Ethics Center: Business Ethics

Rogue Advisors on Parade: Earth Father, Death Broker, “It’s Not My Fault” Scammer

The Securities and Exchange Commission has sanctioned a New Jersey investment advisor with a love for God’s green Earth for ripping off $6 million from his clients and using it to pay for his mortgage and home landscaping services. According to authorities, James R. Trolice of Alpine, New jersey, can no longer serve as an officer or director of a public company and must not ever violate SEC regulations. He also pled guilty to federal criminal fraud charges and has been ordered to pay $5 million in restitution in connection with his raising $6 million from more than 100 investors to purchase stock in a technology start-up paying a large return. Claiming the deal was only for a select few investors, he invited prospects to his multi-million-dollar home that featured well-manicured grounds.

A New Jersey broker who made 40 unauthorized trades in a deceased customer’s account has received a 30-day suspension from the business and has been ordered to pay a $5,000 fine. According to FINRA,Voigt C. Kempson III of Sparta, New Jersey, learned of a client’s death, for whom he had discretionary trading authority, on at least June 29, 2015. He did not inform his broker-dealer, Commonwealth Financial Network, and continued to trade in the account until April 5, 2016. FINRA  took action against Kempson because he violated Rule 2010, which requires high standards of commercial honor and equitable principles of trade, and because his trading authority ended upon the client’s death. In an unrelated criminal matter, authorities arrested Kempson at Newark Liberty International Airport for having a loaded gun and body armor in his carry-on luggage.

A New York financial advisor lost $10 million of his senior clients’ money in speculative trading, then blamed it on the Brexit vote, among other things. However, he claimed they’d get all their money back if Hillary Clinton won the U.S. presidential election. According to New York Attorney General Eric T. Schneiderman, Dean Mustaphalli, conspired over six years to defraud his elderly clients. He convinced them to move their highly conservative savings to a risky hedge fund he managed. After he racked up huge losses and clients complained, Mustaphalli moved all the money to an alternative platform that would conceal his risky trading activity. He also falsified documents, claiming that his clients were accredited investors even though they weren’t. When virtually no money was left, the advisor then transferred $100,000 out of the fund for his own purposes. When clients continued to question their losses, he chalked them up to oil, bad markets, and the election. But he had high hopes of things turning around at some future point.

Takeaway from the National Ethics Association? Crime doesn’t pay! So don’t even think about stealing your clients’ money. You will get caught, and the punishment will be worse than you think.

For information on affordable E&O insurance for low-risk insurance agents, investment advisors, and real estate broker/owners, please visit For information on ethical sales practices, please visit the National Ethics Association’s Ethics Center.