U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 21502 / April 23, 2010

Securities and Exchange Commission v. Susan G. Slovak, Civil Action No. 3:10-cv-00826-N (N.D. Tx. April 23, 2010)

SEC Charges Texas Registered Representative With Misappropriating Hundreds of Thousands of Dollars from Three Customers

The Securities and Exchange Commission today filed a settled civil injunctive action against Susan G. Slovak, a former Corsicana, Texas registered representative, accusing her of misappropriating hundreds of thousands of dollars from three customers. The Commission also instituted settled administrative proceedings against Slovak's former supervisor, Beth R. Chapman.

The Commission's civil complaint, filed in federal district court in Dallas, alleges that, between 2005 and 2008, Slovak took more than $330,000 from an 83-year-old customer, by liquidating securities in his brokerage account and transferring the proceeds to her personal bank accounts. According to the complaint, Slovak used the proceeds to pay personal expenses. During the period of her misconduct, Slovak was associated with firms that are registered with the Commission as broker-dealers and investment advisers.

The complaint further alleges that, in 2008, after exhausting almost all of the elderly customer's liquid net worth, Slovak misappropriated an additional $144,000 from the accounts of two other customers, and transferred those funds to the elderly customer's brokerage account. In August 2008, Slovak acknowledged her misconduct to her branch manager Chapman and, at Chapman insistence, repurchased securities in the customers' accounts. However, according to the complaint, in order to obtain authorization for the repurchases of securities, Slovak made material misstatements and/or omissions to compliance staff and to one of the customers. In particular, she suggested that she had withdrawn the funds by mistake, rather than as a result of deliberate misconduct.

The complaint alleges that, as a result of her misconduct, Slovak violated the antifraud provisions of the Securities Exchange Act of 1934 ("Exchange Act") and of the Investment Advisers Act of 1940 ("Advisers Act"). Slovak has agreed to settle with the Commission without admitting or denying the allegations in the Commission's complaint. She has consented to the entry of a permanent injunction prohibiting her from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Section 206 of the Advisers Act. She has also agreed to pay a civil money penalty of $25,000 and has acknowledged that the Court will not be imposing a penalty greater than $25,000 based on her sworn representations concerning her financial condition. Finally, she has agreed to an administrative order barring her from association with any broker, dealer or investment adviser.

In a separate administrative order issued today, the Commission found that Chapman also misled compliance staff about the circumstances of Slovak's misappropriation of customer funds. The Commission concluded that, as a result of these misleading statements, and her failure to take appropriate actions in response to Slovak's fraud, Chapman's supervisory response to Slovak's misconduct was not reasonable. The order bars Chapman from associating in a supervisory capacity with any broker, dealer or investment adviser, and requires her to pay a civil money penalty of $25,000. Chapman consented to the issuance of the order without admitting or denying the findings in the order.

See Also: SEC Complaint

 
http://www.sec.gov/litigation/litreleases/2010/lr21502.htm

Last modified: 4/23/2010