U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22087 / September 8, 2011
Securities and Exchange Commission v. Richard A. Finger, Jr. and Black Diamond Securities LLC, Civil Case No. 2:11-cv-01479 (W.D. Washington, filed September 8, 2011)
SEC CHARGES SEATTLE BROKER CAUGHT DEFRAUDING HIS CUSTOMERS
The Securities and Exchange Commission today charged a Seattle-area securities broker with fraud, and seeks an order from the federal court in Seattle to freeze the broker’s assets.
The SEC alleges that Richard A. Finger, Jr. of Bellevue, Wash., and his brokerage firm Black Diamond Securities LLC lost millions of dollars for customers in a matter of months through risky, undisclosed options trading and excessive, concealed commissions. Finger opened the firm in February and began managing nearly $5 million in assets, mainly for friends and family members. The SEC alleges that Finger concealed his misconduct from customers by providing them with doctored account statements inflating their account balances and understating his commission charges.
Unbeknownst to his customers, Finger allegedly embarked on a high-frequency, high-risk options trading strategy that lost nearly $2 million over the following months. At the same time, Black Diamond charged customers more than $2 million in commissions, and Finger diverted some funds to his personal bank account to support a lifestyle that included a $2 million home and luxury vehicles.
The SEC’s complaint, filed in federal district court for the Western District of Washington, charges Finger and Black Diamond with violating Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder and charges Black Diamond with violating Section 15(c)(1)(A) of the Exchange Act and Finger with aiding and abetting violations of Section 15(c)(1)(A). The SEC seeks permanent injunctions, an accounting, an asset freeze, disgorgement with prejudgment interest, and civil monetary penalties.
The SEC’s case was investigated by Thomas Eme and Tracy Davis following an examination of Black Diamond conducted by Michael Martin, Marcus Chan, Stephanie Wilson, and Carla Carriveau of the San Francisco Regional Office. The SEC’s litigation efforts will be led by Robert Mitchell. The SEC acknowledges the assistance of the Financial Industry Regulatory Authority (FINRA), the United States Attorney’s Office for the Western District of Washington, and the Federal Bureau of Investigation in this matter.