The SEC charged a Wisconsin broker of misappropriating about $2.4 million from retail investor clients, many of whom were elderly and had limited investment experience.
According to the SEC complaint, Edward E. Matthes started stealing from clients in April 2013, a spree that continued until March of last year. At the time, Matthes reportedly told brokerage customers of an investment opportunity guaranteeing a minimum annual yield of 4%; however, this investment never existed.
In the complaint, Matthes is named as a registered representative in a one-person branch office in Oconomowoc, Wis. (Though his firm isn’t named in the complaint, Matthes’ FINRA BrokerCheck profile has him listed as working at Mutual of Omaha Investor Services until March 2019).
In all, 15 clients sold or authorized the selling of securities underlying their variable annuities; eight clients even withdrew money from personal savings accounts for the fictitious investment opportunity, according to the complaint. Throughout this period, he continued to say that the investment had “no risk” and was “a bright spot in the investment landscape,” according to the SEC.
“Matthes acted deliberately, with the intent to deceive,” the complaint reads. “He knew that the investment he described to his customers and clients did not exist, and he never invested any of the money he raised in the promised investment.”
According to the complaint, Matthes was spending the majority of the money on personal expenses, including “credit card payments, mortgage payments, car payments, child support, luxury items and gifts and home renovation expenses.” Additionally, he used about $170,000 to pay certain customers in the interest of keeping the scheme alive, according to the SEC.
The commission also accused him of lying to Mutual of Omaha Investor Services. When the firm questioned a withdrawal, Matthes claimed that the client had made it for home repairs and car payments, which contrasted with her expressed intent to invest for the long term.
Matthes was discovered when one of his clients made a complaint to FINRA about an account statement that looked false. FINRA contacted Matthes’ firm, which launched an investigation, including an in-person visit on March 11 and 12, 2019, at which point they fired Matthes, according to the complaint. Matthes agreed to settle the charges, with the SEC asking that Matthes be barred from the industry (FINRA already barred him from all registration last May). The commission is also seeking disgorgement and penalties.