The Guiliano Law Firm is investigating claims on behalf of investors involving Paul Wescoe Smith formerly associated with Bolton Global Capital in Wayne, Pennsylvania in connection with the sale of the unregistered securities of the Haverford Group.
On February 2, 2016, according to FINRA Public Disclosure Records, Smith was discharged or terminated by Bolton Global Capital for “selling away” based upon information obtained by the United States Securities & Exchange Commission that notified Bolton Global Capital that Smith “had engaged in a private securities transaction without first notifying the firm.”
Further investigation of this matter reveals that in or about the fall of 2015, Smith engaged in the sale of unregistered securities in the form of a hedge fund under the name The Haverford Group to more than a dozen investors. Upon information and belief, sometime in late 2016, Smith and/or Bolton were served with a Subpoena by the United States Securities & Exchange Commission requesting documents and information relating to the sale of the unregistered securities of the Haverford Group to Smith’s public customers.
Also, upon information and belief, Smith has also been served a request by the Financial Industry Regulatory Authority pursuant to FINRA Rule 8210 seeking to obtain documents and testimony from Smith regarding the solicitation and sale of these securities to his public customers.
Information suggests that The Haverford Group is substantially insolvent, and that investor funds may have been lost in stock market or other trading, and may have been used to pay prior investors, which is typical in any Ponzi-like scheme.
Also in February 2017, Bolton Global Capital notified Smith’s customers that their accounts were being transferred to another “financial representative.” However, no warning or mention is made as to the circumstances surrounding Smith’s actual termination from Bolton Capital or his sale of unregistered securities in the form of an interest in The Haverford Group.
Bolton Global Capital is a FINRA registered securities-broker dealer located in Bolton, Massachusetts. Bolton Global purports to be an “independent” brokerage firm operating from approximately 50 small but geographically dispersed branch offices throughout the United States. Without exception, these offices are “franchise” offices, wherein for a higher commission pay-out, the these offices pay all their own administrative expenses. However, also without exception there is no independent on-site supervision of these “independent” offices.
“Irrespective of an individual’s location or compensation arrangements, all associated persons are considered to be employees of the firm with which they are registered for purposes of compliance with [FINRA]rules governing the conduct of registered persons and the supervisory responsibilities of the member. The fact that an associated person conducts business at a separate location or is compensated as an independent contractor does not alter the obligations of the individual and the firm to comply fully with all applicable regulatory requirements. Notice to Members 86-65 (September 12, 1986).
Since 2002, Bolton Capital, also formerly operating under the name, Delta Equity Services Corporation, has been subject to more than a half a dozen regulatory actions substantially relating to the failure to supervise its registered representatives. In September 2006, Bolton Global’s former president, Richard Grenier was criminally charged by the United States Department of Justice for making false statements to the United States Securities & Exchange Commission. Since its inception, Bolton Capital has made at least three claims under its fidelity insurance policy, which was subsequently revoked, as the result of the theft of customer funds or securities by its employees or agents.
Courts and securities arbitration panels, in identical circumstances, have long held brokerage firms such as Bolton Global, responsible for the conduct of their registered representatives in “selling away” cases based upon the broker-dealer’s failure to supervise. See, e.g., Hunt v. Miller, 908 F.2d 1210 (4th Cir. 1990); Harrison v. Dean Witter Reynolds, Inc., 974 F.2d 873 (7th Cir. 1992)(firm liable for agent’s selling away activities); Hollinger v. Titan Capital Corp., 914 F.2d 1564 (9th Cir. 1990)(same); State Security Insurance Co. v. Burgos, 583 N.E.2d 547, 557 (Ill. 1991)(liability for firm where broker acted with apparent authority); Salmon v. New England Securities Corp., FINRA Arb. No. 01-06935 ($1.4 million award against member for associated persons “selling away” third party notes); Sleight v. Centaurus Financial, FINRA Arb. No. 10-00536; Brezden v. Associated Securities Corp., FINRA Arb. No. 07-03054 (reasoned award against member for failure to supervise agent’s selling away activties); Chandler v. FSC Corporation, NASD Arb. No. 05-0443, (reasoned award against member for failure to supervise agent’s unauthorized selling away); Battle v. Northeast Securities, Inc., NASD Arb. No. 06-04110, (same)(reasoned award); Dobison v. Jospehthal, Lyons & Ross, Inc., NASD Arbitration No. 96-00963 (arbitration award against brokerage firm for broker’s selling away of unregistered notes and warrants). Securities regulators have also taken the same approach and routinely hold broker-dealers responsible for the “failure to supervise,” when their representatives engage in this outside activity. In Re DBCC (No. 5) v. Charles E. French, Complaint No. 5940026, May 18, 1995 (sanctions against member for selling away activity of broker); Siriani v. United States Securities & Exchange Commission, 677 F.2d 1284 (9th Cir. 1982); Stoiber v. Securities & Exchange Commission, 161 F.3d 745 (D.C. Cir. 1998).
The sale of unregistered securities is also illegal under Pennsylvania law. Section 201 of the Pennsylvania Securities Act of 1972, 70 Pa. C.S. § 201-1 declares it unlawful to engage in the sale of securities that are not registered, or exempt from registration under the Pennsylvania Securities Act.
Upon information and belief, Smith in an avid golfer, he is a member of the Bellewood County Club, where he conducted much of his business, and Smith’s victims are, in substantial part, Pennsylvania residents.
Please note that the foregoing statements are merely allegations, and that no factual findings of any kind have been made against Smith or anyone else in this matter.
If you have been a victim of Paul W. Smith, you should contact qualified counsel to determine your legal rights and responsibilities.
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