Finra charges B-D chief with using investor funds for home remodeling

Finra claims the head of a B-D that packages and distributes illiquid equipment-leasing funds misused investor money to pay for personal expenses including remodeling her house.
OCT 15, 2013
The head of a broker-dealer that packages and distributes illiquid equipment-leasing funds is the target of a complaint by securities regulators that alleges persistent misuse of investor money over a three-year period to pay for personal expenses including home remodeling, trips, meals and home Christmas decorations and tools. The Financial Industry Regulatory Authority Inc. filed a complaint May 3 against Kimberly Springsteen-Abbott, the owner, chief executive and head of compliance for Commonwealth Capital Securities Corp. The firm, the broker-dealer arm of Commonwealth Capital Corp., employs about 22 registered reps and conducts business in private placements and direct investments. Ms. Springsteen-Abbott allegedly misused $345,000 in investors' money between December 2008 and February 2012, according to the Finra complaint. She also was allegedly involved in falsifying and backdating a memo accounting for “Disney Tickets” that was given to Finra staff members while they were conducting an exam in 2011, according to the Finra complaint. Commonwealth Capital Securities' general counsel Chris Anderson said: “While we do respect the authority of Finra, we don't agree with these allegations and intend to defend ourselves vigorously in this matter.” In a statement, the company added: “Ms. Springsteen-Abbott and Commonwealth Capital Securities Corp. deny all the allegations in the complaint concerning misallocation of expenses.” The statement also said the misdescription of one charge was an “innocent mistake, and before Finra filed the complaint, Ms. Springsteen-Abbott explained to the staff the circumstances she believes led to the mistake.” “Ms. Springsteen-Abbott and Commonwealth Capital Securities Corp. intend to vigorously defend the proceeding, provide Finra with a clearer understanding of the expenses at issue, and look forward to a fair resolution,” the statement said. In addition, the company said that since the audit, it has instituted procedures to avoid similar errors. Commonwealth Capital Securities is a small to midsize player in the equipment-leasing space. According to the Finra complaint, the broker-dealer has distributed 13 different equipment-leasing funds from 1993 to the present, raising more than $240 million. Each fund acquires equipment involving information technology, medical technology, telecommunications and other categories, according to Finra. Proceeds from the offerings are invested primarily in equipment that is subject to operating leases with durations of 12 to 36 months. Ms. Springsteen-Abbott “directed the misuse of investor funds to pay for various American Express credit card charges that were not related to legitimate business purposes of the funds,” according to the complaint. The Finra complaint includes an exhibit of 27 pages of purchases from Ms. Springsteen-Abbott and other company executives. It includes: $63.43 for a meal at a Hooter's restaurant in 2009; $1,971.11 for a family vacation in 2010 that included Ms. Springsteen-Abbott's husband, daughter, ex-son-in-law and two grandchildren at the Animal Kingdom Lodge in Orlando, Fla.; and $12,414 for a board of directors meeting, also in 2010, at the Princeville St. Regis Hotel in Kauai, Hawaii. Last year, a sexual discrimination suit was filed by a former Commonwealth Capital employee, Shannon Givler, who had contacted the Securities and Exchange Commission in 2010 as a whistleblower. In the sexual discrimination complaint, which was filed in U.S. District Court in the Eastern District of Pennsylvania, Ms. Givler alleged that Ms. Springsteen-Abbott and other company executives “were misrepresenting investor return rates and misappropriating investor funds for lavish personal expenses.” Ms. Givler's attorney, William T. Wilson, said that “the case has been resolved,” and Mr. Anderson, the general counsel for Commonwealth Capital, confirmed that the case had been settled. He declined to comment about Ms. Givler's allegations of misrepresentation of investor return rates and misappropriation of investor funds.

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