In response to charges from Pennsylvania securities regulators that it failed to supervise one of its brokers, SagePoint Financial Inc. last month included some of the broker's testimony as part of its answer to the Pennsylvania court order.
During his response to questioning, Edward Stetz, who was fired by SagePoint last June, repeatedly claimed that clients gave him “gifts” and “loans” instead of paying fees for his work. He often mixes up the terms.
“I put them down as fees, and I was confused at the time,” Mr. Stetz said of payments from one account. “But [the client] gave me those as gifts.”
Gifts or not, the Pennsylvania Securities Commission barred Mr. Stetz from the securities industry last August for borrowing $332,000 from at least two clients. Brokers' borrowing money from clients is a serious violation of securities industry rules.
The regulator sued SagePoint in March, alleging it failed to supervise certain registered reps and engaged in dishonest and unethical business practices. Mr. Stetz had been affiliated with SagePoint or its various predecessors since 1989.
In its response — filed with the state last month — SagePoint systematically denied the overwhelming majority of the 469 claims in the Pennsylvania order.
SagePoint attached Mr. Stetz's testimony from last May. The banned broker's responses often come across as confused. In response to Mr. Stezt's claim that fees collected from one client were in fact gifts — and at times, loans — an attorney for the Pennsylvania Securities Commission, asked, “So, at no time did you charge [the client] a fee for investment-related advice?”
“At no time — and maybe in [sic] the 2000, 1999, 1998,” Mr. Stetz replied. “I would have to go back and look.”
Mr. Stetz later stated: “I said ‘fee' because that's what [the client] told me to say when we were working together. But as I later changed it to [the regulators] and to your home office. I said those were gifts.”
Other clients gave him loans, Mr. Stetz said, but he seems to have confused those facts, too.
When asked if he was charging another client fees, and whether that was a correct statement, Mr. Stetz said, “To my knowledge, yes, because they were fees — or not fees. They were loans.”
Although Pennsylvania has kicked Mr. Stetz out of the securities business, Mr. Stetz has a license to sell insurance in the state, and has a number of working agreements, or “appointments” with leading insurance firms.
When asked about the matter, Mr. Stetz said he had no comment.
Mr. Stetz is not the only former SagePoint broker to recently face legal problems.
This month, a three member Financial Industry Regulatory Authority Inc. panel ordered a former SagePoint broker, Derek R. Kent, to pay 27 investors $1 million for a real estate scheme he allegedly helped devise. According to the arbitrators' decision, which was first reported by Dow Jones, SagePoint settled the case.
Mr. Kent was affiliated with SagePoint until 2007 and Finra barred him from the business last year.
Linda Skolnick, a SagePoint spokeswoman, said that many of the claimants were never customers of SagePoint and transacted business with Mr. Kent outside of his SagePoint affiliation. SagePoint is unable to disclose the terms of the settlement due to confidentiality restrictions.
As for Mr. Stetz — and why SagePoint chose to include his testimony in its response to the Pennsylvania regulator — Ms. Skolnick said the firm did not comment on pending litigation.