McDermott Investment Advisors Loses to SEC in Court, Held Liable for Fraud Against UIT Clients

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Regulators prevailed in a federal trial against McDermott Investment Advisors, with a US District Court jury deciding that McDermott breached fiduciary duties in selling unit investment trusts (UIT) to clients for whom the product may not have been suitable. According to FINRA BrokerCheck, principal Dean McDermott previously was issued a cease and desist/injunction sanction by the SEC, in connection with a fraudulent ponzi scheme by James Zimmerman at long-defunct firm Old Naples Securities.

The SEC announced its legal victory against Dean McDermott's firm, writing, "We are pleased with today’s jury verdict holding defendants liable for fraud against their investment advisory clients. This verdict underscores the bedrock principle that investment advisers must uphold their fiduciary duties to act in their client’s best interest."

In 2019, the SEC filed a complaint against Dean Patrick McDermott and his firm McDermott Investment Advisors / McDermott Investment Services, alleging the defendants unlawfully recommended clients invest in UITs, a security that charged "significant" sales charges when an identical product that did not charge such charges was available. As one might expect, the sales charge-laden UITs reaped larger commissions and profits for McDermott, and the complaint thus included allegations that McDermott failed in its fiduciary duties because the firm placed its interest ahead of the clients' interests.

According to the court filings, McDermott's UIT transactions exceeded $5.7 million and spanned 169 advisory accounts. The SEC estimated excess charges incurred as a result of the unsuitable recommendations in the $160,000-range.

The federal jury took it one step further and held the defendants McDermott liable for fraud against their customers.

If you invested with McDermott Investment Advisors or with any broker-dealer or representative who failed to disclose a conflict of interest in unsuitably recommending a product that resulted in losses or generated excessive commissions and fees, such as sales charges, 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.