By G. Kevin Mathis, Fall 2018 IAC Student Intern
On August 14th, the Securities and Exchange Commission’s (SEC) Investor.org website issued the following alert: check the background of anyone selling you an investment. That statement may seem just as obvious as me saying that puppies and kittens are adorable, even toddlers acknowledge that their animal counterparts are cute.
Sometimes we forget the obvious such as failing to research our investment advisers as much as our investments themselves. At least that is what some recent investment legal news may indicate. The SEC filed a complaint against alleged recidivist stock manipulator, Howard M. Appel, July 27, 2018. Appel is a former licensed stockbroker with two prior securities-fraud related convictions. The SEC complaint alleges that after convincing unwitting investors to purchase shares in the penny stocks, Appel allegedly used his secretly acquired blocks of shares in the stocks to manipulate the prices of the publicly traded companies. Appel along with his co-conspirators allegedly orchestrated a scheme that allowed him to work around his FINRA bar. One of his co-conspirators, a licensed stockbroker, allegedly created nominee accounts that allowed Appel to act as a broker. Appel then allegedly used insider information he gained as a “consultant” for the firms to raise the stock prices, then sell his shares in the firms to the investors that he recruited. Appel’s alleged scheme netted him between $3,000,000 and $4,000,000.
This legal news is just a reminder that we should use the same diligence when researching the past performance of the advisers we plan to invest with as we use when researching the past performance of the securities we plan to invest in. So, even though we may not need studies explaining why the sky is blue, we do need reminders on how and why we should check the background of anyone selling you an investment.