Galvin dings North Carolina brokerage $400,000 for ‘shutting its eyes’ to violations

Massachusetts Secretary of the Commonwealth William Galvin has ordered North Carolina-based brokerage Capital Investment Group Inc. to pay full financial restitution to a Massachusetts woman. The woman lost $400,000 to a CIG agent who allegedly solicited investments for his own private business ventures.

Robert S. Graham was registered in Massachusetts, and previously served as CEO and president at RG Advisory Group of Arizona, a federally registered investment adviser.

(More: Galvin goes after California broker, firm after it reaped at least $750,000 on UIT trades)

Mr. Graham solicited money from several investors, including $400,000 from the Massachusetts woman, without disclosing it to CIG, according to the order released Thursday. The investments also allegedly presented a higher risk than the Massachusetts investor indicated was acceptable. All funds were lost, according to the order.

The Massachusetts investor, a senior citizen, said the funds were intended to help her support her elderly mother and brother.

Upon learning about the actions, CIG did not terminate Mr. Graham’s employment, despite recommendations by the firm’s chief of compliance to do so. Instead the firm retroactively approved his actions, according to the order. The firm also required investors to sign retroactive hold-harmless agreements, the order states.

“This is the classic example of a firm shutting its eyes to the violations of their agents who are either big producers or have some type of name recognition within the community,” Mr. Galvin said.

(More: Galvin calls out broker who claims he never had a customer complaint)

The secretary alleged CIG again failed to perform due diligence by not reviewing the investments even when they were finally approved.

CIG must also pay an administrative fine of $50,000 and review its policies and procedures.

Mr. Graham was barred from registering in Massachusetts and must pay a $15,000 administrative fine.