U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19166 / April 5, 2005
SEC v. David Faubert and Faubert Financial Group, Inc., (United States District Court for the District of Connecticut, C.A. No. 3:05-CV-510 (MRK), filed March 23, 2005)
SEC OBTAINS TEMPORARY RESTRAINING ORDER AND ASSET FREEZE AGAINST DAVID M. FAUBERT FOR DEFRAUDING CLIENTS $2.4 MILLION
The Securities and Exchange Commission announced that, on March 23, 2005, it sought and, on March 24, 2005, it obtained an asset freeze and temporary restraining order against David M. Faubert, a registered representative with Tower Square Securities, Inc., and his financial services business, Faubert Financial Group, Inc. of Avon, Connecticut.
According to the Complaint, Faubert, of Simsbury, Connecticut, defrauded Faubert Financial Group clients of approximately $2.4 million by falsely telling them that their money was invested in a "fixed account" that guaranteed an 8% return when, in fact, Faubert was diverting funds for his personal use, including for the payment of gambling debts. According to the Complaint, on March 14, 2005, representatives of the Securities and Business Investments Division of the Connecticut Department of Banking began an examination of Faubert's activities based on a client complaint. On March 22, 2005, shortly after the Connecticut authorities demanded that Faubert produce certain records, Faubert admitted to having defrauded his clients. In its Complaint, the SEC charges that, to conceal the fraud, Faubert provided his clients with fabricated account statements.
In response to the SEC's emergency motion, on March 24, 2005, the Honorable Mark R. Kravitz, United States District Judge for the District of Connecticut, entered an order freezing the assets of Faubert and Faubert Financial Group, Inc. and prohibiting the destruction of documents. In further response to the SEC's emergency motion, on March 29, 2005, Judge Kravitz issued an Order requiring, among other things, that the defendants provide a detailed accounting of their assets and of the transactions concerning the fraud described in the Complaint. The Court's March 29, 2005 Order also restrains the defendants from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Sections 206(1) and (2) of the Investment Advisers Act of 1940. Among the relief the SEC is continuing to seek in its action are disgorgement of the defendant's ill-gotten gains, civil penalties and a permanent injunction. A preliminary injunction hearing is scheduled for April 7, 2005.