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Written by 8:47 am Blog, Securities Fraud Articles

SEC Sanctions 1st Discount Brokerage Over Failure To Detect Ponzi Scheme

On January 23, 2012, the Securities and Exchange Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Sections 203(e) and 203(f) of the Investment Advisers Act of 1940, Making Findings, Imposing Remedial Sanctions and a Censure Order as to 1st Discount Brokerage, Inc.

The Order finds that from 2002 to 2008, Michael J. Park (Park), a registered representative associated with 1st Discount Brokerage, operated a Ponzi scheme which defrauded more than 50 investors out of nearly $9 million. (Although Park purportedly operated the ponzi scheme in Brentwood, Tennessee through his company Park Capital Management Group, he was registered with 1st Discount Brokerage until 2008).  The Order further finds that 1st Discount Brokerage failed reasonably to supervise Park with a view to preventing and detecting his violations of Section 17(a) of the Securities Act of 1933 (Securities Act), and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder.

Specifically, the Order finds that 1st Discount Brokerage did not have policies and procedures reasonably designed to detect and prevent violations of the securities laws by registered representatives like Park and that had 1st Discount Brokerage had such reasonable policies and procedures, it would have likely uncovered Park’s fraud.

The Order also found that had 1st Discount Brokerage had reasonable policies and procedures in the review of the “doing business as” business accounts of its registered representatives, it is likely that 1DB would have observed a substantial influx of money from 1st Discount Brokerage’s existing customers into Park’s business account, through which he conducted his Ponzi scheme.

Brokerage firms are responsible for supervising the actions of its agents, and, as such, can be responsible for failing to detect a ponzi scheme such as the one allegedly conducted by Michael J. Park.

If you are a victim of the Michael J. Park ponzi scheme, the securities attorneys of The White Law Group may be able to help.  The firm has assisted many victims of ponzi schemes in recovering losses from the broker-dealer that employed the individual operating the ponzi scheme.  For a free consultation, please call the firm’s Chicago office at 312/238-9650.

The White Law Group, LLC is a national securities fraud, securities arbitration, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, visit https://whitesecuritieslaw.com.


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