On April 15, the Securities and Exchange Commission (SEC) filed a complaint against Richard H. Nickles, and three companies that he controls: (1) Innovative Advisory Services, Inc., (2) Innovative Advisory Services LLC, and (3) Island Trader LLC. The SEC alleged that, from March 2009 to the present, Nickles and Innovative Advisory have raised almost $3 million through false newspaper advertisements and oral misrepresentations about certain “insured” and “US Government Guaranteed” investments.
According to the complaint, in some instances Nickles did not invest clients’ funds as he had represented. Instead, he used various fraudulent gimmicks to give clients the appearance that their business was legitimate. For example, Nickles provided clients with trade confirmations for investments that he had purportedly purchased for them. The trade confirmations, however, identified securities that either did not exist or were never purchased. Also, the trade confirmations used the name Island Trader, a broker-dealer registered with the Commission and a member of the Securities Industry Protection Corporation (SIPC) and Financial Industry Regulatory Authority (FINRA). But Nickles had stopped associating with that broker-dealer in March 2009 and was using the firm’s name without authority in order to mislead clients. Nickles also falsely claimed to be certified as a Certified Financial Planner, when in fact, he was not.
The take away – investors need to check on the status of a broker-dealer before sending any checks. In this case, a simple look at FINRA BrokerCheck most likely would have saved the investor from becoming a victim of this scheme. Or simply ask the investment adviser to provide evidence of his or her credentials and then follow through by contacting the institution at which the supposed credentials were earned. This would have exposed the fact that Nickles is not a CFP (assuming the SEC’s allegations are true). Further, don’t be afraid to knock on doors of the third parties that the investment adviser represents are his employers or service providers. Always, always, always do thorough due diligence (i.e., research) on the investment adviser before making an investment.
If you have questions about this SEC case or about due diligence in general, contact Jeffrey Wittenberg at (877) 352-2010.