A former California broker-dealer was barred by the Securities and Exchange Commission over his involvement in a scheme to defraud various pension plans, Financial Advisor reports.
The SEC took the enforcement action against 50-year-old Jason Sugarman of Los Angeles, a former director and indirect owner of broker-dealer and investment adviser Burnham Securities.
In a complaint filed in November 22, the commission said Sugarman and others gained control of two registered investment advisers, Hughes Capital Management LLC and Atlantic Asset Management LLC. They allegedly used their control over their clients’ money in pension funds to buy bonds issued by a Native American tribal corporation.
While proceeds of the bonds were supposed to have been deposited into an annuity to help the tribal corporation and repay bondholders, the SEC alleged that the proceeds were never used to buy any annuities but instead were diverted to Sugarman and others, and used to pay their personal and corporate expenses. Sugarman was accused of defrauding 10 pension plans out of a total of about $43 million.
A final judgment was entered against Sugarman in January, permanently enjoining him from future violations of Sections 17(a)(1) and (3) of the Securities Act of 1933 (“Securities Act”), and Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) thereunder.
He has now agreed to a settlement with the SEC in which he is banned for three years from any association with a broker-dealer or investment advisor, pursuant to Section 15(b)(6) of the Exchange Act, and Section 203(f) of the Advisers Act. Sugarman will become eligible to be reinstated once the ban is completed.
Sugarman was also ordered by the SEC to pay over $10.2 million in disgorgement, interest, and penalties.
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