Former Advisor Barred from Industry Following Alleged Multi-Million Dollar Theft of Client Funds
As recently reported, former Massachusetts financial advisor Gerald Allan Eaton (CRD# 2279093) has been barred from the securities industry by both FINRA (effective November 20, 2019) and the SEC (effective September 30, 2020). The industry bar comes on the heels of a criminal proceeding against Mr. Eaton in federal court in Massachusetts, in which he recently pled guilty to one count each of wire fraud, mail fraud, and aggravated identity theft. Mr. Eaton’s recent plea concerned charges that he purportedly converted to his own use more than $3.7 million from at least 15 customers over an approximate 20-year period (1999-2019). He is expected to be sentenced in 2021.
Mr. Eaton was a long-time financial advisor, having begun his career in the securities industry in 1992. Following an initial stint at John Hancock beginning in 1992, Mr. Eaton was affiliated with Commonwealth Financial Network (Commonwealth) in its Acton, Massachusetts office from March 1995 until his termination on October 28, 2019, in connection with allegations of “forgery” and “wrongful taking of property,” as disclosed in his BrokerCheck report. Mr. Eaton was also a certified financial planner and insurance agent, conducting business under the name of Heritage Financial Group, as owner and CEO.
Following Mr. Eaton’s termination by Commonwealth and the firm’s Form U5 disclosure that he allegedly “fraudulently facilitated distributions from clients’ accounts without their knowledge or consent,” FINRA Enforcement commenced an investigation. During the course of the investigation, Mr. Eaton purportedly failed to provide requested documents and information, a violation of FINRA Rule 8210 and, more generally, FINRA Rule 2010. Ultimately, Mr. Eaton consented to an industry bar by FINRA, without admitting or denying any wrongdoing, as set forth in a Letter of Acceptance, Waiver and Consent entered into on November 20, 2019.
Further details concerning Mr. Eaton’s alleged wrongdoing are asserted in a subsequent SEC Order completely barring him from affiliating with any broker, dealer, or investment adviser as regulated by the SEC. The Order reiterates Mr. Eaton’s purported admissions in the criminal proceeding that he “engaged in a scheme and artifice to obtain money and property from investment accounts and insurance policies that he controlled and managed on behalf of his clients.” Further, he also admitted to forging client signatures on checks and other documents and that he “often misappropriated funds in accounts of clients who were elderly, and/or in poor physical or mental health.”
Under applicable FINRA rules, brokerage firms such as Commonwealth have a legal obligation to supervise their employees and affiliated persons. Pursuant to FINRA Rule 3110 (formerly NASD Rule 3010), firms like Commonwealth must establish and maintain systems to supervise the activities of each associated person. It is also critical that the firms properly maintain their supervision by, among other things, periodically meeting with individual financial advisors to discuss products sold and sales methods, as well as to examine correspondence with customers. In instances where a customer suffers losses due to misappropriation of client funds or other misconduct, the firm may well be held liable for any failure to adequately supervise its employee.
The attorneys at Giarrusso Law Group LLC have significant experience working with investors who have suffered investment losses, including losses related to the misconduct or wrongdoing of a financial advisor. Investors may pursue a claim to recover monies through securities arbitration before FINRA, or in some instances, through litigation. Investors who wish to discuss a possible claim may contact us by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost and confidential consultation.