Late last week, the SEC filed an emergency action seeking a temporary restraining order, charging Richards, a former affiliate of LPL Financial. The federal court of the Northern District of Georgia granted the request and issued an order that temporarily restrained Richards from further securities laws violations, froze his assets, prevented the destruction of documents and expedited discovery.
A hearing date was set for June 6 for the SEC’s request for a preliminary injunction. The SEC’s complaint also seeks a permanent injunction, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties.
The SEC’s complaint alleges that, since at least 2008, Richards misappropriated at least $2 million from at least seven investors. The majority of the misappropriated funds constituted retirement savings and/or life insurance proceeds from deceased spouses.
Richards instructed investors to write out checks to entities under his control, such as “Blake Richards Investments,” with the understanding that he would invest their funds in fixed-income assets, variable annuities and/or common stock, the SEC alleged in its complaint. None of these investments was ever made, the SEC stated. None of the investments appeared on client brokerage account statements, and Richards received no commission income from these investments. The complaint further alleges that Richards siphoned off the funds entrusted to him for personal use.
Richards’ production at LPL has been virtually nonexistent over the last few years, according to the SEC’s summary. He gave one investor a business card with the professional designation AAMS, which stands for Accredited Asset Management Specialist. The College for Financial Planning, which awards this certificate, said that Richards does not hold this designation.
The complaint alleges that Richards violated the antifraud provisions of the federal securities laws, and sections of the Securities Act of 1933 and the Securities Exchange Act of 1934. The complaint also alleges that Richards violated the antifraud provisions of the Investment Advisers Act of 1940.
The SEC complaint can be downloaded here.