Securities Lawyers Blog
According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Scott Newsholme (Newsholme), in September 2017, was accused by the Securities and Exchange Commission (SEC) of stealing more than $1 million from his clients. Newsholme’s problems began back in July 2014 when he was terminated by his then employer SII Investments, Inc. (SII). SII stated that Newsholme was terminated due to allegations that Newsholme stole her IRA assets and engaged in private securities transactions.
In addition to being an investment advisor, Newsholme is a tax preparer, accountant, and the proprietor of MVP Financial LLC in Howell, New Jersey. Between 2002 and 2010 Newsholme was president of two predecessor tax, accounting, and financial planning firms in Matawan, New Jersey – Newley Financial Group, Inc. and Newsholme Financial Center LLC.
In September 2014, FINRA brought an action against Newsholme and ultimately barred him from the industry when Newsholme failed to respond to information requests concerning the issues raised in his SII termination. In June 2015, the State of New Jersey revoked Newsholme’s securities license and imposed an $85,000 fine stating that Newsholme egage in unethical business practices.
Finally, in September 2017 the SEC brought action against Newsholme alleging that the broker stole more than $1 million from clients to support his gambling habit and other personal expenditures. The SEC alleged that Newsholme concealed his fraud by making various misrepresentations to his clients, including falsely reassuring them that their investments were faring well. Newsholme is then alleged to have fabricated account statements, doctored stock certificates, and forged promissory notes and other debt instruments as part of a scheme to convince clients to give him their money. All the while Newsholme diverted his clients’ investment funds for his own use and cashed their investment checks at a check cashing store for himself.
The providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.
In the industry the term selling away refers to when a financial advisor solicits investments in companies, promissory notes, or other securities that are not pre-approved by the broker’s affiliated firm. However, even though when these incidents occur the brokerage firm claims ignorance of their advisor’s activities the firm is obligated under the FINRA rules to properly monitor and supervise its employees in order to detect and prevent brokers from offering investments in this fashion. In order to properly supervise their brokers each firm is required to have procedures in order to monitor the activities of each advisor’s activities and interaction with the public. Selling away misconduct often occurs where brokerage firms either fail to put in place a reasonable supervisory system or fail to actually implement that system. Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including selling away.
In cases of selling away the investor is unaware that the advisor’s investments are improper. In many of these cases the investor will not learn that the broker’s activities were wrongful until after the investment scheme is publicized, the broker is fired or charged by law enforcement, or stops returning client calls altogether.
Newsholme entered the securities industry in 1999. From 1999 until December 2008 Newsholme was associated with Royal Alliance Associates, Inc. Thereafter, from December 2008 until July 2014 Newsholme was associated with SII out of the firm’s Matawan, New Jersey office location.
Investors who have suffered losses may be able recover their losses through securities arbitration. The attorneys at Gana Weinstein LLP are experienced in representing investors in cases of selling away and brokerage firms failure to supervise their representatives. Our consultations are free of charge and the firm is only compensated if you recover.