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SEC bars Chicago investment advisor for misappropriating clients’ funds

On Behalf of | Jun 25, 2024 | Broker Misconduct

A former stockbroker with Fifth Third Securities Inc. has been barred by the Securities and Exchange Commission after being accused of misappropriating the funds of clients, InvestmentNews reports.

The enforcement action, detailed in a June 17 order, was taken against 33-year-old David Sheldon Wells of Chicago.

The SEC’s complaint alleged that Wells misappropriated over $683,000 from three of his investment advisory clients, fraudulently soliciting the clients to give him money to invest on their behalf.  Instead, regulators said he transferred the funds to a personal brokerage account, where Wells lost most of the funds through risky options trading. He allegedly instructed the investors to buy cashier’s checks payable to a business entity that he established just prior to the transfer.

The actions took place between October of 2020 and July of 2021, when he was employed as a stockbroker and investment advisor representative at Fifth Third Securities.

The SEC ordered that pursuant to Section 15(b)(6) of the Exchange Act and Section 203(f) of the Advisers Act, Wells is barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization.

He is also barred from participating in any offering of a penny stock, including: acting as a promoter, finder, consultant, agent or other person who engages in activities with a broker, dealer or issuer for purposes of the issuance or trading in any penny stock, or inducing or attempting to induce the purchase or sale of any penny stock.

The allegations against Wells were detailed in a federal indictment on wire fraud charges in 2023. The indictment stated that Wells falsely represented to three clients that he would invest their money in publicly traded companies. The clients, including two elderly men with dementia, sent him checks made payable to “Wayne and Stark,” which Wells claimed was a publicly traded company. But Wayne and Stark was actually a shell company set up and solely controlled by Wells, according to the charges.

Wells allegedly swindled the clients and used the money for his own expenses, including rent and unauthorized trading in high-risk options contracts. The indictment said he lost or otherwise spent all of the clients’ funds.

The attorneys at Lewitas Hyman have decades of experience dealing with securities fraud cases and have a deep understanding of how capital markets and financial service firms are intended to work to protect investors. If you think your financial professional or firm engaged in misconduct that caused you investment losses, contact Lewitas Hyman at (888) 655-6002 or through our online contact form for a no-cost evaluation of your matter.