Trusted Broker Misappropriates Funds

Frequently investors fall victim to fraudsters because of greed. The Commission has brought numerous cases were investors turned over their hard-earned cash to fraudsters because the potential return from a particular investment appeared so good the investor just could not resist. Of course, in virtually every instance the too good to be true deal was just that – to good and was often undertaken despite red flags that should have warned the investors.

The Commission has brought far fewer cases where the investor turns over his or her cash to a trusted adviser who then misappropriates the cash. This is particularly true where the would-be fraudster had an earlier opportunity to misappropriate a very substantial sum. An action filed earlier this week by the agency did, however, follow this pattern. SEC v. Holts, Civil Action No. 1:23-cv-00081 (E.D. Tx. Filed February 27, 2023 (E.D.Tx. February 27, 2023).

Defendant Bradley Morgan Holts, resident of Beaumont, Texas, holds a Series 7 and 66 licenses from FINRA. From October 2022 he was associated with a broker dealer. Prior to that position he had worked for other broker dealers since 2010.

In 2020 three investors came to Defendant Holts. They had applications to invest with Invesco. The total was about $1.9 million. Defendant Holts invested the funds as directed. The next year was different, however. Early in 2021 the broker opened an account titled “Bradley Morgan Holts d/b/a Invesco Investment Texas”. The account opening documents listed Defendant Holts’ home address. Invesco did not have a relationship with Invesco Investment Texas.

Subsequently, the three investors returned. The sum to be invested was far less than earlier – $187,382. Nevertheless, the funds were not invested as earlier, despite representations by Defendant Holts. To the contrary, the money went to the Invesco Investment Texas account – actually Mr. Holts. The investors have never been repaid or recovered their funds. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b). The case is pending.

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