SEC bars former broker for taking more than $1 million from client accounts

A general exterior view of the U.S. Securities and Exchange Commission (SEC) headquarters in Washington, June 24, 2011. The database is emerging alongside a new program by the FBI's criminal profiling group in Quantico, Virginia, that is creating a series of behavioral composites to help agents investigate white collar crime. The more systematic approach by the SEC and FBI comes in response to the growth and complexity of financial crimes in recent years. Picture taken June 24, 2011. To match Special Report SEC/INVESTIGATIONS REUTERS/Jonathan Ernst (UNITED STATES - Tags: CRIME LAW POLITICS BUSINESS)

Former Wells Fargo rep John Gregory Schmidt had been barred by Finra.

John Gregory Schmidt, who was discharged by Wells Fargo Advisors in October 2017 and barred by Finra shortly thereafter, has been barred by the Securities and Exchange Commission for misappropriating $1.3 million from the accounts of clients, most of them elderly.

In a related criminal case, Mr. Schmidt, who lives and worked in Dayton, Ohio, has been charged with 128 felony counts in Ohio connection with his scheme that defrauded clients.

The SEC’s complaint alleged that between 2003 and October 2017, Mr. Schmidt took funds from accounts belonging to seven of his retail brokerage customers and transferred the cash to at least ten other customers whose accounts were experiencing shortfalls.

“Rather than telling the customers about their dwindling funds,” the SEC said in its administrative proceeding, Mr. Schmidt sent them fake account statements that “grossly overstated their account balances and falsely assured them that their investment returns could fund their withdrawals without jeopardizing their principal.”

(More: Finra bars ex-MML broker who sold $3.5 million of Woodbridge Ponzi)

The SEC said that most of Mr. Schmidt’s customer-victims were elderly retirees with little to no financial expertise. Several of them were suffering from Alzheimer’s disease or other forms of dementia. From February 2013 through October 2017, Mr. Schmidt received over $230,000 in commissions from customers who were either the source of, or recipient of, misappropriated funds.

Mr. Schmidt worked at Wells Fargo from 2006 until he was discharged. He started his securities career in 1980 and worked at seven firms before joining Wells Fargo.