SEC Accuses Advisor of Lying to Clients at Five Firms Over 12 Years
The Securities and Exchange Commission has accused the owner of an investment advisory firm who had previously worked at Merrill Lynch, Smith Barney and a handful of independent broker-dealers of telling some retired clients that their accounts were flourishing when they were in fact dwindling to near-zero balances.
Richard Cody, owner of registered investment adviser Boston Investment Partners, lied to at least three clients who were rapidly depleting their retirement accounts through monthly deductions, the regulator said in a complaint filed Monday in federal court in Boston.
The complaint, which seeks to freeze Cody’s assets and disgorgement of any ill-gotten gains, said he fabricated account statements, told clients they were withdrawing investment gains rather than depleting their principal and sent a doctored document to indicate that a “well-known financial firm” was holding an annuity on behalf of one client.
The incidents occurred over 12 years, a period in which Cody was registered as a broker with five different independent firms, according to the complaint.
Cody, who is 42 and lives in Spring Lake, NJ, according to the SEC complaint, could not be reached for comment. He began his brokerage career in 1997 at Merrill Lynch and was fired by IFS Securities, his seventh employer, in September of this year for selling away and forgery, according to his BrokerCheck record.
As recently as this spring, Cody told a customer who had asked about the value of his retirement accounts during a visit to the customer’s home that they were worth $498,000 when the actual balances were no more than $43, the lawsuit says. He told a retired couple In 2015 that they had a nest egg of $1.3 million when it was actually $255,496.
Cody, who worked for four-and-a-half years at Merrill and Smith Barney without incident at the start of his career, according to his BrokerCheck record, started Boston Investment Partners in 2009, and until his dismissal by IFS had maintained his brokerage licenses (with, successively, GunAllen Financial, Westminster Financial Securities and Concorde Investment Services prior to IFS).
He was suspended from practicing by the Financial Industry Regulatory Authority from January 7, 2013 to January 6, 2014 for allegedly sending clients inflated account statements while at Westminster and Concorde. During the suspension, he turned the accounts over to his wife Jill, who was also registered with the firms and who is listed in the SEC complaint as a “related party” but is not named as a defendant.
During his suspension, Cody used personal email accounts to communicate with clients about investment strategies that his wife would then execute, the complaint said. He also forged client signatures to move their accounts to IFS, the SEC said.
The complaint does not name any brokerage firm as a defendant.
Throughout his independent brokerage career, Cody amassed six customer disputes, including three still pending. He settled the other complaints of unauthorized and unsuitable trading in order to avoid drawing out litigation, according to his comments on BrokerCheck.