Publicly available records published by the Securities and Exchange Commission (SEC) and accessed on November 6, 2018, as well as contemporaneous reporting by Investment News indicate that former Pennsylvania-based Next Financial Group broker Douglas Simanski has agreed to settle SEC charges that he participated in a “$3.9 million fraud.”
According to an SEC complaint filed against Mr. Simanski in the United States District Court for the Western District of Pennsylvania, he allegedly raised more than $3.9 million from about 27 investors between 2002 and 2016 “by falsely representing he would invest their money in one of three ventures.” One was a “tax free investment” that gave a fixed-return for a number of years he did not specify; another was “one of two coal mining companies” in which he “claimed to have an ownership interest”; and the third was a “car rental company.” Mr. Simanski allegedly convinced his clients, many of whom were elderly or retired individuals, to make these investments despite his knowledge that they “were not legitimate, that he would make virtually no securities investments on their behalf, and would instead use their money for personal expenses or to repay other investors.” The SEC alleges that he hid his activities by placing their funds in brokerage and bank accounts which he opened under his wife’s name, and by repaying legacy investors with newer investors’ money; his “scheme collapsed” following the filing of a FINRA complaint in May 2016 by a customer whom “he failed to repay,” according to the SEC.
Per the Investment News report, Mr. Simanski has agreed to pay disgorgement of the “ill-gotten gains” with interest, as well as civil penalties. He has also pleaded guilty to criminal charges in a parallel action filed by the U.S. Attorney’s Office for the Western District of Pennsylvania.
Mr. Simanski’s FINRA BrokerCheck report documents 21 customer complaints against him, with most settling in 2016 or 2017.
In 2016, for instance, a customer alleged Mr. Simanski, while employed at Next Financial Group, recommended an unapproved investment away from the firm. The complaint settled in 2017 for $30,000.
In 2017 a customer alleged they suffered “devastating financial losses” as a result of “unapproved activity” Mr. Simanski conducted away from Next Financial Group. The complaint settled in April 2018 for $97,000.
In 2017 a customer alleged Douglas Simanski, while employed at Next Financial Group, sold unapproved investments away from the firm. The complaint settled in April 2018 for $440,000.
Regarding the SEC action, Next’s president Barry Knight told Investment News: “when Next became aware of the allegations against Mr. Simanski, we took immediate steps to address the matter.” He was discharged from the firm in 2016 and barred by FINRA that same year.