HELENA, Mont. – Securities Commissioner Matt Rosendale announced today that his office has reached a settlement totaling about $5.7 million with FSC Securities Corporation to resolve the alleged illegal activities of one of the company’s former Missoula branch employees.
In 2015, FSC began receiving complaints from clients of Barry Hartman regarding investments in Invizeon, a private Missoula company unrelated to FSC, regarding illiquid investments they had purchased and their inability to access their investment proceeds, and regarding long-term annuities he had sold them.
Hartman was a beneficial owner and director of Invizeon. The company closed in 2015 and investors lost their entire amount of investment.
Hartman was terminated by FSC on March 5, 2015 for “violation of firm policies, to include Mr. Hartman’s participation in an undisclosed outside business activity and an undisclosed private securities transaction.”
The Commissioner of Securities and Insurance, Office of the Montana State Auditor (CSI) investigated the complaints and identified 12 clients of Hartman who had purchased Invizeon, 26 clients of Hartman who held illiquid investments that may not have been suitable for them based on their investment objectives, their age and their liquidity needs, and identified 16 clients who held annuities that may not have been suitable. Most of these clients live in the Missoula area.
This month’s settlement with FSC follows a July 2017 settlement with Eric Rolshoven, who was Hartman’s supervisor at FSC and allegedly failed to supervise Hartman as he conducted the illicit securities investments. Rolshoven was fined $15,000.
The terms of the FSC settlement include:
- FSC will pay over $1.3 million in restitution, including over $1.1 million in principal and more than $230,000 in interest to FSC clients who invested in Invizeon
- FSC will offer over $1.4 million in rescission, including nearly $1.2 million in principal and over $130,000 in interest to FSC clients who purchased unsuitable, illiquid investments
- FSC will waive or refund surrender penalties on the original purchase cost of nearly $2.7 million of unsuitable annuities to FSC clients who purchased unsuitable annuities
- FSC will pay a fine of $100,000
- FSC will contribute $11,900 to the CSI’s Securities Restitution Assistance Fund
- FSC will reimburse CSI’s investigative expenses
“After Missoulians were harmed by FSC’s former employee, the company has taken the steps necessary to remedy the situation as best as possible,” Rosendale said. “I appreciate FSC’s cooperation, and I am very happy to report that we reached a resolution to get Montanans their money back and protect future investors.”
Background on the problematic securities transactions:
Hartman engaged in the inappropriate practice of “selling away,” which is when an investment professional who sells, or solicits the sale of, securities not held or offered by the brokerage firm with which he or she is associated.
Illiquid investments can be unsuitable investments for investors who likely will need access to their investments within a short period after making their investment.
An annuity can be an unsuitable investment for specific investors because it may lock up an investor’s money for years before they can receive payments. Investors who need to access their money before the end of the specified deferral period typically pay hefty surrender penalties, even if the money is needed for emergency medical treatment or changes in living arrangements. Surrender penalties may be as much as 25 percent of the principal.
More information on Montana securities is available from the CSI’s Securities Department at http://csimt.gov/securities/.