U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20272 / September 10, 2007
Securities and Exchange Commission v. Senior Resources Of Hawaii, Inc. and Mark K. Teruya, Civil Action No.CV 07 00467 HG LEK (Sept. 7, 2007 D. Hi.)
SEC Files Emergency Action to Halt Honolulu-Based Adviser From Defrauding Seniors
The Securities and Exchange Commission and announced the filing of a securities fraud action against a Honolulu-based investment adviser representative who targeted and defrauded members of the senior and retirement communities in Hawaii.
The SEC's emergency action in federal district court in Honolulu against Mark K. Teruya ("Teruya") , age 35, and his company, Senior Resources of Hawaii, Inc. ("Senior Resources") seeks to halt the defendants' fraudulent activities and deprive them of their ill-gotten gains. Teruya is a representative of an SEC-registered investment adviser, which was not named in either of today's action.
According to the SEC's complaint, since at least 2004 and continuing as recently as August 2007, Teruya, through Senior Resources, has on multiple occasions fraudulently induced clients to sign a series of pre-printed, fill-in-the-blank forms by misrepresenting the purpose of the forms, the reasons that they needed prospective clients' signatures on the forms, and the way in which they would use the forms. The complaint alleges that Teruya used the signed forms to sell the seniors' existing securities holdings without their knowledge or authorization. The complaint also alleges that Teruya, who is also a licensed insurance agent, then used the proceeds of the unauthorized sales to purchase equity-indexed annuities for which he received substantial, undisclosed commissions totaling about $2 million.
The complaint alleges that each month the defendants lured about 75 senior citizens, mostly retirees in their 60s, 70s, and 80s, to free breakfast and dinner seminars focusing on retirement financial planning. The complaint alleges that the defendants targeted seniors through advertisements in local newspapers, such as The Honolulu Advertiser and Honolulu Star-Bulletin, and direct mail invitations. The advertisements featured eye-catching headlines, such as "7 Seldom Heard, Significant Financial Opportunities [That] May Be Available to Many Retirees," and "10 Common Costly Financial Mistakes Hawaii Retirees May Make and Ways to Avoid Them."
As alleged in the complaint, defendants then offered seminar attendees free one-on-one consultations with Teruya, a self-proclaimed "certified retirement financial adviser." The complaint further alleges that, during these individual meetings, defendants fraudulently induced the seniors to sign the blank forms.
The SEC's complaint charges the defendants with violating the antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The SEC also seeks preliminary and permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties.
Simultaneous with the filing of the SEC's complaint, the Hawaii Securities Commissioner issued a Preliminary Order to Cease and Desist and Notice of Right to Hearing against Teruya and Senior Resources seeking to revoke Teruya's state registration as an investment adviser representative. SEC enforcement staff joined forces with the State of Hawaii in taking action on this matter, sharing information and resources. SEC examination staff, acting on information provided by Hawaii securities regulators, inspected Teruya's office as part of a cooperative state, SRO, SEC examination sweep of financial services firms that sponsor "free lunch" investment seminars.