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Market Professional Misappropriates Client Funds For Years

Market Professional Misappropriates Client Funds For Years

T. GormanPosted on June 16, 2023 Posted in SECActions

Market Professional Misappropriates Client Funds For Years

Misappropriation of client assets seems to be an increasing issue in the securities business. Recently the Commission appears to be filing more actions centered on market professionals who misappropriate assets from their long time clients. Those actions are, of course, keyed to the trust of the client. In many of the cases the client vested the professional with authority regarding his or her account that was sufficient to permit the misappropriation. In other cases the clients appears to have failed to properly monitor ther account, thereby facilitating the wrongful conduct of the professional. This appears to be the situation in the Commission’s latest case in this areas, SEC v. Thayer, Civil Action No. 1:23-00362 (S.D. Ohio Filed June 13, 2023).

Named as defendant is Patrick N. Thayer, a resident of Cincinnati Ohio who held Series 6,7 and 66 licenses with the Commission. Between 2010 and 2022 Defendant Thayer was a registered representative of four different broker-dealers. Effective February 21, 2023 FINRA banned him from the securities business.

Since May 2010 Mr. Thayer has conducted business through his firm, Broadway Financial Solutions. Though that firm he provided investment services as well as broker services, executing trades for clients at times on a discretionary basis.

Mr. Thayer did not charge clients for his services except for the commissions he earned as a broker. He did, however, misappropriate about $1.3 million from one client for his benefit over a period of years. The fraud was accomplished by establishing a bank account under the client’s name and forging documents. The bank account had the address of Broadway Financial rather than that of the client. Defendant also set up the account so he could transfer funds from it.

On almost a monthly basis, from November 213 until August 2022, Defendant sold assets in the client’s brokerage account, transferred the proceeds to the Bank Account he established and later moving the funds to himself.

The complaint alleges violations of Securities Act Sections 17(a)(1) and (2), Exchange Act Sections 10(b) and Advisers Act Sections 206(1) and 206(2). The case is in litigation.

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Prepared:

Thomas O. Gorman

DC Attorney specializing in securities
and other agency litigation

Former SEC Senior Counsel, Enforcement
and Special Trial Counsel, GC Office
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