The Securities and Exchange Commission today announced it has won a court-ordered asset freeze to halt an ongoing fraud by two former brokers with disciplinary histories who allegedly raised more than $5 million from investors without using the money as promised.
In an emergency action filed in federal court in Chattanooga, the SEC alleged that James Hugh Brennan III and Douglas Albert Dyer, both of Chattanooga, sold purported shares in eight similarly named companies to more than 240 investors since 2008 without ever registering the stock as they promised.
Instead, according to the SEC's complaint, Brennan and Dyer transferred investor funds into their personal accounts or those belonging to their wives.
The SEC further alleged that Brennan and Dyer continue to solicit investors while touting their securities industry experience and failing to disclose that Brennan was banned from the brokerage industry and Dyer suspended and fined for executing unauthorized transactions in customers' accounts.
"We allege that Brennan and Dyer have been telling investors the same lies for several years without fulfilling any of the promises they've made, and the court's temporary restraining order stops them from soliciting any more investors and freezes their assets as we pursue litigation," said Walter Jospin, director of the SEC's Atlanta Regional Office, in a statement.
The SEC said it encourages investors to check the backgrounds of investment professionals before investing their money.
A quick search on the SEC's investor.gov website would have shown that neither Brennan nor Dyer has been registered to sell investments as a broker since the late 1990s as well as their disciplinary problems with the Financial Industry Regulatory Authority and state regulators, according to the statement.