Former RIA gets year probation for obstructing SEC investigation into referral fee
An investment adviser barred from the industry for making referral payments to an attorney for access to a…
An investment adviser barred from the industry for making referral payments to an attorney for access to a wealthy client was sentenced in federal court in Boston on Thursday to a year of probation, according to the U.S. Attorney’s Office.
John W. Rafal, the former president and chief executive of Essex Financial Services Inc. of Essex, Conn., is to serve four months of his probation in home detention, according to a press release from the U.S. Attorney’s Office for the District of Massachusetts. Mr. Rafal, 67, also must pay a $4000 fine.
In January, the Securities and Exchange Commission had barred Mr. Rafal from the securities business and ordered him to pay $577,297 in penalties after he allegedly paid the referral fee and then tried to undermine the agency’s investigation of the matter.
In 2011, Mr. Rafal agreed to pay an attorney a $50,000 referral fee in return for recommending that a wealthy client become a client of Essex.
After Mr. Rafal had paid a portion of the fee, his company discovered the payments, stopped them, and directed Mr. Rafal to have the attorney return the money that had already been paid, the release said. But Mr. Rafal then secretly paid the referral fee to the attorney from his private checking accounts, unbeknownst to his company.
In May 2015, Rafal testified about the referral agreement as part of a formal SEC examination. In his testimony, Mr. Rafal repeatedly described the referral matter as “cured,” “reverse[d],” “undo[ne],” or “fix[ed]” in an effort to prevent the SEC from learning about his secret payments to the attorney. In his testimony, Mr. Rafal never mentioned the checks he had written to the attorney out of his personal accounts.
At the close of his testimony, the SEC asked Mr. Rafal whether he was aware of any other information that might be helpful to the SEC’s investigation. Mr. Rafal answered, “I’m not aware of any other information.”
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