SEC Bars John Rafal, Former Top Barron’s Connecticut Broker
The Securities and Exchange Commission has permanently barred a 66-year-old brokerage firm founder from the securities industry for misleading investigators about referral fees he allegedly paid a lawyer.
John Rafal, the founder and former CEO of Essex Financial Services in Essex, Conn., agreed to the permanent industry bar and a $575,000 penalty as part of a settlement announced Monday with the SEC.
The Old Lyme, Conn. resident, who ranked sixth in Barron’s 2015 honor roll of Top 100 Independent Financial Advisors, admitted the SEC charges was separately sued by the U.S. Attorney’s Office for the District of Massachusetts on Monday for obstructing the SEC’s investigation.
The criminal charge is the latest in a series of reversals for the veteran banker and broker, and signals regulators’ continued efforts to prosecute a range of cases amid the deregulatory fervor stimulated by the victory of president-elect Donald Trump. The SEC on Monday issued an alert to help investors detect and report excessive trading in their accounts and the Financial Industry Regulatory Authority last week said that it will step up examinations of firms with histories of hiring rogue brokers.
Rafal’s downfall appears to have resulted more from his attempted cover-up than from his underlying alleged crime.
“Rafal misled one client by hiding referral fees, misled other clients by falsely stating the SEC’s investigation was over and then attempted to mislead those investigating him,” acting SEC enforcement division director Stephanie Avakian said in a prepared statement. ”He will now be paying the price for his deceit.”
Rafal, who has been an advisor for more than 40 years and founded his savings bank-affiliated broker in 1982, had told clients in emails while probes were ongoing that the SEC had “issued a ‘no action’ letter completely exonerating him,” according to the settlement.
“No client lost any money as a result of Mr. Rafal’s actions and Mr. Rafal is looking forward to opening a new chapter in his professional life,” said his lawyer, John F. Sylvia of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. in Boston.
Sylvia declined to comment specifically on the pending criminal charges or on Rafal’s future professional plans.
The SEC alleged that he misled its investigators by concealing after its probe of a $50,000 payment to a local lawyer had begun that he ordered an employee to mischaracterize an additional $25,190 payment to the lawyer as being for legal fees.
The lawyer, Peter D. Hershman, agreed to pay more than $90,000 for aiding and abetting Rafal’s violations of securities law, the SEC said on Monday.
Essex Financial agreed in the settlement to pay more than $180,000 in disgorgement and interest.
Hershman and Essex neither admitted nor denied the allegations.