A Department of Justice press release announcing ex-financial adviser Anthony Diaz's 17-year prison sentence for wire fraud and mail fraud highlighted a dangerous practice undertaken by certain unscrupulous brokers: arranging for clients to sign blank forms for high-risk and high-fee products, only to add false information to account forms, such as inflated client assets, risk tolerance preferences, and investment experience level in order to qualify for the higher-risk and higher-fee/commission securities.
After reviewing the facts of the case and the jury's decision to find Diaz guilty of fraud, US District Court Judge Malachy E Mannion called Diaz a "sophisticated criminal" who "lied through his teeth" and showed no remorse for his fraudulent actions that harmed scores of customers. FBI agent Michael Driscoll portrayed the victimization thusly: "The harm done here was significant—retirement delayed, tuition money lost, lives turned upside down—all in service of one man's greed."
The message for investors is clear: be wary of any broker who recommends you sign a blank document.
According to prosecutors, Diaz persuaded clients to invest in high-risk and illiquid alternative investment products, such as real estate investment trusts (REITs), business development companies (BDCs), and risky oil and gas offerings, but in order to bypass industry rules restricting such risky investments to higher net worth individuals, more risk tolerant customers, or more experienced/sophisticated clients, Diaz purportedly had his customers sign blank forms and then fabricated information to ensure the clients appeared to qualify for riskier and higher-cost products that they should not have been eligible to invest in.
As for motive, witnesses testified that Diaz earned commissions on the alt investments that were significantly greater than what he would have earned on conventional investments, such as stocks, bonds, and mutual funds.
Prosecutors alleged that Diaz earned more than $1.5 million annually—in commission payments alone—and spent the excessive commissions-turned-income on expensive cars, real estate properties, and exotic vacations.
Barred by FINRA in 2018, Anthony Diaz (CRD #4131948) was terminated by six firms, including SII Investments, which is affiliated with National Planning Corporation (El Segundo, California) and Jackson National Life Distributors (Denver, Colorado); Diaz has 62 disclosures in his BrokerCheck file dating back to his 2002 termination from Edward Jones, including customer disputes.
In 2018, FINRA stated it would flag brokers as "high-risk" due to association with fraudulent firms and representatives, while a prior report found that a small number of rogue representatives account for a disproportionate percentage of industry misconduct: the hiring of problematic stockbrokers and financial advisers who jump from firm to firm, despite prior disclosures for misconduct or termination from earlier firms, is known industry-wide as cockroach culture, and a firm's failure to do due diligence on such a problematic broker could spell trouble for not just the firm's clients, but the broker-dealer itself.
If you have invested with any broker, investment adviser, or representative who requested you sign blank account forms or other documents in the blind, only to then fabricate or embellish your information—such as net worth, risk tolerance, or investment objectives—in order to pursue riskier and higher-fee products, and this unauthorized and unsuitable behavior has proven harmful to your investments or interests, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.
All information in the above post was verified as accurate at the time of posting. We invite readers and the subject(s) of the posting to contact us with new or updated information.