October 20, 2020
Update: On September 17, 2020, the Financial Industry Regulatory Authority (FINRA) Department of Enforcement approved a Letter of Acceptance, Waiver and Consent (AWC) in which Cheshire, Connecticut resident and Investment Company and Variable Contracts Products Representative Matthew Clason consented to a bar from associating with any FINRA member firm.
According to the AWC, FINRA staff sent Clason a request seeking the production of information and documents pursuant to FINRA Rule 8210. FINRA was investigating allegations reported in his Form U5 that stated he had engaged in liquidations of securities in a customer’s account, transferred funds to a joint bank account and withdrew the funds for personal use.
September 15, 2020: On September 1, 2020, the Securities and Exchange Commission (SEC) filed a Complaint in the U.S. District Court for the Central District of Connecticut against Matthew Clason, a resident of Cheshire, Connecticut, alleging that he stole hundreds of thousands of dollars from a client of his associated firm, LPL Financial LLC in New Britain, Connecticut.
According to the SEC complaint, Clason began stealing funds from his client starting in at least December 2018. Clason allegedly developed a personal relationship with the client—a 73-year-old retired resident of New Britain, Connecticut—and had been providing investment services to her since 2015 or 2016. The client, a retired retail investor, held five accounts with $482,000 in assets as of July 31, 2020, but believed she had approximately $1 million under management with Clason as of August 2020.
In 2018, the client and Clason opened a joint banking account at a national bank with the understanding that Clason could access funds for investment purposes and make personal withdrawals on behalf of the client since she had limited mobility and other health conditions.
The SEC alleges in its Complaint that between December 2018 and August 2020, Clason made 45 transfers totaling $330,000 out of the client’s advisory account, most of which was funded by selling securities in the client’s advisory account. Clason concurrently withdrew at least $300,000 in cash in increments under $10,000 through various bank branches. The SEC presumes Clason withdrew funds in this manner to avoid suspicion from bank staff and to avert their required reporting of any cash transaction over $10,000 to federal authorities. Finally, the SEC asserts that Clason’s client did not approve of these withdrawals, nor did she receive the bulk sum of these cash withdrawals.
Based on the foregoing, Clason violated his fiduciary duty as an investment adviser to employ reasonable care to avoid misleading, misrepresenting, and omitting material facts regarding her investment accounts and to exercise the utmost good faith in dealing with her investment accounts.
The SEC Complaint charges Matthew Clason with violating Section 202(a)(11) and Section 206(1) of the Advisers Act. The SEC Complaint seeks permanent injunctions from future violations of these provisions, disgorgement of ill-gotten gains with prejudgment interest, civil penalties, and an order freezing assets, accounting, and other equitable relief.