Former Norwalk, CT Financial Advisor James T. Booth Receives 42-Month Sentence for Ponzi Scheme
On November 17, 2020, former dually registered broker and investment adviser James T. Booth (CRD# 1906145) was sentenced in Manhattan federal court to a 42-month prison sentence in connection with a Ponzi scheme that he orchestrated from 2013 to 2019. Booth pled guilty to one count of securities fraud in October 2019, subsequent to his termination by LPL Financial LLC (LPL) in May 2019. In total, Booth solicited more than $4.9 million in capital from approximately 40 of his customers in furtherance of the scheme.
Booth’s misconduct began in 2013 when he started soliciting some of his clients to invest outside of their advisory and brokerage accounts, specifically directing customers to invest in an entity called “Insurance Trends Inc.,” whose bank account Booth controlled. In typical Ponzi-fashion, Booth used some investment capital to pay “returns” to earlier investors, as well as misappropriating funds to pay certain business and personal expenses. Booth’s scheme was carried out through his eponymous firm, Booth Financial Associates, which was formed in 1989 to provide investment advisory and insurance services to his client base. In turn, Booth Financial Associates was affiliated with now-defunct broker-dealer Invest Financial Corporation, which was acquired by LPL in February 2018.
According to FINRA BrokerCheck, Booth had a nearly three-decade career in the securities industry, having most recently worked at LPL from February 2018 until his discharge in June 2019. Following his termination, FINRA Enforcement began an investigation into Booth around May 2019, later barring him from working in the securities industry after finding that he converted customer funds into an account that he controlled and then diverted for his personal use.
As alleged by the SEC in a Complaint filed in a parallel securities fraud enforcement action—venued in Connecticut federal court—the majority of Booth’s customers “were unsophisticated investors, including seniors who utilized Booth’s services for their retirement savings.” In furtherance of Booth’s scheme, the SEC alleged that he provided investors with “fabricated elaborate account statements” designed to perpetrate the fraud by creating “the false appearance that the investors’ money had been invested as promised” with some statements including “fictitious securities and values.” As is typical with Ponzi schemes, Booth lured investors to move their assets with the promise of safety and higher returns. In one instance, Booth convinced an elderly, recently widowed family member to move money she had received from her late husband’s pension into Insurance Trends Inc. As alleged by the SEC, “Since 2009, the customer has provided Booth with over $600,000.”
Under applicable FINRA rules, brokerage firms such as LPL have a legal obligation to supervise their employees and affiliated representatives. Under FINRA Rule 3110 (NASD Rule 3010), brokerage firms 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, and to examine correspondence with customers. In instances where a customer suffers losses due to misappropriation of client funds and other inappropriate or illegal behavior by their financial advisor, the firm may be held liable for failure to adequately supervise their 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 are invited to contact us by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost and confidential consultation.