Failure to Disclose Commissions Earned: Company Allegedly Fraudulent
A recent SEC complaint alleges that Behavioral Recognition Systems, Inc. (BRS), currently known as Giant Gray, Inc., engaged in investment fraud. SEC accusations allege that the company operated a fraudulent investment scheme that solicited more that $28 million from investors in seven equity security offerings between 2013 and 2015. According to SEC allegations, Behavioral Recognition Systems, Inc. made misrepresentations and misleading statements to investors to raise funds. Investors were deceived about the intended use of investor proceeds, company transactions, operating expenses, and executive compensation and commissions.
The SEC alleges that Ray Davis, a broker with Behavioral Recognition Systems, used diverted investor funds for his own purposes, including purchases of expensive art and antiques and a $5.2 million transfer to a joint bank account with his wife. Davis also sent additional solicited investor funds of $679,000 to an antiques broker to pay for luxury jewelry purchases for himself and his wife.
The SEC also charged Steele Financial, an investment advisory firm, with selling $13 million of high-risk securities to public school teachers without disclosing exorbitant commissions collected by the firm. Steele Financial, with over 450 clients and $60 million in assets, allegedly sold shares of Behavioral Recognition Systems between 2012 and 2016. Tamara Steele allegedly sold $15 million in securities for Behavioral Recognition Systems, collecting from 8% to 18% in undisclosed commissions that amounted to over $2.5 million. The SEC alleges that Steele failed to disclose her commissions to 120 clients who invested $13 million. In 2015, BRS’s financial condition deteriorated, causing missed interest payments on promissory notes. Many note holders included Steele’s clients.
According to allegations, Steele, a former school teacher, targeted school teachers for fraudulent investments. Most of the teachers were not regular investors, so they were easily deceived by misleading information and fraudulent documents. In addition to defrauding clients, the SEC says that Steele and Behavioral Recognition Systems acted as brokers without valid registration which resulted in illegally earned commissions. The SEC is seeking repayment of illegally acquired gains with interest, penalties and permanent injunctions.
By retaining an investment fraud attorney, victims of investment fraud schemes can often recover damages, including investment principal, expected gains if money had been properly invested, arbitration costs, attorney's fees, and punitive damages for egregious broker misconduct. Contact Meyer Wilson today to discuss your legal options by calling us at (888) 390-6491.