An irreverent Wall Street Blog
by Bill Singer
by Bill Singer
Broker Pocketed Customer Investments For Four Years
June 5, 2013
For four years, a stockbroker simply pocketed the funds intended for a number of outside investments. The defrauded victim wasn't merely an unsophisticated public customer but, to the contrary, a licensed insurance representative.
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Huel Cox, Jr. submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Huel Cox, Jr., Respondent (AWC 2011029621801, May 9, 2013).
Cox first became registered in 1987 with PFS Investments, Inc., where he remained until his November 8, 2011 termination.
The AWC alleges that Cox engaged in the following transactions with a PFS customer:
- August 2005: Cox recommended an investment in a casino and the customer wrote a $30,000 check payable to Cox for the alleged investment.
- June 2007: Cox recommended an investment in a property undergoing home improvements and the customer wrote a $35,000 check payable to Cox for the alleged real estate investment.
- September 2007: Cox recommended another investment in real estate. Thereafter, between September 2007 and March 2008, the customer allegedly wrote multiple checks totaling $61,300, each payable to Cox for the alleged investment.
- March 2008: Cox recommended investment in another "property" and the customer wrote a $15,000 check payable to Cox for the alleged investment.
- October 2007 and November 2009: The customer wrote multiple checks to Cox for various real estate investment.
Making It Personal
As to the 2005 - 2009 investments cited above, Cox allegedly deposited the checks into his personal bank accounts outside the firm and used the funds for his personal expenses. The AWC asserts that Cox did not make any of the promised real estate investments and merely misappropriated at least $206,398.89. The AWC charges that the above conduct was in violation of NASD Rules 2330 and 2110, and FINRA Rule 2010.
U5
On November 8, 2011, the PFS filed a Uniform Termination Notice for Securities Industry Registration ("Form U5") disclosing that Cox had been discharged for alleged misappropriation of customer funds. Online FINRA documents as of June 4, 2013, indicate that PFS discharged Cox based upon allegations that:
THE AGENT OBTAINED MONEY TO INVEST OUTSIDE THE FIRM FROM A CUSTOMER OF THE FIRM, WHO WAS ALSO A LICENSED INSURANCE REPRESENTATIVE OF AN AFFILIATE. IT APPEARS THAT MONEY WAS NEITHER INVESTED NOR REPAID TO THE CUSTOMER.
Arizona Revocation
On February 6, 2013, the Arizona Corporation Commission issued a Consent Order In The Matter of Huel Cox. (S-20862-12-0428, Decision No. 73663). The Order found that Cox deposited a customer's funds into his personal banking account instead of investing the funds as represented, in violation of Securities Act of the State of Arizona. Cox' Arizona securities salesman registration was revoked, and he was ordered to pay $85,573.89 to the State of Arizona as restitution, and a $10,000 administrative penalty.
FINRA Bar
In accordance with the terms of the AWC, FINRA imposed upon Cox a Bar from associating with any FINRA member in any capacity.