Signator Investors Settles SEC Charges
On August 13, 2015, the Securities & Exchange Commission (SEC) announced that three Maryland men have agreed to settle charges that they defrauded investors in a company that owns and operates residential and commercial real estate. Boston-based Signator Investors Inc. and one of its supervisors agreed to settle separate charges that they failed to supervise two of the men who worked in Signator’s Maryland office.
The SEC alleges that James R. Glover orchestrated the fraud by enticing family, friends, and fellow church members to become his clients at Signator and invest in Colonial Tidewater Realty Income Partners, which he co-managed. Most of Glover’s clients were financially unsophisticated and relied on him for investment guidance.
“Glover lied to unsuspecting members of his close-knit religious community and preyed upon the trust they placed in him as their registered representative,” said Sharon B. Binger, Director of the SEC’s Philadelphia Regional Office.
According to the SEC’s complaint against Colonial Tidewater, Glover, and Colonial Tidewater’s co-manager Sherman T. Hill:
- Glover steered approximately 125 clients to purchase partnership units in Colonial Tidewater.
- Glover and Hill provided false and misleading written statements about Colonial Tidewater’s value and financial condition.
- Glover lied to investors about the liquidity of Colonial Tidewater’s investments and the expected returns.
- Glover and Cory D. Williams, his business partner in Signator’s Maryland office, did not inform clients that they received undisclosed commissions from Colonial Tidewater when clients invested in the company, thus failing to disclose conflicts of interest.
- Glover misappropriated hundreds of thousands of dollars of investor funds.
According to an SEC order instituting a settled administrative proceeding against Signator and Gregory J. Mitchell, who was a supervisor in Signator’s Maryland office:
- Signator and Mitchell failed to identify and prevent the alleged fraud conducted by Glover and Williams.
- Signator failed to have reasonable policies and procedures governing consolidated reports, which could be used to combine all of a client’s financial holdings in a single report.
- Glover, without Signator’s knowledge, inserted clients’ Colonial Tidewater holdings into the consolidated reports to create the false impression that Colonial Tidewater was a Signator-approved investment when it was never authorized for sale by Signator representatives.
- Rather than following Signator’s policies and procedures, Mitchell routinely allowed Glover and Williams to select client files for his review or he provided them a pre-selected list of names of client files to be reviewed, enabling them to remove all references to Colonial Tidewater investments before Mitchell reviewed the records.
“Signator and Mitchell failed to conduct the thorough reviews necessary to catch Glover and Williams in the act of defrauding investors,” said Ms. Binger.
Colonial Tidewater, Glover, and Hill agreed to settle the SEC’s charges without admitting or denying the allegations, and consented to the appointment of a receiver to take control of Colonial Tidewater. Under settlements that are subject to court approval, Colonial Tidewater would be required to pay $527,844 in disgorgement, $66,542 in prejudgment interest, and a $725,000 penalty. Glover agreed to be barred from the securities industry and pay $839,128 in disgorgement, $64,977 in prejudgment interest, and a $450,000 penalty. Hill agreed to pay a $75,000 penalty.
In a separate SEC order, Williams agreed to settle charges that he violated provisions of the Investment Advisers Act. Without admitting or denying the SEC’s findings, he agreed to be barred from the securities industry and pay $94,191 in disgorgement, $9,854 in prejudgment interest, and a $94,191 penalty.
Signator and Mitchell agreed to pay penalties of $450,000 and $15,000 respectively without admitting or denying the SEC’s findings. Signator agreed to be censured and Mitchell agreed to be suspended from acting in a supervisory capacity for one year.
For further information, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real South, Suite 202 North, Boca Raton, Florida, (561) 416-8956, or [email protected]101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton &Associates Law Group, P.A. and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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