The SEC’s complaint alleges that Douglas P. Simanski raised over $3.9 million from approximately 27 of his brokerage customers and investment advisory clients, many of them retired or elderly, by telling them that he would invest their money in either a “tax free” fixed rate investment, a rental car company, or one of two coal mining companies in which Simanski claimed to have an ownership interest.  He allegedly told the investors to write checks payable to personal bank and brokerage accounts he opened in his wife’s name.  The complaint alleges that instead of investing the money as he promised, Simanski largely used the money to repay other investors and for his personal use.  According to the complaint, Simanski’s scheme collapsed when one of his clients contacted the Financial Industry Regulatory Authority (FINRA) and Simanski admitted his scheme to his employer.

“This matter highlights the need for retail investors – and retirees and elderly individuals in particular – to remain skeptical of investments that sound too good to be true and confirm that investments recommended by brokers and investment advisers are approved for sale by their respective brokerage or advisory firms before transferring funds,” said Kelly L. Gibson, Associate Regional Director for Enforcement in the SEC’s Philadelphia Regional Office.

In a parallel action, the U.S. Attorney’s Office for the Western District of Pennsylvania today announced that Simanski pleaded guilty to criminal charges.

The SEC’s complaint, filed in federal court in Johnstown, Pennsylvania, charges Simanski with violating antifraud provisions of the federal securities laws.  Simanski has agreed to settle the charges against him.  The settlement, which is subject to court approval, orders injunctive relief and disgorgement of ill-gotten gains plus interest.

Simanski also agreed to the entry of an SEC order that, when entered, will bar him from the securities industry for the rest of his life.

The SEC’s investigation was conducted by Jack Easton and Kingdon Kase in the Philadelphia office with assistance from Karen Klotz, and supervised by Ms. Gibson.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Western District of Pennsylvania, U.S. Secret Service, Internal Revenue Service, and FINRA.