Corporate & Securities Law

Stock Broker Fraud Case Involving Martin Wegener Offers Lesson For Investors

By Mark Maddox

The alleged stock broker fraud case involving Martin Wegener offers insight into what investors can do to avoid becoming victims of investment scams. On June 14, the Securities and Exchange Commission (SEC) charged Wegener and his companies - Wealth Resources, Inc. and Wealth Resources, LLC - with defrauding investors out of at least $6.5 million.

According to the SEC, Wegener was not a registered broker or investment adviser yet told his clients he would invest their money through Wealth Resources. He would then provide investors with purported ?brokerage account? statements from Wealth Resources - statements that falsely represented a variety of investments courtesy of Wegener?s ?financial acumen.?

Wegener never used his customers? money for those investments, however. Instead, the SEC says he took clients? money for his personal use, paid business expenses and made investments on his own behalf in entities where he had an ownership interest. Those companies included WU Ventures, LLC, Secura Technology, LLC, and Trailblazer Learning, Inc., as well as Wealth Resources. Investors? funds also were transferred to Wegener?s former wife, Kristin Wegener.

The SEC further says that during the course of the alleged scam, Wegener used money from investors to make Ponzi-like payments to clients who wanted a portion or all of their investment returned.

The Wegener case offers several lessons for investors. First, before investing money with any financial professional, take time to verify that the person is a registered stock broker or financial advisor. Is the individual a member of the Financial Industry Regulatory Authority (FINRA)? Does the person have any customer complaints, disciplinary actions, fines, suspensions or other sanctions by FINRA, the SEC or other federal or state regulatory agencies listed on FINRA?s BrokerCheck Web site?

In addition, be leery of sales pitches that make exaggerated claims about the expected profitability of an investment, such as it will double in value in six months. The bottom line, if it sounds too good to be true, it usually is.

Full post as published by Representing Investors on July 17, 2010 (boomark / email).