Former adviser agrees to $2 million settlement in scheme to defraud mostly elderly clients

Michael Donnelly admitted he never invested the client funds he received, using them for business and personal expenses

Oct 19, 2015 @ 4:47 pm

By Mark Schoeff Jr.

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.

0
Comments

What do you think?

View comments

Most watched

INTV

How the 2020 elections could impact ESG investing

Joseph Keefe, president of Impax Asset Management, on the elections and how advisers can build a bridge to the next generation of clients with ESG investing.

INTV

How advisers can be a gamechanger for women investors

Why women defer to men when it comes to finances and how advisers can combat this phenomenon and make a difference for female investors, according to Heather Ettinger, founder and CEO Luma Wealth Advisors.

Latest news & opinion

Schorsch, AR Capital to pay $60 million to settle SEC charges

The former REIT czar and his firm wrongfully obtained millions linked to REIT mergers.

CFP Board postpones enforcement of its revised fiduciary standard

Board's new Code of Ethics and Standards to be enforced next June, in line with the SEC's Reg BI

Charles Schwab reportedly in talks to buy USAA brokerage, wealth management business

The deal would net Schwab roughly $100 billion in new assets.

Advisers scramble to help retirees navigate looming Fed rate cut

The Fed's first interest-rate cut in a decade has advisers warning against chasing the bait of risk over safety.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print