National investment fraud lawyers KlaymanToskes is investigating Sean Michael Kane (CRD# 5778181) and Kevin John Kane (CRD# 2269484) after the SEC filed fraud charges against the father and son financial advisory team, based in York, PA. The charges are in connection with findings that the pair was terminated from Waddell & Reed, Inc. for firm policy violations prior to joining Cambridge Investment Research.
Sean and Kevin Kane are alleged to have falsely represented to customers that they were still associated with their former firm and that they still had access to customers’ accounts, going as far as to impersonate certain customers of their former firm.
Investors that suffered losses with Sean Kane and/or Kevin Kane may be entitled to a financial recovery. Contact Lawrence L. Klayman, Esq. immediately at (888) 997-9956 or lklayman@klaymantoskes.com to discuss your recovery options. Consultations are free and we do not collect attorney’s fees unless we are able to obtain a financial recovery for you.
According to the Securities and Exchange Commission (“SEC”) complaint filed in the U.S. District Court for the Middle District of Pennsylvania on March 1st, 2023, Sean Kane and Kevin Kane were terminated from their former brokerage firm (Waddell & Reed) on February 23rd, 2021 due to allegations that they both violated multiple firm policies and procedures regarding “outside business activities, communications with the public and client/data privacy.” Sean Kane’s termination notice also noted his violation of firm policies related to “client signatures.”
Allegedly, the Kanes worked together as a team, operating under the same “team code” and even shared compensation earned from advising their clients. As of February 10, 2020, “the Kanes were investment advisors to over one hundred clients who collectively had over $27 million in assets under management” at Investment Adviser 1 (Waddell & Reed).
The SEC’s complaint alleges that following their terminations, “the Kanes repeatedly defrauded and breached their fiduciary duty” to customers in an effort to convince clients from their previous firm (Waddell & Reed) to join them at their new investment advisory firm (Cambridge Investment Research).
The SEC’s complaint alleges that Sean Kane and Kevin Kane engaged in the following acts of misconduct/securities violations:
Investment Adviser 1 (Waddell & Reed) issued letters to the Kanes’ former customers, informing investors that the Kanes were no longer associated with the firm. The firm’s letter allegedly did not provide the customers with any specific details regarding the reasons for Kevin Kane and Sean Kane’s separation from the firm.
The SEC’s complaint notes several specific instances of the Kanes’ fraudulent conduct and breaches of fiduciary duties, including a list of fraudulent interactions with at least 11 specific customers (Clients A through K). In one example provided by the SEC, after learning about the Client Letter, a former customer, referred to as “Client A,” allegedly texted Kevin Kane asking whether the Kanes had “left [Investment Adviser 1]?!?” and if so, “Now what?” Kevin Kane allegedly lied to the customer and falsely stated, “No. Not yet. Lol. [Investment Adviser 1] was bought by [Investment Adviser 2]. Not happy with it but I’m still at my desk.”
While the complaint does not name the firms involved, KlaymanToskes’ findings indicate that the communication above may reference Waddell & Reed as “Investment Adviser 1” and Macquarie Management Holdings, Inc. and/or LPL Financial as “Investment Adviser 2.” According to public record, Waddell & Reed was acquired by LPL Holdings, Inc. from Macquarie Management Holdings, Inc. on April 30th, 2021, whereby 900 of Waddell’s advisors joined LPL.
Kevin Kane allegedly engaged in a follow-up phone call with “Client A” where he gave the customer the false impression that he and his son, Sean Kane, were leaving Investment Adviser 1 (Waddell & Reed) voluntarily because of Investment Adviser 1’s merger with Investment Adviser 2. Kane failed to disclose that he and his son had actually been terminated for cause and allegedly also falsely stated that they could still access “Client A’s” advisory account.
In another example cited by the SEC, “Client B” instructed Sean Kane to purchase a specific security in their Investment Adviser 1 (Waddell & Reed) advisory account. Sean Kane failed to disclose to “Client B” that the firm had terminated the Kanes for cause, or that the Kanes could no longer access the customer’s account. Allegedly, without the customer’s consent, Sean Kane impersonated “Client B” on a telephone call with Investment Adviser 1 (Waddell & Reed) in order to execute the purchase of a security. To accomplish this act of misconduct, and without the customer’s consent, Sean Kane allegedly accessed the customer’s confidential information, including the customer’s date of birth and social security number.
In another circumstance, relating to to the impersonation of “Client H,” Sean Kane allegedly “attempted to disguise his identity from Investment Adviser 1 by entering *67 before he called the firm.” According to the SEC’s complaint, entering *67 before making a call allows a user to block their Caller ID name and number. In another example of using customers’ account and social security numbers, without their knowledge or consent, Kevin Kane impersonated “Client K” on a telephone call to Investment Adviser 1 (Waddell & Reed) to request a cash disbursement from “Client K’s” account.
On March 18, 2021, Investment Adviser 1 (Waddell & Reed) allegedly became wary that the Kanes were impersonating advisory clients in telephone calls to the firm, and launched an investigation into their misconduct. On March 23, 2021, Investment Adviser 1 (Waddell & Reed) sent cease-and-desist letters to Sean Kane and Kevin Kane, stating they were not authorized to act as representatives or associated persons of the firm, demanding the return of the firm’s confidential client information.
According to the SEC’s complaint, both Sean Kane and Kevin Kane “violated, and unless enjoined, will continue to violate Section 206(1) of the Advisers Act, 15 U.S.C. § 80b-6(1).” This securities violation is known as Fraud by an Investment Adviser (Knowing or Reckless). The Kanes are also alleged to have violated Section 206(2) of the Advisers Act, 15 U.S.C. § 80b6(2), known as Fraud by an Investment Adviser (Negligent). The SEC requests that the court “order defendants to pay civil money penalties pursuant to Section 209(e) of the Advisers Act, 15 U.S.C. § 80b-9(e).”
Sean Michael Kane (CRD# 5778181)
According to FINRA BrokerCheck, Sean Michael Kane is currently registered as a broker and investment advisor with Cambridge Investment Research in York, PA.
Sean Kane was previously registered with Waddell & Reed from 2018 to 2021 in York, PA. On February 23rd, 2021 Sean Kane was “terminated for violation of multiple firm policies including outside business activities, communications with the public, client/data privacy and client signatures.” Sean Kane was also previously registered with Resource Securities from 2015 to 2018 in Philadelphia, PA and with Cohen & Steers Securities from 2013 to 2015 in New York, NY.
Brokers/financial advisors who misrepresent and/or omit material facts concerning investment recommendations are engaging in a sales practice violation and may be subject to FINRA sanctions. “Selling away” in private securities transactions occurs when a broker or investment advisor engages in selling an investment to a customer that is not offered by the executing brokerage firm, and without the approval of his/her brokerage firm.
Acts of broker/financial misconduct may also constitute a FINRA arbitration claim for a breach of fiduciary duty. Additionally, FINRA-regulated brokers and advisors are required to disclose “outside business activities” to regulators and their firms. Investors can review their broker’s “outside business activities” and other public disclosures by using FINRA’s free Brokercheck tool.
Former and current customers of Sean Kane and Kevin Kane at Cambridge Investment Research’s York, PA branch and/or Waddell & Reed’s York, PA branch who have experienced significant investment losses are encouraged to contact securities attorney Lawrence L. Klayman, Esq. at 1-888-997-9956 or lklayman@klaymantoskes.com for a free and confidential consultation to discuss recovery options.
KlaymanToskes offers legal services on a contingency fee basis, meaning we do not collect attorney’s fees unless we are able to obtain a financial recovery for you.
KlaymanToskes is a leading national securities law firm which practices exclusively in the field of securities arbitration on behalf of retail and institutional investors throughout the world in large and complex securities matters. The firm has recovered over $250 million in FINRA arbitrations and over $350 million in other securities litigation matters. KlaymanToskes has office locations in California, Florida, New York, and Puerto Rico.
KlaymanToskes, P.A.
Lawrence L. Klayman, Esq.
888-997-9956
lklayman@klaymantoskes.com
www.klaymantoskes.com