LPL Financial Corporation (LPL) will pay nearly $1.3 million in restitution to Montana investors and a fine of $150,000 to the State of Montana under a settlement announced today by Monica Lindeen, Montana Commissioner of Securities and Insurance.
The restitution and fine are the resoultion of claims involving the alleged illegal activity of a former LPL registered representative, Donald Chouinard, who allegedly operated a Ponzi scheme in the Kalispell area, and the alleged failure by LPL to supervise Chouinard.
LPL did not admit or deny any of the allegations as part of the settlement; however, LPL believed it was in the best interests of its customers to resolve the alleged violations. Lindeen praised the company for doing right by the injured Montana investors.
“Too many hard-working Montanans lost their savings due to the actions of Mr. Chouinard, but today we started the process of recovering those losses,” said Lindeen. “This settlement is the result of both efficient and effective enforcement work by this agency and a willingness by LPL Financial Corporation to arrive at a solution that addresses the needs of its clients. We are very pleased with this result.”
The settlement with LPL did not resolve any claims against Chouinard individually or his companies, which the Montana Department of Securities continues to pursue.
In September, the Securities Department issued a Temporary Cease and Desist Order against Chouinard and filed a Notice of Proposed Agency Action against him and his companies, DC Wealth Management, Inc., and DC Associates, Inc. The action alleges that Chouinard and his companies committed securities fraud and conducted a Ponzi scheme involving Montana and Idaho investors who invested in what they thought was was a “day-trading” program. In fact, the investors received proceeds taken from money contributed by newer investors.
Specifically, the Department’s action alleges Chouinard convinced one investor to obtain a $100,000 loan and invest with him because he could guarantee a high return in 30 days. Instead of investing the $100,000 in the “day-trading” program, Chouinard used $50,000 to pay off a previous investor, deposited $25,000 into his personal joint-checking account, and gave the other $25,000 to his attorney.
The Department also alleges that Chouinard traded in the investors’ accounts without authorization and forged their signatures to authorize certain trades, as well as that he failed to provide the investors with statements or tax documents for their “day-trading” investments. Chouinard routinely informed the investors about the values of their investments orally or via email. The investors allege Chouinard also misrepresented the values of their investments, in one case by as much as 10,000%. The excessive trades also resulted in thousands of dollars in commissions for Chouinard.
Montanans who feel they have been treated unfairly by an investment broker or company or who believe they have been the victims of fraud should call the Montana Commissioner of Securities and Insurance at 1-800-332-6148 or in Helena at 444-2040.
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