SEC Fines Scott Wolfrum for Conflicts of Interest in Investment Recommendations
The SEC’s Division of Enforcement has reportedly requested an extension of time until February 6, 2024, to submit a Proposed Plan of Distribution in connection with fines and penalties reportedly involving financial advisor Scott Wolfrum.
According to an administrative order on March 24, 2021, the Securities and Exchange Commission announced it has settled charges with broker Scott Wolfrum over allegations that Wolfrum failed to disclose conflicts of interest when recommending that his advisory clients invest in Foundry Mezzanine Opportunity Fund, a private fund that provides lending to and invests in small businesses.
From December 2015 to June 2018, Wolfrum reportedly sold more than $20 million in interests in the Foundry Mezzanine Opportunity Fund, almost all of which were recommended by Wolfrum and sold to his advisory clients. The SEC alleges that Wolfrum failed to disclose to his clients the conflicts of interest created by his and his family members’ financial interests in two of the Fund’s holdings and Wolfrum’s alleged receipt of $140,125 in finder’s fees for facilitating two different investments by the Fund.
According to the order, Wolfrum in addition to the cease and desist order and the censure, the SEC has ordered Wolfrum to pay disgorgement of $140,125 and prejudgment interest of $21,354 and a civil money penalty in the amount of $75,000 to the Securities and Exchange Commission.
Wolfrum’s broker profile indicates he was registered with David A. Noyes & Co. in Indianapolis, IN from May 2013 until January 2018. He then made a move to Huntleigh Securities Corp. where he reportedly worked until September 2019.
He reportedly has six complaints filed against him, according to FINRA, with one pending from June 2022. Allegations include “unsuitable and concentration of annuities,” and “the purchase of a private placement was made without complainant’s approval, and “inadequate due diligence” among others.
Conflicts of Interest
Conflicts of interest can occur in the securities industry when a broker or financial advisor prioritize their own interests over their clients. Due to the complex nature of relationships between companies, brokers, and investors conflicts of interest are a common occurrence. Brokers are often incentivized to sell certain securities or investment products, which can lead to conflicts of interest when those particular products are not in the best interest of the investor.
Brokers who owe fiduciary duty to their clients are required to act in the client’s best interest and to avoid conflicts of interest. This means that a broker must put their clients’ interests ahead of their own and must disclose any potential conflicts of interest that could impact their ability to act in the client’s best interest. Following through on fiduciary duties is an important concept to understand in the securities industry because it helps to ensure that investors are protected from potential conflicts of interest. Breaching fiduciary duties is a serious offense and can lead to severe punishments.
Filing a Complaint against your Brokerage Firm
When brokers abuse client accounts and conduct transactions that violate securities laws, the brokerage firm they are working with may be liable for investment losses through FINRA Arbitration. Brokerage firms that fail to monitor the business activities of their employees may be liable for investment losses due to negligent supervision for the misconduct of their employees.
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois.
If you are concerned about your investments with Scott Wolfrum, please call the securities fraud attorneys at The White Law Group at 888-637-5510 for a free consultation.
For more information on The White Law Group, and its representation of investors, please visit www.WhiteSecuritiesLaw.com.
Tags: broker investigation, scott wolfrum Last modified: October 30, 2023
