A former investment adviser agreed to pay more than $2 million to settle fraud charges brought by the Securities and Exchange Commission related to a scheme to rip off mostly elderly clients.
Michael Donnelly, former president of Coastal Investment Advisors Inc. in Wilmington, Del., admitted to defrauding 13 clients — at least 10 of whom were older than 65 — of nearly $2 million from 2007 through August 2014.
Under the agreement with the SEC, Mr. Donnelly will disgorge $1.9 million in ill-gotten gains and pay prejudgment interest of $365,723.
Mr. Donnelly, who was also a registered representative of Coastal Equities Inc., has been barred from the securities industry.
DIDN'T INVEST CLIENT FUNDS
Now a resident of Lecanto, Fla., Mr. Donnelly never invested the client funds he received in the financial products he told them he would buy on their behalf. Instead, he used the money for business and personal expenses, such as rent, car payments, golf club memberships and his children's private-school tuition.
He hid his scheme by providing clients false account statements and trade confirmations. The SEC filed its complaint in federal district court in Philadelphia. Separately, the U.S. Attorney's Office for the Eastern District of Pennsylvania filed criminal charges against Mr. Donnelly.
“[Mr.] Donnelly stole from his clients over a period of several years and then repeatedly lied to cover up his theft,” Sharon B. Binger, director of the SEC Philadelphia Regional Office, said in a statement. “We will aggressively pursue and prosecute industry professionals like [Mr.] Donnelly who abuse their positions of trust to take advantage of their unsuspecting clients.”
An attorney for Mr. Donnelly could not immediately be reached for comment.
The SEC, the Financial Industry Regulatory Authority Inc. and state regulators have all been targeting senior financial abuse over the last year in both policy initiatives and enforcement.