FINRA barred Milkie Ferguson Investments, Inc. broker Scott Schroeder of Los Angeles, California for making unsuitable recommendations to multiple elderly customers. Specifically, Schroeder allegedly recommended high-risk investments to customers with moderate risk tolerances.
The investigation states that Schroeder recommended a 70-year-old retiree and the customer's 65-year-old spouse with "moderate" risk tolerance liquidate a portion of their mutual fund holdings and use the proceeds to invest $100,000 in Provident Royalties, LLC-issued oil and gas interests, which were described in their offering materials as "high-risk" and warning customers that "investors could lose all of their investment funds."
Provident Royalties accordingly defaulted, resulting in the couple's loss of their entire $100,000 investment.
Schroeder recommended a second 74-year-old customer invest in two high-risk investments even though his investment objective was long-term growth with moderate risk tolerance. The investigation states Schroeder recommended this customer invest 33-to-40% of his retirement assets in the high-risk Retirement Value, LLC life settlement contracts and an assisted living facility private placement.
A receiver subsequently took over the business operations of Retirement Value, which has since stopped making any principal or interest payments.
Schroeder also improperly recommended a customer invest in Retirement Value using the entirety of a $400,000 loan, in contravention of Milkie firm policies and written supervisory procedures which specifically prohibit registered representatives from allowing customers to use borrowed funds to make investments.
The investigation further states that Schroeder knew the CEO of Retirement Value had prior disciplinary history for SEC and Texas Department of Insurance actions in connection with fraud and nonetheless omitted to disclose this to his customers.
In 2012, Schroeder was fined $15,000 and suspended for allegedly soliciting investments, with firm associate Daniel Levin, indiscriminately over the radio via the associate's "Investment Talk" radio show.
According to those findings, Levin improperly promoted Provident Shale Royalty offerings—which were unregistered securities that could not be sold through general solicitations—during his radio show, even though he did not explicitly mention the offerings by name.
According to archived audio recordings of the show captured by FINRA, Levin stated, in part, "This is a preferred stock in a partnership. That 15% income which comes monthly starting at about four months is taxed at the 15% bracket like a stock dividend…It's for accredited investors, number one. $50,000 for the life settlements, $25,000 for the natural gas two year investment."
Levin allegedly repeated similar statements during a show two weeks later.
Investigators found that after the statements on the radio show were made, Milkie Ferguson, Levin and Schroeder each participated in the sales of Provident Royalty Shale offerings to customers, which were impermissible sales because Levin did not broadcast the solicitations to customers with whom he, Milkie Ferguson or Schroeder had a pre-existing and substantive relationship.
Because the solicitations were broadcast to the general public and sales with new customers were executed thereafter, Schroeder violated NASD Rule 2110 and FINRA Rule 2010 by violating Section 5 of the Securities Act of 1933.
If you have invested with Scott Donovan Schroeder, Daniel Levin, firm Milkie Ferguson Investments or purchased the Provident Shale Royalty offering as a result of this general solicitation, and such activity has proven harmful to your interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881.