In December 2002, the SEC filed a Complaint in US District Court for the Northern District of Georgia (BDLawBlog's home district) alleging that four insurance salesmen from Florida defrauded senior citizens by selling them into a ponzi scheme relating to pay telephones. The Commission alleged that the four made material misrepresentations and omissions to investors and violated various section of the federal securities laws. In January 2003, three of the four consented to permanent injunctions from violating the securities laws.
Last Friday, the SEC announced that the District Court entered a Final Judgment requiring all four to disgorge their sales commissions, with interest, and to pay a civil fine. Each were ordered to disgorge commissions ranging from about $73,000 to about $156,000, and each were given an additional $50,000 fine as well. See the SEC release here.
What's interesting about this case is that it is so uninteresting - it is so typical. I don't know any of the salesmen, but I'd bet if I could interview them, their story would be the normal one: "I didn't know I had to be registered to sell this; I didn't know it was s fraud; I didn't know that my customers would be ripped off; I didn't know that getting a commission of 20-22% was a red flag; I didn't know that the investments were not fully insured as the issuer told me, etc., etc." Many people understand that if it appears too good to be true, it is, but these guys apparently didn't get that. Had they been brokers, their firms would undoubtedly been named in various arbitration claims and firms could have been taken to the cleaners for the actions of their agents. Have you double-checked your firm's 3030/3040 policies and procedures? Importantly, have you reiterated those to the troops lately? Might be a good time.