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Robert W Pearce
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Mr. Pearce has tried, arbitrated and mediated numerous disputes involving complex securities, commodities, administrative, contract, commercial, business tort and employment law issues for over 30 years. He has represented hundreds of clients in Federal and state courts (trial and appellate) as... More
My company:
The Law Offices of Robert Wayne Pearce, P.A.
My blog:
The Investor's Rights Law Blog
  • FORMER OPPENHEIMER REGISTERED PRINCIPAL MARK CHRISTOPHER HOTTON NAMED IN FINRA COMPLAINT ALLEGING FRAUDULENT ACTS AND SUITABILITY OBLIGATION VIOLATIONS 0 comments
    Aug 21, 2013 11:25 AM

    Former Oppenheimer registered principal Mark Christopher Hotton was named in a Financial Industry Regulatory Industry (FINRA) complaint alleging that he improperly used and converted $5,932,000 of customer funds, without his customers knowledge or consent, for his own use and benefit, and caused at least an additional $2,584,078 to be wired from the customer accounts to his outside business activities and individual affiliates. The complaint alleges that while Mr. Hotton was employed by Oppenheimer, he was either employed by or accepted compensation from outside business entities, which were outside the scope of his relationship with Oppenheimer. Also, the complaint alleges that Mr. Hotton submitted various U4 Forms but failed to disclose his engagement in a number of entities while employed by Oppenheimer. The complaint further alleges that Mr. Hotton forged and falsified numerous documents and made numerous misrepresentations, verbal and written, to his customers, his firm, and others to further his fraudulent scheme. In addition, the complaint alleges that Hotton provided customers with fabricated statements for a non-existent account at an entity and false written statements about the value of their investments with him. Moreover, the complaint alleges that Hotton exercised control over customers' accounts; recommended and executed transactions that were excessive and unsuitable in light of customers' investment objectives, risk tolerance, and financial situation; loaned $250,000 to firm customers with notifying and receiving written authorization from the firm; and acted with intent to defraud or with reckless disregard for the customers' interests and for the purpose of generating commissions.

    FINRA also alleged that during Hotton's on-the-record testimony, he falsely testified about numerous topics in response to FINRA's questions. Hotton also and allegedly provided FINRA with false statements and claims after authorities made a request for information and documents. Regarding Hotton's U4, the complaint alleges that he willfully failed to make any disclosure on his U4 of several legal actions against him, or the settlement of those actions - he failed to disclose that information even after the NASD instructed him to do so; he failed to timely amend his U4 to disclose the commencement of a federal action against him, or the temporary restraining order granted in that action; and when he finally amended his Form U4 to disclose the federal action, he falsely described the action as a business dispute between business partners.

    Mr. Hotton also allegedly committed numerous acts of misconduct in clients' accounts and violated his customer-specific suitability obligations. FINRA's complaint states that Hotton executed hundreds of unauthorized trades in customers' accounts without his customers' knowledge, consent, or authorization. FINRA claims that Hotton's customers neither gave Hotton prior written authorization to exercise discretionary powers in their accounts, nor did they give Hotton verbal discretionary power. One of Hotton's customers specifically stated that he was not interested in risky or speculative trading, but Hutton still recommended investments that were contrary to the customer's investment objectives and financial situation. Some of the risky investments recommended were leveraged on inverse exchange traded funds or ETFs, which Hotton did not completely understand. In particular, Hotton did not understand or explain to his clients that the long-term return of a leveraged or inverse ETF can substantially deviate from the underlying index. Therefore, Hotton failed to satisfy the reasonable basis suitability requirement in connection with his investment recommendations.

    The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. Please see our Instablog profile (left column) for ways to contact us and get answers to any of your questions about this blog post and/or any related matter.

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