NEW YORK, June 20 (Reuters) - A former Raymond James broker accused of stealing $3 million from his clients by creating a fictitious investment fund to channel their money into his own personal bank account has been barred by Wall Street’s self-watchdog.
The Financial Industry Regulatory Authority (FINRA) said in a letter dated Wednesday and posted to its site that Claus C. Foerster, a former broker based in Greenville, South Carolina, had convinced his customers to invest in a fake income fund he called “S.G. Investments,” which was actually a personal bank account he owned.
As a result, FINRA has permanently barred Foerster from association with any FINRA member firm “in any capacity.” Raymond James said it has also reported Foerster’s activities to law enforcement and regulators.
FINRA said Foerster had instructed his clients to transfer money from their brokerage accounts into their personal bank accounts, and then write checks payable to S.G. Investments under the assumption that they were investing in a fund. Foerster even went so far as to give some of his customers fake account statements and provided at least two of them with purported dividend payments on a monthly basis.
The Ponzi scheme, which had been operating since 2000, involved 13 of Foerster’s clients, FINRA said.
Foerster, through his lawyer, declined to comment.
Raymond James said it terminated Foerster’s employment after he admitted to misappropriating the client funds. The firm said it has begun to make restitution to the involved clients.
“The company was not a legitimate investment opportunity and Foerster ultimately used the client funds for his own personal purposes,” Raymond James said in a statement. “At no time did these activities involve Raymond James, its systems or other firm personnel.”
Foerster had been in the industry for 25 years, according to his FINRA broker record. He had also previously worked at J.C. Bradford & Co, Citigroup Inc and later Morgan Keegan & Co Inc, which was eventually bought by Raymond James in 2012. (Reporting by Ashley Lau in New York; Editing by David Gregorio)