LPL Financial Corp. (LPL) will pay nearly $1.3 million in restitution to Montana investors plus a fine of $150,000 to the State of Montana under a settlement reached with the Montana Commissioner of Securities and Insurance. The restitution and fine are tied to alleged illegal activity on the part of a former LPL registered representative, Donald Chouinard, who is accused of operating a Ponzi scheme and the alleged failure of LPL to supervise him.
The settlement with LPL did not resolve any claims against Chouinard individually or his companies, which the Montana Department of Securities continues to pursue.
In September, the state of Montana issued a Temporary Cease and Desist Order against Chouinard and filed a Notice of Proposed Agency Action against him and his companies, DC Wealth Management and DC Associates. The action alleges that Chouinard and his companies committed securities fraud and conducted a Ponzi scheme involving Montana and Idaho investors who invested in what they thought was a “day-trading” program. In reality, however, the investors received proceeds taken from money contributed by newer investors.
Specifically, the Department’s action alleges Chouinard convinced one investor to obtain a $100,000 loan and invest with him because he could guarantee a high return in 30 days. Instead of investing the $100,000 in the “day-trading” program, Chouinard used $50,000 to pay off a previous investor, deposited $25,000 into his personal joint-checking account, and gave the other $25,000 to his attorney.
The Department also alleges that Chouinard traded investors’ accounts without their authorization, forged investors’ signatures to authorize certain trades, and failed to provide investors with statements or tax documents for their “day-trading” investments. Chouinard routinely informed the investors about the values of their investments orally or via email. The investors allege Chouinard misrepresented the values of their investments – in one case by as much as 10,000%.
The excessive trades resulted in thousands of dollars in commissions for Chouinard.
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