Litigation Release No. 19523 / January 5, 2006

Securities and Exchange Commission v. David M. Faubert, et al., Civil Action No. 03:05-CV-00510 (D. Conn.)


The Securities and Exchange Commission announced today that it had obtained a default judgment permanently enjoining David M. Faubert ("Faubert") and his investment advisory firm, Faubert Financial Group ("FFG"), from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1940 and Rule 10b-5 thereunder, and Sections 206(1) and (2) of the Investment Advisers Act of 1940. In addition, Faubert and FFG were ordered to pay over $7.5 million in disgorgement and penalties. The order was entered by the United States District Court Judge Mark Kravitz on December 14, 2005.

On March 23, 2005, the Commission sought and obtained an asset freeze and temporary restraining order against the defendants, based in part upon Faubert's confession to the Connecticut Department of Banking that he had defrauded several clients. In its accompanying Complaint, the Commission alleged that from 2000 to the present, Faubert defrauded as many as 15 clients by telling them he would invest their money in a "fixed account" which "guaranteed" an 8% return. In many instances Faubert persuaded the clients to transfer their money from legitimate investments such as mutual funds or variable annuities into an investment in his "fixed account" with its "guaranteed" return. However, instead of investing the clients' funds as promised, Faubert diverted the funds for his personal use, including the payment of his gambling debts. The Complaint further alleged that, to conceal the fraud, Faubert periodically provided the clients with account statements that he had fabricated. Finally, the Complaint stated that Faubert defrauded the clients of approximately $2.4 million. In pleadings filed in the civil action, the Commission previously alleged that the assets identified to date consist of approximately $7,000.

For more information see Litigation Release No. 19166 (April 5, 2005) and 19189 (April 18, 2005).