In June 2020, Securities America, Inc. was fined $1.75 million by the Securities and Exchange Commission (SEC) for allegedly failing to safeguard clients from Hector May (CRD# 323779), who pleaded guilty in 2018 to stealing $8 million from clients. According to the SEC, “As set forth in the Order, FIU’s automated Trade Monitor surveillance system generated multiple alerts for potentially suspicious withdrawals from client accounts, but its analysts failed to carry out the prescribed processes for investigating those alerts. Cashiering permitted disbursements without the required signatures, and Trade Support failed to contact clients to verify that they had initiated disbursement requests and, when they did carry out verification procedures, failed to obtain the required information from clients.”
In July 2019, former Securities America, Inc. broker May was sentenced to 13 years in prison. May was also ordered to pay $8.4 million in restitution.
May is accused of stealing $11.5 million from more than 15 investors in a Ponzi scheme. It is alleged that May induced investors to turn over money from their securities accounts under the false pretense that he would use the money to purchase bonds and other investments on their behalf. Instead, he used the money for personal and business expenses and to pay back other investors.
May was registered with Securities America, Inc. in New City, New York from 1998 to 2018 and with Securities America, Inc. from 1994 to 1998, when he was terminated regarding, “Misappropriation of client assets.” May worked from a remote location for Securities America, Inc. May was also president of Executive Compensation Planners Inc., a registered investment adviser and financial planning firm located in New City, New York, since 1982.
In February 2019, the SEC barred May following a complaint alleging that May misappropriated at least $7.9 million from at least 15 investment advisory clients by perpetrating a Ponzi scheme in which he offered to buy bonds for investment advisory clients, solicited their funds for the investments, and then diverted the money for his own use. According to May’s BrokerCheck, “The complaint alleged that May further perpetrated this scheme by creating and sending out fabricated account statements reporting fictitious bond purchases, which over time grossly inflated the victims’ holdings, deceiving them further. The complaint also alleged that May used the clients’ money to make Ponzi-like payments to other clients who sought to withdraw funds.” May pleaded guilty to one count of conspiracy to commit wire fraud and one count of investment adviser fraud. May admitted to the forfeiture allegation of the criminal information and agreed to forfeit $11,452,185 to the United States. Additionally, “The counts of the criminal information to which May pled guilty alleged that he defrauded investors and obtained money and property by means of materially false and misleading statements, that he used an email server in order to induce investors to turn over their money under false pretenses, and that he caused investors to send their money to him by wire transfer or check.”
In December 2018, the SEC alleged that May and Bell (May’s daughter and controller of his firm) misappropriated at least $7.9 million from at least 15 investment advisory clients by perpetrating a Ponzi scheme. “May, with Bell’s assistance, offered to buy bonds for his clients, solicited their funds for the investments, and then diverted the money for his own use. Over the life of the scheme, instead of buying bonds, May used his clients’ money to pay for salaries for himself and Bell, business and personal credit card bills, a limousine driver, country club dues, home remodeling, travel, personal loans to friends, political contributions, a vacation home, and furs and jewelry for his wife. In an effort to conceal and further perpetuate the scheme, May and Bell created and sent the clients fabricated account statements reporting fictitious purchases of bonds. Over time, as the fake bond purchases multiplied, these account statements grossly inflated the victims’ holdings, deceiving them further.” May pled guilty to running a Ponzi scheme and faces up to 25 years in prison. “MAY, 77, of Orangeburg, New York, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; and one count of investment adviser fraud, which carries a maximum sentence of five years in prison and a maximum fine of $10,000 or twice the gross gain or loss from the offense,” according to the Department of Justice, U.S. Attorney’s Office of the Southern District of New York.
In March 2018, the U.S. Department of Justice opened an investigation into May regarding, “The U.S. Department of Justice is conducting an official criminal investigation of a suspected felony.”
According to public records, nine former customers of May filed a FINRA arbitration against May and Securities America, Inc. The complaint alleges that Securities America, Inc. failed to supervise May, who is alleged to run a Ponzi-like scheme. According to the complaint, Securities America’s Inc. aided and abetted fraudulent practices conducted by May. It is alleged that May had wires and checks sent to Executive Compensation Planners instead of through Securities America, Inc. May also allegedly created fictitious statements and kept the client funds for his own personal use.
It is alleged that the victims reside throughout Long Island and upstate New York and northern Virginia. Many of the victims of this Ponzi scheme are elderly people who entrusted May with their life savings.
May has been the subject of three customer complaints, according to his CRD report:
- January 2020. “Plaintiffs allege that from 2001 to March 2018, the representative misappropriated funds from their accounts. Allegations include securities fraud, fraudulent concealment, fraud, breach of fiduciary duty, negligence, unjust enrichment, and conversion.” The customer is seeking $18 million in damages in this pending complaint.
- February 2019. “Plaintiffs allege that from 2001 to March, 2018, the representative misappropriated funds from their accounts. Allegations include securities fraud, fraudulent concealment, fraud, breach of fiduciary duty, negligence, unjust enrichment, and conversion.” The customer is seeking $18 million in damages in this pending customer complaint.
- September 2018. “Claimants allege that they are victims of fraud and misappropriation by the representative. Additional allegations include breach of fiduciary duty and breach of contract.” The customer sought $439,000 in damages and the case was settled for $406,510.
- June 2018. “Claimants allege that the representative defrauded them, misappropriating their assets in a Ponzi-style scheme.” The customers are seeking $1,074,487 in damages and the case was settled for $3,950,908.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Securities America, Inc. may be liable for investment or other losses suffered by May’s customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If you have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.