On June 28, 2012, our firm posted a blog entry that, in summary, reported Milton "Todd" Charles Ault, III was fined $75,000 by FINRA, and ordered by FINRA to pay $312,916.06 plus interest in restitution to investors Ault had defrauded.
We used three different FINRA reporting sources to gather our information regarding the regulatory allegations leveled against Mr. Ault and their resolution.
First, FINRA'S Brokercheck service publicly states on Mr. Ault's Brokercheck report: "Without admitting or denying the findings, Ault consented to the described sanctions and to the entry of findings; therefore
he is fined $75,000; suspended from association with any FINRA member in any capacity for two years
and ordered to pay $312,916.06, plus interest, in restitution to investors." A copy of Mr. Ault's Brokercheck as of August 3, 2012, may be found
Second, FINRA'S June 2012, monthly discipline report states:
Milton Charles Ault III (CRD #2157788, Registered Principal, Fountain Valley, California) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $75,000, suspended from association with any FINRA member in any capacity for two years
and ordered to pay $312,916.06, plus interest, in restitution to investors. The fine must be paid either immediately upon Ault's reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings,
Ault consented to the described sanctions and to the entry of findings that he effected transactions in customer accounts (and the relatives of two of the customers) without the customers' prior knowledge, authorization or consent. The findings stated that Ault failed to remit payment for a securities transaction to a customer and failed to deliver securities to the customer.
A copy of the page of FINRA'S monthly disciplinary report may be found here.
Third, the FINRA Letter of Acceptance, Waiver, and Consent ("AWC"), No. 20080161571-01, may be found here. The AWC reports that Mr. Ault "…accept[ed] and consent[ed], without admitting or denying the findings,… to the entry of the following findings by FINRA."
1. During the review period; Respondent while associated with Zealous Capital Markets, LLC, effected 43 transactions in the accounts of four customers, JR, GC, MH and SS (and the spouses of two of those customers), without the customers' prior knowledge, authorization or consent. The conduct described in this paragraph constitutes separate and distinct violations of NASD Rule 2110 and IM-2310-2.
2. During the review period, Respondent failed to remit to a customer, customer SS, payment for a securities transaction. The conduct in this paragraph constitutes a violation of NASD Rule 2110.
3. During the review period, Respondent failed to deliver securities to a customer, customer SS. The conduct in this paragraph constitutes a violation of NASD Rule 2110.
Mr. Ault also consented in the FINRA AWC that "I may not take any action or permit to be made any public statement, including in regulatory filings or otherwise, denying, directly or indirectly, any finding in this AWC or create the impression that the AWC is without factual basis.
The FINRA AWC regarding Mr. Ault may be found here.
On August 2, 2012, Mr. Ault's counsel sent a "cease and desist" letter alleging that the blog post was defamatory and demanding its retraction. A complete copy of the letter may be found here. Specifically, his counsel identified that Milton "Todd" Charles Ault, III never admitted to any wrongdoing nor was there ever an order issued by FINRA for Mr. Ault to pay any fine or restitution, but simply Mr. Ault settled the FINRA allegations by consenting to the suspension, fine, and restitution payment without a determination of fault or guilt.
On August 3, 2012, we removed the blog entry in its entirety and further investigated the issue raised by Mr. Ault's counsel.
Mr. Ault's counsel is correct there was never a judicial or quasi-judicial finding by FINRA that Mr. Ault defrauded any client. While Mr. Ault accepted the FINRA findings that he engaged in 43 unauthorized transactions, failed to remit payment to a customer for a securities transaction, and failed to deliver securities to that same customer, there was not a specific finding or acceptance that Mr. Ault defrauded his clients. To that extent, we retract the statement "…Ault had defrauded." We sincerely apologize for the inconvenience and any confusion this incorrect statement caused.
We wish Mr. Ault well in paying restitution to his clients, and again apologize for misstating that there was a FINRA finding that he defrauded his clients.