Finra has barred Kimberly Springsteen-Abbott, owner of a broker-dealer that packages and distributes illiquid equipment-leasing funds, from the securities industry for misusing investor funds by improperly allocating expenses to the funds that were not related to the funds' business.
Ms. Springsteen-Abbott is the CEO, chief compliance officer and chairman of Commonwealth Capital Corp., parent of the wholesaling broker-dealer, Commonwealth Capital Securities Corp.
“The practice of charging personal expenses to the funds was a way of life for [Ms.] Springsteen-Abbott and her husband, Hank Abbott,” according to the Financial Industry Regulatory Authority Inc. panel's decision.
Mr. Abbott is a director at the broker-dealer, Commonwealth Capital Securities Corp., and president of the parent company, Commonwealth Capital Corp.
The two “regularly charged thousands of dollars of personal expenses on the same American Express credit card they used for business expenses, and then, when she received the monthly American Express bills, [Ms.] Springsteen-Abbott allocated to the funds many of those personal expenses,” according to the Finra panel's decision.
The personal expenses charged to the funds included those related to a birthday cruise in Alaska; Mother's Day, Thanksgiving and post-Christmas holiday family meals; and a Disney family vacation, according to the decision.
She also improperly allocated to the funds expenses for holiday decorations for her home, car rentals her husband used for personal purposes, clothes, accessories, and pharmacy and grocery expenses.
“In the hope of concealing her misconduct and avoiding regulatory action, [Ms. Springsteen-Abbott] then lied to Finra staff investigating the matter and later lied to the hearing panel regarding the purposes for which she spent the money,” according to the panel's decision.
Ms. Springsteen-Abbott's conduct was in violation of Finra rule 2010, which requires a Finra broker-dealer and rep to “observe high standards of commercial honor and just and equitable principals of trade” when conducting business, according to the Finra panel's order, which was released on March 30.
She “abused her authority by improperly allocating to the funds two types of expenses that were not related to the funds' business: personal expenses and broker-dealer expenses,” according to the Finra panel's decision. “It was a misuse of money belonging to investors in the funds,” according to the panel's decision.
Finra's investigation covered three years, from early 2009 to early 2012. Finra enforcement filed its original complaint in May 2013 and later filed an amended complaint.
Finra's department of enforcement “alleged — and proved — that [Ms.] Springsteen-Abbott purposefully used investor monies as though they were her own, to her personal benefit and to the investors' detriment, and in violation of limitations imposed by the offering documents for the investments,” according to the Finra panel's decision. She also was ordered to pay $209,000 in disgorgement, plus interest, and was fined $100,000.
In an email to InvestmentNews, Commonwealth Capital Corp. on Tuesday said Ms. Springsteen-Abbot “believes the Finra panel erred and plans to pursue a vigorous appeal of the ruling in order to clear her name.”
Calling the FINRA ruling “unjust and disproportionate,” the email stated that “for more than 35 years, Ms. Springsteen-Abbott has been a respected member of the securities industry during which [time] she has proudly served thousands of investors.”
“In fact, she has made voluntary contributions totaling more than $3.1 million to the funds under her management during the years 2008 through 2014,” according to the email. “These contributions on behalf of her investors were in the form of direct capital contributions, forgiveness of reimbursable expenses and waiver of fees, all during a period when her companies also absorbed approximately 10% of all expenses otherwise allocable to the funds.”
From December 1993 to October 2013, Commonwealth Capital Securities Corp. created and sold 13 different funds to investors through independent broker-dealers, raising over $240 million, according to the panel's decision.
In September 2013, Ms. Springsteen-Abbott reached a $1.5 million settlement with the Securities and Exchange Commission after the agency alleged that a related fund group misled investors regarding compensation practices at the equipment-leasing funds.