The SEC’s complaint lays out an astonishing scheme to defraud investors. The SEC alleged that Cody would tell retired clients that their accounts were flourishing and making money when in fact they were dwindling to near-zero balances. The SEC tells the tale of three clients who were lied to by Cody about their rapidly depleting retirement accounts through monthly deductions that were unsustainable.
Further, to make the scheme work Cody fabricated account statements, told clients they were withdrawing investment gains rather than depleting their principal, and sent a doctored document to indicate that a financial firm was holding an annuity on behalf of one client. Cody’s conduct occurred over a 12 year period in which Cody was registered as a broker with five different independent firms.
In addition, Cody was suspended from the securities industry by FINRA from January 7, 2013 to January 6, 2014 for allegedly sending clients inflated account statements while at Westminster and Concorde. Despite the suspension Cody continued to manage his accounts and violate the terms of the suspension by turning the accounts over to his wife Jill who was also registered with Westminster Financial and Concorde Investment.
During his suspension, Cody used personal email accounts to communicate with clients about investment strategies that then forward recommendations to Jill to execute trades. Cody is also alleged to have forged client signatures to move their accounts to IFS. Jill Cody was later the subject of separate FINRA sanction for her facilitation of Cody’s conduct.
Finally, Cody was fired by IFS Securities, his seventh and last employer, in September of 2016 on allegations of selling away and forgery.
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”. Often times brokers who engage in this practice use outside businesses in order to market their own securities and raise capital for various ventures or get themselves through times of personal economic hardship.
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.
The investment fraud attorneys at Gana Weinstein LLP have represented hundreds of investors in securities related disputes where brokerage firms failure to supervise their representatives. Our consultations are free of charge and the firm is only compensated if you recover.