SEC Charges Michigan Registered Representative with Misappropriating Brokerage Customer Funds

Litigation Release No. 24274 / September 18, 2018

Securities and Exchange Commission v. Ernest J. Romer, III, No. 18-civ-12927 (E.D. Michigan filed September 18, 2018)

The Securities and Exchange Commission charged a former registered representative with defrauding his brokerage customers - including many elderly retirees and unsophisticated investors - out of more than $2.7 million in a multi-year investment scam.

According to the SEC's complaint, from at least 2014 through 2016, Ernest J. Romer, III persuaded at least 30 of his customers, many of whom invested most of their life savings with Romer, to sell securities in their brokerage accounts and transfer the proceeds to either P&R Capital, LLC or CoreCap Solutions, LLC. Romer allegedly represented to his customers that upon transferring the money, he would invest it in the stock market and earn them a better return than their current investments. Based on Romer's misrepresentations, the customers believed that CoreCap Solutions and P&R Capital were affiliated with a broker-dealer where he worked. Romer's alleged statements to his customers were false. As alleged in the complaint, P&R Capital and CoreCap Solutions were Romer's personal businesses, and Romer did not invest the customers' money in the stock market for their benefit. He allegedly stole the money and used it to benefit himself and his family, to conduct trading in his own brokerage account, to make Ponzi-like payments to other customers, and to repay customers from his prior brokerage firm who had suffered losses on an investment Romer had recommended.

The SEC's complaint, filed in the federal district court in the Eastern District of Michigan, charges Romer with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC is seeking a judgment ordering Romer to disgorge his ill-gotten gains with prejudgment interest, and to pay civil penalties.

The SEC's investigation, which is continuing, is being conducted by Marlene Key-Patterson and Wilburn Saylor of the Chicago Regional Office, and supervised by Steven Klawans. The litigation will be led by John E. Birkenheier and Ms. Key-Patterson. The SEC appreciates the assistance of the Macomb County, Michigan Prosecutor's Office.