NEWARK – Continuing the State’s efforts to safeguard New Jersey’s vulnerable senior population from fraud and abuse, Attorney General Gurbir S. Grewal today announced two actions taken by the Division of Consumer Affairs’ Bureau of Securities (“the Bureau”) against individuals who financially exploited older investors.
In separate Summary Orders issued this week, the Bureau Chief entered a cease and desist order against two Florida residents who sold $800,000 worth of unregistered securities to ten investors, including two senior New Jersey residents, and revoked the registration of a Bergen County financial adviser who siphoned nearly $700,000 from the bank account of a 98-year-old woman for whom he had power of attorney.
“Protecting our seniors from financial predators is a top priority for our Bureau of Securities,” said Attorney General Gurbir S. Grewal. “By stopping this unlawful conduct and holding these bad actors accountable, we are sending a clear message that we will not allow our older residents to be financially exploited.”
“The actions we are announcing today involve unscrupulous individuals who deliberately sought out and preyed upon New Jersey residents,” said Kaitlin Caruso, Acting Director of the Division of Consumer Affairs. “Unfortunately, older adults remain a top target of investment fraud and of financial abuse more generally. We will continue our aggressive enforcement of the rules and laws that protect New Jersey investors from financial predators, especially our older residents.”
In the first Summary Order, issued today, the Bureau Chief found that Florida residents Shari Frimer and her son, Jarret Frimer (collectively, the “Frimers”), financially preyed on two New Jersey residents, who are 90 and 94, by selling them unregistered securities issued by Jarret Frimer’s day-trading company, StratagemEq, Inc. (“the Stratagem Income Notes”). Shari Frimer, who once was registered with the Bureau as a broker-dealer agent, knew at least one of the investors from working at a penny-stock company years prior.
The Frimers represented to the two New Jersey investors that the funds they invested would be deposited with a brokerage firm and used as collateral for Jarret Frimer to day trade. The Frimers made false statements to the investors, including that the proceeds from the sales of the Stratagem Income Notes were secure investments; that returns on the Stratagem Income Notes were guaranteed; and that the investors’ funds “could not be touched.” In reality, the day trading strategy pursued by Jarret Frimer and Stratagem was high-risk; returns from the Stratagem Income Notes were not guaranteed; and investors’ funds could not only be “touched” but also lost entirely in the market if there were losses in the day trading account, the Bureau Chief found.
The Frimers also failed to disclose to the two New Jersey investors that the Stratagem trading account at the time had virtually no assets other than their investments, and that any losses in the volatile day trading activity in the account would make it impossible for Stratagem to return these investors’ principal, much less pay the promised interest on the Stratagem Income Notes.
In addition to ordering the Frimers to cease and desist, the Bureau Chief also ordered civil penalties totaling $180,000.
In the second Summary Order issued this week, the Bureau Chief revoked the agent registration of Mahwah resident John Joseph Cahill for engaging in dishonest or unethical practices in the securities business. Specifically, Cahill failed to disclose to his employing broker-dealer that he had an ongoing fiduciary relationship with a woman for whom he had been granted power of attorney. The woman, a 98-year-old New Jersey widow, was not a current customer of Cahill, but had been his customer at a prior firm.
In early 2019, the woman’s court-appointed guardian ad litem determined that Cahill had used his power of attorney for his own financial benefit.
The investigation conducted by the guardian ad litem revealed that from 2012 through 2019, Cahill used the woman’s bank account to write checks payable to himself and to cash. In total, these checks added up to $693,990. Cahill also used her account to pay his daughter, his wife, and various other individuals who performed unexplained services for the woman. In total, Cahill withdrew more than $1 million from the woman’s accounts.
“As these cases illustrate, even financial advisers who are known and believed to be trustworthy can use their positions of trust to fraudulently solicit money from their senior clients,” said Christopher W. Gerold, Chief of the Bureau of Securities. “This is why it is critical that senior investors, and their caregivers if they have any, remain vigilant and take steps to protect their assets no matter who is overseeing them.”
These are the latest actions in the Bureau’s ongoing efforts to address growing concerns about the financial exploitation of older investors. Those efforts were bolstered by the New Jersey Safeguarding Against Financial Exploitation (“SAFE”) Act, signed into law by Governor Murphy in January 2020, which requires financial professionals, including broker-dealers, to promptly notify the Bureau of Securities and county adult protective services if they reasonably believe that a senior or vulnerable investor is being financially exploited. Further, financial professionals may delay transactions and disbursements from the vulnerable investor’s accounts when such a report has been made. Since the SAFE Act took effect in April 2020, the Bureau has received dozens of “SAFE reports” alleging financial exploitation of older adults.
Deputy Bureau Chief Amy Kopleton, Enforcement Chief Richard Szuch, Supervising Investigator Michael McElgunn, and Investigator Michael LaChapelle investigated the Frimer matter for the Bureau. Deputy Attorney General Evan A. Showell of the Securities Fraud Prosecution Section within the Division of Law’s Affirmative Civil Enforcement Practice Group represented the Bureau in the Frimer matter.
Deputy Bureau Chief Amy Kopleton and Investigator Irwin Slotnick investigated the Cahill matter for the Bureau.
The Bureau is charged with protecting investors from investment fraud and regulating the securities industry in New Jersey. It is critical that investors “Check Before You Invest.” Investors can obtain information, including the registration status and disciplinary history, of any financial professional doing business to or from New Jersey, by contracting the Bureau toll-free within New Jersey at 1-866-I-INVEST (1-866-446-8378) or from outside New Jersey at 973-504-3600, or by visiting the Bureau’s website. Investors can also contact the Bureau for assistance or to raise issues or complaints about New Jersey-based financial professionals or investments.