Home News SEC Charges Longtime Broker with Defrauding Retail Investors

SEC Charges Longtime Broker with Defrauding Retail Investors

The Securities and Exchange Commission has charged a Connecticut investment adviser with allegedly misappropriating $560,000 from his advisory clients.

The Securities and Exchange Commission has charged a Connecticut investment adviser with allegedly misappropriating $560,000 from his advisory clients by selling fictitious financial products and using the proceeds to pay other advisory clients, as well as for his own use.

According to the SEC’s complaint, Lester W. Burroughs engaged in a scheme to defraud retail investors that spanned from at least November 2012 to at least January 2019. He allegedly told certain advisory clients that he would invest their money in guaranteed interest contracts with annual returns of 4 percent or 7 percent, however, the SEC claims that Burroughs never invested his clients’ money and instead provided clients with fake account statements.

Burroughs has been registered as a broker since 1969 and as an investment adviser since 1978. He is affiliated with Lincoln Investment Planning and also serves as an investment adviser representative with Capital Analysts.

According to the complaint, Burroughs allegedly sold the first investor, an elderly client, four separate fictitious guaranteed interest contracts totaling approximately $370,000. The SEC claims that bank records show that Burroughs misappropriated the money and used it for part of a payment to another client, insurance policy payments for other clients, his personal expenses, and small “interest” payments back to the first client.

When a relative of the elderly client began to ask Burroughs to explain these investments, he supposedly created a fake statement from a well-known insurance company and sent it to the relative.

The statement showed the client had a guaranteed interest contract that paid 4 percent interest and was worth $152,081.61. When Burroughs was pressed by the relative to return the invested money, he allegedly convinced three other investment advisory clients to invest so that he could pay the money back.

Burroughs convinced the three clients to invest approximately $560,000, some of which he used to repay the original client approximately $445,000, which reflected the principal invested plus 4 percent annual interest.

The SEC’s complaint charges Burroughs with violating certain antifraud provisions of the Investment Advisers Act of 1940 and seeks a permanent injunction from future violations, disgorgement and prejudgment interest, and a civil penalty.

In a parallel action, the U.S. Attorney for the District of Connecticut announced criminal charges against Burroughs.

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