey’s Uniform Securities Law through the following activities, among others:
- offering and selling unregistered securities;
- engaging in fraud or deceit upon FPA’s advisory clients and others;
- engaging in dishonest and unethical practices in the investment advisory business; and
- failing to maintain written investment advisory contracts.
Belott violated New Jersey’s Uniform Securities Law by:
- acting as an agent without registration;
- making untrue statements of material fact and/or omitting to state material facts; and
- making false and misleading statements to Bureau investigators during an investigative deposition.
FPA violated New Jersey’s Uniform Securities Law by:
- failing to make and keep required books and records;
- failing to maintain minimum capital or the required bond while having custody of clients’ funds.
"Today, as communities around the world focus attention on the growing problem of elder abuse, the Bureau is reminding everyone that seniors are primary targets for investment fraud,” said Bureau Chief Gerold. “As this case illustrates, even trusted advisers sometimes try to fraudulently solicit money from their elderly clients. It is, thus, critical that senior investors, and their caregivers, remain vigilant and take steps to protect their assets."
According to the North American Securities Administrators Association, seniors remain a top target of investment fraud, and the problem of elder financial abuse continues to grow.
To minimize the risk of financial exploitation, New Jersey seniors who are interested in investing are encouraged to follow these tips BEFORE handing over any money:
- Contact the Bureau to find out if the investment professional and security they are selling are registered.
- Review all information regarding the investment with a trusted relative or friend.
- Allow time for careful consideration - scam artists will often try to rush people into making an investment decision.
- Understand the risks, restrictions and costs of the investment. Never buy without fully understanding every aspect of the transaction.
The Bureau’s action was handled by Deputy Bureau Chief Amy Kopleton, Director of Examinations Stephen Bouchard, and Investigator Theresa Hendricks, within the Division of Consumer Affairs.
Deputy Attorney General and Section Chief Victoria Manning and Deputy Attorney General Katherine A. Gregory of the Securities Fraud Prosecution Section in the Division of Law represented the Bureau in this matter.
More information for both elderly investors and their caregivers can be found on the Bureau’s website at www.njconsumeraffairs.gov/bos/Pages/investormaterials.aspxor at www.ServeOurSeniors.org.
The Bureau is charged with protecting investors from investment fraud and regulating the securities industry in New Jersey. It is critical that investors “Check Before You Invest.” Investors can obtain information, including the registration status and disciplinary history, of any financial professional doing business to or from New Jersey, by contacting the Bureau toll-free within New Jersey at 1-866-I-INVEST (1-866-446-8378) or from outside New Jersey at 973-504-3600, or by visiting the Bureau’s website at www.NJSecurities.gov.