The Securities and Exchange Commission said Friday that a former Next Financial Group Inc. broker has agreed to settle charges that he operated a $3.9 million fraud.
The SEC had charged the broker, Douglas Simanski, with operating a long-running fraud. Mr. Simanski was based in Altoona, Pa., and was registered with Next Financial from 1999 to 2016, according to his BrokerCheck report.
The SEC's complaint alleges that Mr. Simanski, 53, raised more than $3.9 million from approximately 27 of his brokerage customers and investment advisory clients, many of them retired or elderly, by telling them that he would invest their money in either a "tax free" fixed-rate investment, a rental car company or one of two coal mining companies in which Mr. Simanski claimed to have an ownership interest.
He allegedly told the investors to write checks payable to personal bank and brokerage accounts he opened in his wife's name. The complaint alleges that instead of investing the money as he promised, Mr. Simanski used the money largely to repay other investors and for his personal use.
According to the complaint, Mr. Simanski's scheme collapsed when one of his clients contacted the Financial Industry Regulatory Authority Inc., and the broker then admitted his scheme to his employer. Finra barred him from the securities industry in 2016.
Barry Knight, president of Next Financial, wrote in an email that "when Next became aware of the allegations against Mr. Simanski, we took immediate steps to address the matter."
The firm interviewed Mr. Simanski about the allegations, which prompted his admission of the unauthorized activities. The firm immediately terminated his affiliation with Next and reported him to Finra.
Next also reached out to clients affected by Mr. Simanski's actions to determine the extent of the damage and reported the matter to the U.S. Attorney's Office, Mr. Knight wrote, adding that all pending claims by his clients have been resolved.
According to the SEC complaint, Mr. Simanski is to "disgorge ill-gotten gains," along with interest, and pay civil penalties as part of the settlement; the complaint did not specify amounts.
In a parallel action, the U.S. Attorney's Office for the Western District of Pennsylvania announced Monday that Mr. Simanski pleaded guilty to criminal charges.
A 2016 article by the Pittsburgh Post-Gazette reported that Mr. Simanski's clients included a VFW post near Altoona.
Mr. Simanski's attorney in the criminal matter, Christopher Brown, did not return a call to comment.