U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21610 / August 2, 2010
Securities and Exchange Commission v. Gregory Todd Froning, Civil Action No. 3:10-cv-01503 (N.D. Tex. August 2, 2010)
SEC Charges Texas Registered Representative With Misappropriating Hundreds of Thousands of Dollars from Fifteen Brokerage Customers and Advisory Clients
The Securities and Exchange Commission today filed a partially settled civil injunctive action against Gregory Todd Froning, a Coppell, Texas-based registered representative, accusing him of misappropriating over $800,000 from fifteen investors with whom he had pre-existing brokerage and advisory relationships. Froning consented on a neither-admit-nor-deny basis to the entry of a permanent injunction prohibiting him from violating Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rule 10b-5 thereunder. The injunction is subject to court approval.
The Commission's civil complaint, filed in federal district court in Dallas, alleges that between 2005 and 2009 Froning solicited fifteen individuals through an unregistered offering of promissory notes secured by rights to convert to equity interests in a now-defunct financial planning company Froning owned. While Froning represented to investors that offering proceeds would be used to fund operating expenses and growth of the financial planning company, he diverted the proceeds to a personal bank account and used them to pay for personal expenses such as cash withdrawals, purchases from internet retailers, adult entertainment, meals, and groceries. He also used investor funds to make Ponzi payments to some investors.
The complaint alleges that, as a result of his misconduct, Froning violated the antifraud provisions of both the Securities and the Exchange Act. Pending court approval of the injunction, the court will also determine the amount of disgorgement and civil money penalties to be assessed against Froning. Finally, upon the court's entry of the injunction, the Commission will institute settled administrative proceedings against Froning. Froning has agreed to an administrative order barring him from future association with any broker, dealer, or investment adviser.
The Commission acknowledges the assistance of the Texas State Securities Board and the Financial Industry Regulatory Authority in this matter.
See Also: SEC Complaint