U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17621 / July 17, 2002
SEC v. Gregory A. Hinkson, Case No. SA CV 02-5576 (DT)(AJWx)(C.D. Cal.).
SEC SUES FORMER MERRILL LYNCH BROKER FOR FRAUD
The Securities and Exchange Commission today filed civil fraud charges for misappropriation of client funds and unauthorized trading against Gregory A. Hinkson, a former Merrill Lynch broker at the Newport Beach, California branch office. Hinkson, age 38, lives in Irvine, California. Hinkson has entered into a settlement with the Commission by agreeing to pay nearly $675,000 in disgorgement and penalties.
The Commission's complaint alleges that from December 1998 to May 2000, while he was a Merrill Lynch broker, Hinkson sold several of his clients' Cash Management Account money fund securities and then forged their signatures on authorizations to transfer the proceeds into his own bank and securities accounts. Hinkson was able to cover up his scheme because he also transferred funds to client accounts whose funds had been previously misappropriated. If a client discovered an unauthorized transaction, Hinkson falsely told the client that a mistake had been made and that the funds had been, or would be, replaced with interest. At the time of Hinkson's termination from Merrill Lynch in June 2000, two of his clients' accounts were missing a total of $327,356. The Commission's complaint also alleges that Hinkson performed unauthorized trading in one of his client's accounts. From April 2000 to May 2000, Hinkson performed 38 unauthorized trades from which he received approximately $10,016 in commissions.
The Commission's complaint charges Hinkson with violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder based on his misappropriation of client funds and unauthorized trading. Without admitting or denying the allegations in the complaint, which was filed in U.S. District Court in Santa Ana, California, Hinkson has consented to the entry of a permanent injunction prohibiting him from committing future violations of the antifraud provisions of the federal securities laws. Hinkson has also agreed to pay $337,372 in disgorgement, with prejudgment interest thereon, and a civil money penalty of $337,372.