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Broker Operating Ponzi-Scheme Permanently Barred From FINRA

There are probably a dozen or so sure-fire ways a person could get himself barred from FINRA; operating a Ponzi-scheme is one of them.

Yesterday, FINRA announced in a news release that Kenneth George Neely, a St. Louis broker formerly employed by Stifel Nicolaus & Co., Inc. and AXA Advisors, LLC, was permanently barred from the industry for having run a Ponzi-scheme in which he "improperly used over $600,000 in investor assets, returned about $300,000 of the funds back to some of the investors and thus converted more than half of this amount to his own personal use." Notably, Neely was not picky when deciding which clients to use as part of his scheme. According to the FINRA release, victims included family members, members of Neely's church, a long time friend and recent retiree, that friend's daughter, and Neely even used his own mother's address as the address for his "St. Louis Investment Club," a purportedly exclusive club fabricated by Neely to lend an air of credibility to investing in his fictitious real estate trust.

For individuals wondering what a typical Ponzi scheme "smells" like, check out the FINRA release at www.finra.org/Newsroom/NewsReleases/2009/P119438

At present, FINRA has turned the matter over to criminal authorities and only time will tell what happens to Neely and how many more Ponzi-schemes will turn up in 2009.

Stay tuned.

Full post as published by OverRegd - Securities Regulation and Litigation Blog on July 28, 2009 (boomark / email).