The Law Offices of Robert Wayne Pearce, P.A. is currently representing a Client of Joseph Michael Todd who has filed an arbitration claim against his employer, Centaurus Financial, Inc.
Joseph Michael Todd Formerly With Centaurus Financial, Inc. and Investors Capital Corp. Has Three (3) Customer Complaints For Alleged Broker Misconduct.
IMPORTANT: We are providing information about our clients’ allegations and seeking information from other investors who did business with Joseph Michael Todd and had similar investments, a similar investment strategy, and a similar bad experience to help us win our clients’ case. Please contact us online via our contact form or by giving us a ring at (800) 732-2889.
Update: SEC Files Suit Against Joseph Michael Todd
The SEC finally filed suit against Joseph Michael Todd (“Todd”) engaging in a fraudulent scheme from at least August 2016 through at least November 2022, where he allegedly misappropriated at least $3 million from at least 20 customers of Centaurus Financial, LLC (“Centaurus”), a dually registered broker-dealer and investment adviser that employed Todd as a registered representative. Todd obtained investor funds through deceptive means by instructing his Centaurus customers to write checks payable to his entities Todd Financial Services, LLC (“TFS”) and/or TFS Insurance Services LLC (“TFS Insurance”) or to Todd himself by falsely assuring customers that he and his entities would invest their funds in various securities. Instead, Todd commingled investors’ funds and kept the money for his own personal use, spending it on lavish real estate, boating, hunting, casinos, and adult entertainment. Todd perpetuated the fraud by making material misrepresentations to customers regarding the use of their funds in meetings that took place in person, in phone conversations, and in documents that he prepared and provided to customers.
The SEC accused Todd and his entities because of their conduct, Todd, TFS, and TFS Insurance knowingly or recklessly committed securities fraud. In violation of Section 17(a) of the Securities Act of 1933 (the “Securities Act”) [15 U.S.C. §§ 77e(a), 77e(c), and 77q(a)] and Todd, TFS, and TFS Insurance violated Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
The SEC brought the lawsuit to prevent further harm to investors and to seek disgorgement, civil penalties, permanent injunctions, and conduct-based injunctions stemming from the Defendants’ wrongdoing, and a permanent officer-and-director bar against Todd.
Joseph Michael Todd Was Terminated by Centaurus Financial, Inc.
On July 21, 2022, Joseph Michael Todd was terminated by Centaurus Financial, Inc. for not cooperating with an ongoing investigation into whether Joseph Michael Todd violated firm policy and industry rules with respect to allegations of selling away and the receipt of customer funds. Our law firm was contacted by a customer of Joseph Michael Todd alleging misappropriation or theft of funds. We are currently investigating such claims and are accepting clients who were victims of Joseph Michael Todd’s alleged misconduct.
Joseph Michael Todd was fired from Centaurus Financial in July 2022, according to FINRA’s BrokerCheck. Michael Todd was terminated from Centaurus Financial because of claims he sold investments not authorized by the company, a common practice known as “selling away.”
Did Joseph Michael Todd Cause You Investment Losses?
Joseph Michael Todd, also known as Michael Todd, Formerly With Centaurus Financial, Inc. and Investors Capital Corp. Has Three (3) Customer Complaints For Alleged Broker Misconduct.
If you believe you have suffered investment losses resulting from the conduct of Joseph Michael Todd at Centaurus Financial and Investors Capital Corp. you can contact the securities attorneys at The Law Offices of Robert Wayne Pearce, P.A. for a free consultation to discuss your rights.
Joseph Michael Todd Customer Complaints
Joseph Michael Todd has been the subject of three (3) customer complaints that we know about, one (1) of those complaints was filed in 2022 to recover investment losses. And One (1) of Joseph Michael Todd’s three (3) customer complaints were settled in favor of investors. However, one (1) of Joseph Michael Todd’s customer complaints was closed, and the customers have not taken any further action. There is currently one (1) pending customer complaint filed against Joseph Michael Todd’s former employer Centaurus Financial, Inc. for investment losses caused by alleged misconduct.
Allegations Against Joseph Michael Todd
A sample of the allegations made in the FINRA reported arbitration claim settlements and/or pending complaints for investment losses are as follows:
- Clients allege Joseph Michael Todd misrepresented surrender period of annuity and failed to provide contract in a timely fashion
- Client’s allegations in which she alleges she gave money for Joseph Michael Todd to invest in “other investments” outside of her Edward Jones account.
- During 2020 through present, the customers allege that Joseph Michael Todd misrepresented illiquid, high risk and unsuitable investments and engaged in selling away from his broker/dealer.
We currently represent a Client of Joseph Michael Todd who have filed an arbitration claim against his employer, Centaurus Financial, Inc. A summary of the allegations made in the FINRA arbitration filed for investment losses realized by the Claimant were as follows:
Respondent Centaurus employed Joseph Michael Todd (hereafter referred to as either “Mike” or “Mr. Todd”) and held him out as registered representative, investment adviser, investment manager, financial adviser, and financial planner with special skills and expertise in the management of securities portfolios and financial, estate, retirement, and tax planning matters. Centaurus hired Mr. Todd after he was terminated by two prior broker-dealers for violations of industry rules, firm policies and procedures, including allegations of selling unapproved investments and misappropriation. It also permitted Mr. Todd to operate his Centaurus branch offices under the name “Todd Financial Services” as “a DBA for branding purposes.” The Respondent is being sued in its capacity as broker-dealer and investment adviser, investment portfolio manager, financial planner, and/or as an employer whose employees and agents, including, but not limited to, Mr. Todd, committed the acts and omissions which are the subject of this Statement of Claim.
Claimant is a 62-year-old single woman back working 3 months after she had retired and discovered that her Centaurus’ stockbroker and investment advisor Mr. Todd did the following:
1) Stole $425,000 of her funds that were supposed to have been invested in safe, liquid, fixed income securities for her retirement security and income;
2) Acted in his own “best interest” instead of Claimant’s “best interest” in soliciting her to sell $420,000 of her investment grade municipal bonds and reinvesting the sales proceeds in illiquid and high-risk alternative investments;
3) Purchased $255,000 of high-risk preferred stocks and real estate investment trusts in her account without consulting her or any written discretionary authority; and
4) Misrepresented Claimant’s investment portfolio holdings in customized reports prepared by him at his Centaurus office to cover up the theft of her funds.
Apparently, Claimant was not Mike’s only victim. On July 21, 2022, Mike’s employment with Centaurus was terminated for failing to cooperate with the broker-dealer’s investigation into allegations by others that he made unauthorized investments and/or absconded with their funds. Mr. Todd is under investigation by the Citrus County Sherriff’s Office and the United States Securities and Exchange Commission. He has surrendered what is left of his assets to an Assignee for Benefit of Creditors, the value of which is substantial less than the amount he owes to Claimant and other Centaurus clients.
2. The Relevant Facts
The Claimant is a high school graduate with a 2-year associates degree. She has had many jobs over the years in various industries. The Claimant thought she had retired from her last job in April 2022. Unfortunately, she has had to go back to work for the same company after she discovered theft, fraud, and other misconduct, which is the subject of this arbitration proceeding.
The Claimant first met Mike in Homosassa, Florida in 2000. He was recently divorced with 2 children in his custody and lived across the street from her. They were neighbors and became close friends. The Claimant even helped take care of Mike’s house and children when needed. Similarly, Mike helped Claimant with some of her personal matters. They developed a relationship of trust, confidence, and reliance upon each other years before Claimant opened her Centaurus accounts with Mike as her stockbroker and investment advisor.
The Claimant’s investment experience was primarily in the real estate market. Prior to opening her accounts with Centaurus, she bought, improved, and sold several real estate properties for a profit and used the proceeds to invest in more real estate and fixed income securities in furtherance of her retirement plan.
Claimant also had a securities brokerage account at FMS Securities (“FMS”) in which she accumulated municipal and corporate bonds selected by her bond broker. The Claimant’s FMS bond broker would recommend bonds, discuss their ratings, maturities, yields, etc. and obtain her approval before any transaction was executed. The Claimant received paper account statements and confirmations on a regular basis to keep her advised about the transactions in her accounts and overall portfolio.
In the late spring 2021, Claimant was close to retirement and needed a more qualified investment advisor/retirement planner than her bond broker to help plan her imminent retirement. She wanted to have a financial advisor who she could meet with face-to-face and discuss the retirement plan. Mike lived and maintained two Todd Financial Services offices within miles of her home and so, she reached out to him for advice.
In June 2021, Claimant met with Mike and brought the May 2021 FMS Securities (“FMS”) account statements for her individual and IRA retirement accounts and began the ACAT transfer process of moving assets from FMS to Centaurus and its clearing broker Pershing & Co. (“Pershing”). After reviewing the account statements, Mike recommended that Claimant diversify her investment portfolio by investing in an American Equity Indexed Annuity tied to the S&P 500, which supposedly would provide principal protection and income. Mike instructed Claimant to write a check payable to Todd Financial Services in the amount of $90,000 for him to invest in the American Equity Indexed Annuity. Claimant noted the investment to be made by Mike on the check as “American Equity.”
The assets transferred from FMS to Centaurus in pieces from late June through early July 2021. Shortly after all the assets transferred, Mike solicited Claimant to sell over $255,000 (face value) of the municipal bonds she transferred in her taxable account and $165,000 (face value) of the municipal bonds transferred in her IRA account because they were supposedly too risky. Approximately one week later, Mike solicited Claimant at a meeting to purchase two alternative investments; namely, Prospect Capital Corporation -Series A1 Preferred Stock ($90,000) and Tasty Brands II, LP ($125,000) (hereafter referred to as “Prospect Capital,” “Tasty Brands,” or the “Alternative Investments”) claiming they were safer investments and they would give her a better return on her money than the municipal bonds he sold.
Mike knew all about Claimant’s retirement plan and that the Alternative Investments were illiquid, high risk, and represented over 75% of the investments in her IRA account. Claimant accepted Mike’s recommendation but did not understand the true nature, mechanics, or risks of the Alternative Investments or that they were being purchased in her IRA account or the consequences thereof. The sales of the municipal bonds and purchases of Alternative Investments in the IRA account were not in Claimant’s “best interest;” rather, they were in Centaurus and Mike’s “best interest” to get the higher commission than what he would have been paid on other suitable investments.
In August 2021, Claimant told Mike she had an additional $25,000 to invest and he recommended that she invest again in the American Equity Indexed Annuity. Once again, pursuant to Mike’s instructions, Claimant made a check payable to Todd Financial Services and noted the investment on the check as “American Equity Annuity SP 500.” She left that meeting with the understanding she now had $115,000 invested in an American Equity Index Annuity.
Mike and Claimant’s next meeting was in September 2021. In advance of the meeting, he prepared a report, which Centaurus allowed its investment advisors to prepare and deliver to clients. The report purportedly stated her portfolio holdings as of September 21, 2021. At that meeting they discussed another Centaurus investment called the Priority Income Fund. Mike described the fund as another safe income investment and solicited Claimant to invest $100,000 in that fund and she agreed to do so. Once again, Mike instructed her to make the check payable to Todd Financial Services and she did so, noting the investment on the check as the “Priority Income Fund.”
On October 7, 2021, Mike purchased another alternative investment in Claimant’s taxable account with $125,000 cash in that account to generate income. The investment was in the Bluerock Residential Growth REIT (“Bluerock”). The Claimant has no recollection of Mike discussing the Bluerock investment in advance of the purchase and believes she did not learn about that investment until their meeting later that month. Fortunately, that investment was redeemed, and she suffered no losses thereon.
Claimant and Mike’s next meeting was on October 21, 2021. In advance of the meeting, Mike prepared another customized report, which Centaurus allowed its investment advisors to prepare and deliver to their clients. The report purportedly stated her holdings in her portfolio as of October 21, 2021. At that meeting they discussed the holdings listed on the report, including the Bluerock investment and three others he purportedly made for her: Preferred Apartment Community Service Preferred Stock ($100,000); the Priority Income Fund ($100,000); and the American Equity Indexed Annuity ($115,000). Not only did Mike not make any Priority Income Fund or American Equity Indexed Annuity investments for Claimant, but he also never purchased the Preferred Apartment Community Service Preferred Stock. The October 2021 portfolio holding report Mike prepared was a fiction to cover-up his theft of Claimant’s funds. Whenever they met, Mike prepared and provided Claimant with the reports that misrepresented her holdings to fraudulently conceal his theft of her funds she intended for him to invest for her retirement.
In early 2022, Claimant decided to retire and move to North Carolina. Her small cabin in Bakersville, North Carolina was not a suitable full-time home. In February, Claimant brought Mike another check payable to Todd Financial Services in the amount of $40,000 to hold in money market to pay for a home in North Carolina. Later that month Claimant found another home in Bakersville, North Carolina and withdrew $60,000 from her account to purchase and close in late April. She promised Mike she would replenish the Centaurus investment account when she sold the cabin.
In March, Claimant contracted to sell her Florida home. Thinking that her retirement housing plan was in order, Claimant gave notice to officially retire in April. The Claimant then packed up her belongings in the Florida house and shipped them to North Carolina. After Claimant packed her Florida home and temporarily moved back into her North Carolina cabin, the pipes burst in the North Carolina home she was going to purchase, so the contract was cancelled. Meanwhile, in Florida, the buyer could not come up with the cash needed to purchase her Florida home and cancelled that contract.
In May, Claimant’s retirement plan fell apart and so she requested Mike find some investment opportunities for the cash that had been set aside for the North Carolina real estate transaction and sitting in the account. In addition, Claimant delivered two checks in the amounts of $50,000 and $120,000 payable to Todd Financial Services for investment while she made a new retirement plan. The Claimant handed Mike the $120,000 check at their last meeting on June 28, 2022, where Mike once again misrepresented the portfolio holdings and value of her investment portfolio.
The next month Claimant followed up with Mike on his plan for investment of the $225,000 cash held in her accounts. She requested a printout of her accounts and another meeting, but he was always unavailable for one reason or another. Shortly thereafter, Claimant found another real estate property and attempted to contact Mike for some of her cash to close that transaction without success.
In late July, Claimant became very worried when she opened a letter from Centaurus inquiring about whether she had ever written checks to Mike or Todd Financial Services. She went to Mike’s office and was told by one of his employees he was out sick with Covid-19, which was untrue.
The truth is Mr. Todd was terminated by Centaurus on July 21, 2022. Centaurus reported the reason for the termination on his CRD, as follows:
The Firm is investigating whether the Registered Representative violated Firm policy and industry rules with respect to an allegation of selling away and the receipt of customer funds. The Registered Representative has not cooperated with the investigation. The investigation is ongoing.
This was not the first time Mr. Todd was terminated by a brokerage firm. He was terminated by two prior broker-dealer employers: Investors Financial Corporation (“IFC”) and Edward Jones. The stated reason for Mr. Todd’s termination at: IFC was “failure to follow procedures;” and at Edward Jones it was “for engaging in outside business activity without the firm’s knowledge or approval.” Id. Further, one client of Mr. Todd at Edward Jones “alleged misappropriation.” Thus, Centaurus was on notice before Mr. Todd was hired that Edward Jones had terminated him for the same type of misconduct.
Notwithstanding the prior allegations of misconduct, Mr. Todd was hired by Centaurus and permitted to operate two stand-alone Centaurus branch offices with the name “Todd Financial Services” on the front door. On information and belief there was no “heightened supervisory procedures” taken by the firm while he was employed. On the contrary, the supervision was remote, really remote; Mr. Todd’s supervisors were located 2500 miles away in Anaheim, California.
On information and belief, Mike has fled Florida to whereabouts unknown. Both offices where Mr. Todd conducted Centaurus brokerage and investment advisory businesses have closed, his home appears to have been deserted, and official correspondence sent certified mail to all last known addresses has been returned undelivered. The Claimant has filed a criminal complaint, which remains under investigation along with the other reported thefts.
Claimant has cooperated with Centaurus in its investigation of its Registered Representative’s misconduct and made numerous attempts to resolve all the issues raised in this claim without success. Unfortunately, she had to retain counsel and incur attorney fees, expert witness fees, filing fees, and other fees and expenses to right a wrong for which Centaurus is jointly and severally liable along with Mr. Todd.
What is Selling Away?
“Selling away” describes the practice of selling securities in unauthorized private transactions outside the regular scope of the broker’s business. Brokerage firms maintain a list of approved securities their brokers are allowed to offer. By approving products ahead of time, brokerage firms ensure that their brokers sell only securities that are vetted and verified as legitimate products. Brokers sell away when they offer their clients securities not on the firm’s approved product list.
Some brokers may choose to ‘sell away’ in order to make extra commissions, rather than sharing with their firm.
Selling away is not always malicious; sometimes, a broker means well but isn’t able to offer the securities a client wants through normal channels. Regardless of the broker’s intent, however, FINRA prohibits selling away and sanctions brokers for doing so.
Can a Broker Steal Client Funds?
Yes, it is possible for a broker to misappropriate or steal client funds. Brokers who have access to their client’s accounts should not take advantage of that access and use the assets in an unauthorized manner.
While theft is not as common as other investment scams, it does happen. When a brokers steals investor money for their own personal use it is called Conversion of Funds.
This criminal behavior does not happen often, but when it does, it is usually by a desperate broker or advisor plagued with gambling debts, drug habit and/or a lifestyle he or she cannot afford to pay for without stealing from clients.
Joseph Michael Todd Red Flags & Your Rights As An Investor
Of course, Joseph Michael Todd did not admit to any of the allegations. But regardless of whether an arbitration award was entered, a settlement occurred, or the customer complaint is still pending, the allegations made by customers are red flags that should put all current and former customers of Joseph Michael Todd at Centaurus Financial, Inc. and Investors Capital Corp. on alert to review carefully the activity and performance of their accounts and question whether Joseph Michael Todd has engaged in any stockbroker misconduct that may have caused them investment losses. The customer complaints at Centaurus Financial, Inc. and Investors Capital Corp. also raise questions about the brokerage firms’ supervisory practices. If these red flags raise questions, call us and we will inform you of your rights as an investor.
File A Claim To Recover Your Investment Losses At Centaurus Financial, Inc., and Investors Capital Corp. Due To Joseph Michael Todd
If you have questions about Centaurus Financial, Inc. and/or Investors Capital Corp. and Joseph Michael Todd and misappropriation or theft of funds and/or the management or performance of your accounts, please contact Attorney Pearce for a free initial consultation via email or Toll Free at 1-800-732-2889.