A Connecticut senior citizen and investment adviser is facing multiple federal fraud charges on allegations that he used his financial services firm to conduct a Ponzi scheme that took in at least $10 million from clients over 20 years. James Booth, 74, was arrested yesterday morning on one charge of wire fraud, one charge of securities fraud, and one count of investment adviser fraud, and is also the subject of an enforcement action filed by the Securities and Exchange Commission.
Booth, who has been in the securities industry for nearly 30 years, was the founder and operator of Booth Financial Associates (“Booth Financial”) where he provided advisory services and sold insurance products to clients. Booth was also affiliated with several broker-dealers as a registered representative and investment advisor, most recently being affiliated with LPL Financial from February 2018 to June 2019 after previously being at Invest Financial Corporation December 2005 to February 2018. While serving as a registered representative and investment adviser and using Invest Financial’s trading platform, Booth allegedly solicited Booth Financial clients to invest in outside opportunities through a company, Insurance Trends, Inc., that he controlled. In doing so, Booth purportedly told potential clients that he could achieve larger returns for them through Insurance Trends and encouraged them to invest their inheritances, retirement savings, and children’s college funds.
Clients that invested with Booth were provided with account statements showing positions in securities that Booth had promised would be purchased with funds invested with Insurance Trends. These statements included details about those securities, including cost basis, total gains, and returns. In total, Booth convinced clients to invest over $10 million with him and Insurance Trends from 1999 to the present.
LPL Financial, Booth’s then-current broker-dealer, made an unannounced onsite office in May 2019 in part stemming from complaints by former Booth clients about difficulties in transferring their assets to a new investment adviser. After LPL officials reviewed Insurance Trend bank statements and raised questions about the company, Booth allegedly confessed to running a Ponzi scheme for the last 20 years and to having stolen from $4 million to $10 million from clients. Booth also admitted that he had fabricated account statements that had been provided to clients during the scheme. LPL subsequently terminated Booth’s association with the firm the next day, and Booth later submitted a written response to a regulatory inquiry by the Financial Industry Regulatory Authority confessing to operating a Ponzi scheme and stealing client funds. Booth has since been barred from the financial industry.
Booth’s ownership and association with Insurance Trends constituted an outside business activity under regulatory rules and thus he was required to both disclose and gain approval of that OBA while he was associated with a broker-dealer. That disclosure in turn obligates the associated broker-dealer to supervise the registered representative’s OBA with the goal of preventing situations like Booth’s where client funds are misappropriated through fraudulent means. In reviewing Booth’s FINRA BrokerCheck, it appears that Insurance Trends was not listed in the “Other Business Activities” section and thus it remains unknown whether Booth sought to concela his association from Invest, LPL, and other broker-dealers with whom he was associated during the duration of the Ponzi scheme.
A copy of the SEC’s Complaint is below: