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Regulatory Sanctions

If the Deal Seems Too Good to be True …

March 27, 2019

by Howard Haykin


… it’s probably a sham. That’s what clients of MML Investors Services found that out after they invested in a Private Securities Transaction devised and operated by their registered rep and fellow church goer, Oscar Francis.



Francis, 40, was a resident of Margate, Florida, who’s now in the custody of the Federal Bureau of Prisons, serving a 41-month sentence, followed by 3 years of supervised release. He also was ordered to pay $422,000 in restitution.


Francis admitted that, while associated with MML Investors Services, he knowingly devised a scheme to defraud at least 11 investors out of approximately $665,190. From June 2012 to May 2017, he solicited his MML clients, with whom he attended church, to invest in Mahum, Inc., which Francis incorporated and controlled. He falsely represented that the company was affiliated with MML Investors Services and that investments in Mahum would generate high rates of return.


The misappropriated funds were instead spent on cocaine, alcohol, strip clubs, and luxury items. When investors inquired or complained about the status of their investments, Francis obtained loans or used other investment funds to repay the investors to prevent them from reporting Francis’s activity to MML or to law enforcement.



Private Securities Transactions conducted away broker-dealers are a leading vehicle used by registered reps to defraud their clients. That’s no secret.
Perhaps one way of combatting such scams - that collectively cost unsuspecting and naïve clients hundreds of millions and, in all probability, will never be recovered – might be to REQUIRE BROKER-DEALERS TO ISSUE ANNUAL NOTICES TO FIRM CUSTOMERS warning that deals transacted away from the firm - i.e., not processed through their accounts - are unauthorized and often too good to be true.  



This case was reported in SEC Administrative Proceeding File #3-19121.