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SEC Bars Herbert Hafen, Broker Who Pled Guilty to Investment Fraud

The Securities and Exchange Commission (SEC) has barred former broker Herbert Hafen (CRD#: 867068), according to his BrokerCheck record accessed on March 25, 2020. This comes after he was barred by FINRA, was the subject of numerous customer complaints, and ultimately pled guilty to investment fraud.

Herbert Hafen

On September 4, 2019, before the U.S. District Court for the Southern District of New York, Herbert Hafen pled guilty to one count of investment adviser fraud. On February 4, 2020, he was sentenced to 30 months in prison. On March 4, 2020, the Securities and Exchange Commission instituted administrative proceedings against Herbert Hafen, finding that he violated the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940. Herbert Hafen submitted an Offer of Settlement, which the SEC accepted. As a result, the SEC permanently barred Herbert Hafen from acting as a broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized self-regulatory organization. He was also barred from being involved in any penny stock offering. 

How did this all come about? According to his BrokerCheck record, Herbert Hafen’s troubles began in August of 2018. On August 21, 2018, Wells Fargo Clearing Services LLC terminated Herbert Hafen after he admitted that he made unapproved financial arrangements with clients.

One month later, on September 27, 2018, Herbert Hafen became involved in a customer dispute in which it was alleged that he misappropriated client funds from July 2011 to January 2018. The client requested $675,000 in damages; the matter settled for $430,000. On October 29, 2018, FINRA sent Herbert Hafen a Notice of Suspension after he failed to respond to FINRA’s request for information. This letter was soon followed by a Suspension from Association letter sent on November 23, 2018. Because Herbert Hafen failed to respond to his Notice of Suspension within three months, FINRA barred him from associating with any FINRA member in any capacity. His bar began February 1, 2019. 

On September 4, 2019, Herbert Hafen’s troubles deepened. The Securities and Exchange Commission filed a complaint against Herbert Hafe, alleging that, from July 2011 through April 2018, he convinced clients to take advantage of an investment opportunity outside of the financial institution at which he worked. The clients liquidated stock holdings and tapped into their retirement funds after Hafen guaranteed them a 6% return. But instead of investing the clients’ funds, he used the money for his personal enrichment, according to the SEC. The SEC alleged that he ultimately took $1.6 million from 11 investors, violating the Exchange Act and the Advisers Act. As mentioned above, the same day that the SEC filed this complaint against him, Herbert Hafen pled guilty to investment fraud. 

Even though Herbert Hafen has pled guilty and been sentenced to prison for his actions, that hasn’t stopped clients and government regulators from filing complaints against him. On February 10, 2020, a client alleged that Herbert Hafen defrauded her, encouraging her to send him her retirement funds in exchange for a high-yield investment. The alleged conduct occurred from May 10, 2018 to August 21, 2018 and the client is seeking $110,000 in damages; the dispute is pending. One day later, on February 11, 2020, a client filed a customer dispute against Herbert Hafen, alleging that he misappropriated their funds from April 2008 to March 2018. The same day, the Connecticut Banking Commissioner issued a cease and desist order, as well as an Intent to Fine, to Herbert Hafen. The Connecticut Banking Commissioner alleged that Herbert Hafen violated the Connecticut Uniform Securities Act by convincing an elderly client to move her IRA funds to an outside investment opportunity. The alleged conduct occurred from July 2011 to 2018 and Herbert Hafen was registered as a broker in Connecticut at the time. The client had inherited the IRA from her deceased husband, who intended it to support her for the rest of her life. But Connecticut found that Hebert Hafen used the IRA funds to pay his own credit card bills, causing the elderly client to incur losses. Connecticut also found that Herbert Hafen told the elderly client that her IRA was worth $300,000 when it was really only worth $150,000. 

If Herbert Hafen was your broker and you have questions about your investments, don’t hesitate to contact the securities attorneys of Fitapelli Kurta to learn about your options for recovery. Call (877) 238-4175 or email info@fkesq.com for your free case consultation with a securities attorney. 

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