SEC Charges CV Brokerage Stockbroker With Fraud
Brenda Ann Smith (also known as Brenda Smith Peterman) of West Conshohocken Pennsylvania a stockbroker and investment advisor formerly associated with CV Brokerage Inc., Broad Reach Capital LP and Bristol Advisors LLC is named in a Securities and Exchange Commission (SEC) Complaint alleging that Smith and the companies she controlled had defrauded investors who purchased limited partnership interests. SEC v. Smith et al. Civil Action No. 2:19-cv-17213 (Aug. 27, 2019).
According to the Complaint, a fraudulent scheme involving limited partnership interests was perpetrated in 2016 by Broad Reach Capital (also known as Broad Reach Fund) along with Broad Reach Partners LLC and Bristol Advisors. Those companies were allegedly controlled by Smith. Investors were purportedly offered limited partnership interests in Broad Reach Fund which resulted in more than $105,000,000.00 in purchases from at least forty investors. SEC contended that $63,000,000.00 in principal has yet to be repaid to the investors.
The Complaint alleged that investors were told that a sophisticated trading strategy that involved highly liquid securities was used by Broad Reach Fund but this strategy was only applied for a small portion of investors’ assets. SEC contended that investors’ funds were used by Smith for her own investment agenda and for making repayments to other investors.
SEC also alleges that investors seeking redemptions were provided with documents falsely reflecting that more than thirty percent annual returns were generated by the Broad Reach Fund and that the Fund did not generate a loss in any month. SEC indicated that in July 2019, investors were also provided with documentation which falsely conveyed that the Broad Reach Fund had assets of $180,000,000.00 and that $100,000,000.00 of a $2,500,000,000.00 bond purportedly held by Smith was directed to the Broad Reach Fund.
Smith not only violated her fiduciary duty but had abused her position by lying and concealing information from investors according to the Complaint. SEC stated that Smith’s actions constituted fraud in violation of Securities Exchange Act of 1934 Section 10(b) and SEC Rule 10b-5. The Complaint also alleges violations of Securities Act of 1933 Section 17(a) and Investment Advisers Act of 1940 Section 206.
Smith has been barred from associating with any FINRA member in any capacity based on findings of her failing to cooperate with investigators who were reviewing allegations of her private securities transactions and her misrepresentation of information pertaining to an investment fund. Letter of Acceptance Waiver and Consent No. 2017052325901 (July 2, 2019). FINRA found Smith’s failure to furnish information and documentation to be violative of FINRA Rules 2010 and 8210. Smith has also been criminally charged with four counts of wire fraud and one count of securities fraud. Criminal Action No. 2:18mj3377 (D.N.J. Aug. 22, 2019).
FINRA Public Disclosure reveals that Smith is referenced in a customer initiated investment related arbitration claim where the customer sought $3,341,500.00 in damages founded on accusations of Pennsylvania laws being violated in regard to transactions effected by the stockbroker while registered with CV Brokerage. FINRA Arbitration No. 18-03955 (Dec. 11, 2018). According to the claim, fiduciary and contractual duties had been breached by Smith. The customer’s funds were allegedly converted.
On June 14, 2019, Smith was terminated by CV Brokerage based upon allegations of her failure to honor requests made by FINRA during its investigation.