An investigation begun by the securities division of the Tennessee Department of Commerce & Insurance (TDCI) led to a recent court-ordered asset freeze to halt ongoing fraud by two former Chattanooga brokers with disciplinary histories.
James Hugh Brennan III and Douglas Albert Dyer, co-owners of Chattanooga-based Broad Street Ventures, LLC, allegedly raised more than $5 million from investors without using the money as promised. On Feb. 22, TDCI filed a cease-and-desist order against Broad Street, Brennan, and Dyer, alleging that they had sold unregistered securities, were not registered to sell securities in Tennessee, and had engaged in fraud by failing to disclose the existence of a desist-and-refrain order previously issued in California. The U.S. Securities and Exchange Commission (SEC) issued an asset freeze on July 22.
TDCI’s initial order became final on Aug. 12. The department then referred the case to the SEC and the Federal Bureau of Investigation (FBI) for further action.
In an emergency action filed in federal court in Chattanooga on July 22, the SEC alleges that Brennan and Dyer sold purported shares in eight similarly named companies to more than 240 investors since 2008 without ever registering the stock as they promised. Instead, according to the SEC’s complaint, Brennan and Dyer transferred investor funds into their personal accounts or those belonging to their wives. The SEC further alleges that Brennan and Dyer continue to solicit investors while touting their securities industry experience and failing to disclose that Brennan was banned from the brokerage industry and Dyer suspended and fined for executing unauthorized transactions in customers’ accounts.
“We allege that Brennan and Dyer have been telling investors the same lies for several years without fulfilling any of the promises they’ve made, and the court’s temporary restraining order stops them from soliciting any more investors and freezes their assets as we pursue litigation,” said Walter Jospin, director of the SEC’s Atlanta regional office.
The SEC encourages investors to check the backgrounds of investment professionals before investing their money. A quick search on the SEC’s investor.gov website would have shown that neither Brennan nor Dyer has been registered to sell investments as a broker since the late 1990s, as well as their disciplinary problems with the Financial Industry Regulatory Authority and state regulators.
The SEC’s complaint alleges that Brennan, Dyer, and their company, Broad Street Ventures, have violated Section 17(a) of the Securities Act of 1933 as well as Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The SEC seeks disgorgement of ill-gotten gains plus interest and penalties as well as permanent injunctions. The SEC also seeks penny stock and officer-and-director bars against Brennan and Dyer.
The court’s order issued this month freezes the assets of Broad Street, Brennan, and Dyer. Their spouses are named as relief defendants in the SEC’s complaint for the purposes of recovering ill-gotten gains deposited in their accounts. A hearing date is pending.
Individuals who suspect they might be a victim of securities or insurance fraud, or who would like to file a complaint or speak with an investigator, can contact the Tennessee Securities Division – Financial Services Investigations Unit at (615) 741-5900. To file a complaint online, visit tn.gov/commerce/article/securities-file-a-complaint.
Source: Tennessee Dept. of Commerce & Insurance