The Securities & Exchange commission recently announced that it filed an order against Securities America Advisors, Inc. (“SAA”), a Nebraska-based investment advisor, for failing to implement policies and procedures reasonably designed to protect the misappropriation of advisory client assets relating to one of its formerly registered representatives, Hector May. The failure to supervise by Securities America Advisors resulted in Hector May’s misappropriation of millions of dollars from clients’ advisory accounts at the firm.
The SEC Order Against Securities America Advisors, Inc.
According to the SEC Order, from November 2014 to March 2018, SAA failed to implement policies and procedures for the review of automatically generated surveillance alerts after client disbursements had occurred. SAA also failed to implement reasonably designed policies and procedures for reviewing client disbursement requests for possible misappropriation before the disbursements occurred.
As a result of the supervisory failures, Hector May, who is the owner of an independent state-registered investment adviser whose clients participated in certain SAA advisory programs, misappropriated, without SAA’s detection, approximately $8 million from the SAA advisory accounts of at least fifteen SAA advisory clients.
Securities America Advisors was fined $1.75M for its failure to supervise.
Background of Hector May
According to BrokerCheck, Hector May was terminated by Securities America in March 2018. There are eight (8) BrokerCheck disclosures for May, three of which are customer disputes relating to the investment fraud.
The SEC order states that Hector May was a resident of Orangeburg, New York prior to his incarceration in August 2019. From 1998 to March 2018, May was the owner of Executive Compensation Planners, Inc., which is an independent state-registered investment adviser, an investment adviser representative of ECP, and a registered representative of SAI.
The SEC charged May in federal district court in December 2018 with securities fraud for misappropriating approximately $8.0 million from the SAA advisory accounts of at least fifteen of his clients. On February 14, 2019, the SEC instituted administrative proceedings against May and accepted his offer of settlement to associational and penny stock bars. Hector was also criminally charged for the same conduct. On December 13, 2018, May pled guilty to one count of conspiracy to commit wire fraud and one count of investment adviser fraud.
Hector May’s Misappropriation of Client Assets
According to the SEC Order, May encouraged certain of his advisory clients, who had opened SAA advisory accounts and invested assets in an SAA advisory program, to buy bonds away from these accounts. In doing so, Hector May falsely claimed that he could obtain the bonds at better prices and avoid fees.
Hector May proceeded to instruct his clients to transfer funds from their SAA advisory accounts to their personal bank accounts and to approve the transfer in the event they were contacted for confirmation. Once the funds arrived at the personal bank accounts, Hector May told his clients to transfer the monies to an “ECP Custodial Account.”
Instead of making the bond investments, Hector May diverted their assets for his own personal use. Worse, May fabricated and distributed to his defrauded clients phony advisory account statements that purported to contain all of their SAA advisory program investments including the fake bonds, their returns, and valuations.
Investment Losses Relating to Hector May and Securities America Advisors, Inc.
Former and current customers of Hector May at Securities America Advisors, Inc. with investment losses that exceed $100,000, and those who may have information relating to the manner in which the firm handled their accounts, are encouraged to contact Lawrence L. Klayman, Esq., at (561) 542-5131, and download our Special Investor Report.
KlaymanToskes is a leading national securities law firm which practices exclusively in the field of securities arbitration and litigation, on behalf of retail and institutional investors throughout the world in large and complex securities matters. The firm represents high net‐worth, ultra‐high‐net‐worth, and institutional investors, such as non‐profit organizations, unions, public and multi‐employer pension funds. K&T has office locations in California, Florida, New York and Puerto Rico.