How Serious are the Allegations?
To say that the allegations against John Nicholas Matson are serious would be an understatement. In fact, they are grave enough to warrant public administrative proceedings as deemed by the U.S Securities and Exchange Commission (SEC). He is accused of fraudulent actions and violations of key sections of the Securities Act of 1933 and the Exchange Act. To understand how this affects investors, it’s important to delve a little further.
The crux of the allegations centres around Matson selling securities, following blind trust put in by five investors, under the garb of LLC Bonds. The faith value of these securities amounted to a staggering $1,560,000. Investors were promised interest rates between 12 to 20% in return. However, Matson allegedly exploited this trust by transferring investor money to his personal account. Far from the promised returns, investors were left dealing with financial losses, as Matson reportedly used their funds to pay previous investors in a classic Ponzi scheme.
We have seen time and again that when a financial advisor strays off the path of integrity, the very investors who trusted them, pay the hefty price. As the famous quote by Warren Buffet goes, “It takes 20 years to build a reputation and five minutes to ruin it.” Unfortunately, this resonates truly for investors who lose their life’s savings in scams led by trusted financial professionals.
The Financial Advisor’s Background
John Matson is no stranger to the financial sector. He’s been part of the industry since 1996 with associations to well-known firms such as Merril Lynch, Citigroup Global Markets Inc., and LPL Financial LLC. Over time, he has allegedly orchestrated a series of financial specifics to exploit investor trust and misuse their funds under the facade of lucrative returns.
However, his past is not without complaints. Seven disclosures have marred his record, pointing to a concerning pattern of alleged unethical practices. He reportedly sold unauthorized promissory notes, was accused of churning and unsuitable investment recommendations, negligence and breach of contract. Cases of lapses in supervision and management of accounts have also been documented leading to significant losses for his investors. These are red flags that draw attention to dubious practices and raise concerns around the practices carried forward in the financial sector.
Understanding the Role of FINRA Rule in Layman’s Terms
For a clear understanding of this scenario, it’s important to shed light on the FINRA Rule. The financial sector operates under a string of well-delineated guidelines issued by regulatory bodies such as the Financial Industry Regulatory Authority (FINRA). These guidelines aim to maintain a level of proprietary in the investment sector and ensure that practices are done within the boundaries of set laws.
For example, Quantitative suitability under FINRA Rule necessitates a broker or financial advisor to reasonably believe that the number and frequency of recommended transactions are not excessive and unsuitable for the investor. It takes into account the customer’s investment profile and needs, among others. If any such duties are breached, these rule offer grounds for investors to recover their investment losses.
Consequences and Lessons Learned
The consequences of Matson’s alleged misconduct are profound. He now faces the prospect of being barred from any association with broker dealers, investment advisors, and other financial entities. On a broader scale, this incident serves as a wake-up call for the investment community. It underlines the need for due diligence while choosing a financial advisor and underscores the role of regulatory policies in safeguarding investor interests.
As a final note, remember that 60% of investors say they were defrauded by their advisor, according to a study by the Certified Financial Planner Board of Standards. Therefore, exercising caution, verifying credentials, and conducting regular performance reviews are crucial steps in the path towards securing your financial future.