NEW YORK — In a comfortable Colonial-era tavern in Rhode Island last Tuesday, David L. Ullom dished out generous portions of retirement advice — along with a free meal of chicken, mashed potatoes and summer squash.
In front of an invitation-only gathering of about 30 retirees and pre-retirees in Charlestown, R.I., Mr. Ullom, who bills himself as a “financial planner” on his business card, delivered his spiel: “10 common mistakes retirees make with their finances.” During the 90-minute presentation, he touched on everything from bonds to mutual funds to annuities.
What Mr. Ullom failed to mention, however, was that in 2005, the Securities and Exchange Commission barred him from the brokerage industry.
Mr. Ullom, a former branch manager in Rhode Island for Raymond James Financial Services Inc. of St. Petersburg, Fla., neglected to supervise a broker that stole $16 million from clients in 1999 in 2000, according to the SEC.
“I think he knew his stuff,” said Kathy Nealon, a 55-year-old certified public accountant who attended Mr. Ullom’s sales dinner. “He made no mention of being barred.”
In fact, the SEC booted Mr. Ullom twice from the securities business. The first was a permanent expulsion as a supervisor, and the second was limited to only a year and hinged upon Mr. Ullom reapplying with regulators after that time if he wanted to work at a broker-dealer or investment adviser.
But according to officials with SEC, NASD of Washington and the Rhode Island Department of Business Regulation, there is no record of Mr. Ullom making such an application.
There’s no way to determine if there has been a change in the number of reps and investment advisers who re-emerge as financial advisers or planners after being banned from the industry, attorneys and regulators say.
The problem, however, is a persistent one and, in some ways, is both procedural and bureaucratic: Once NASD bars a registered representative, securities regulators lose track of them, attorneys admit.
“There’s no system in place to try to monitor for these guys,” said an attorney with a leading independent-contractor broker-dealer who asked not to be identified. “The states and the SEC have the information. The problem is, how do [regulators] know to monitor” for that specific broker or adviser, the attorney asked.
“It’s not like the guy is on probation and has to see his parole officer,” the attorney said. “He drops off the radar screen.”
After a broker is barred, his or her records are available for two years through NASD’s central registration depository system, noted spokesman Herb Perone. After that, investors can check a broker’s records through a state CRD system, he said, adding that a simple search of the web using a search engine such as Google often
can reveal the histories of barred brokers.
The SEC, for its part, maintains that it keeps an eye out for barred brokers who make their way back into the business.
“It’s definitely something we pay attention to,” said spokesman John Nester. “Word gets around pretty fast.”
Meanwhile, regulators in Rhode Island are paying close attention to Mr. Ullom and have launched an investigation into his current work, said Richard Berstein, executive counsel with the Rhode Island department of business regulation.
Mr. Ullom is “innocent until proven guilty,” Mr. Berstein said.
When asked about the nascent investigation by Rhode Island regulators, Mr. Ullom’s son, Jason, who is a broker affiliated with Investors Capital Corp. of Lynnfield, Mass., said, “I know nothing about it.”
Jason Ullom worked at the same Rhode Island branch with his father at Raymond James Financial Services before switching his affiliation in 2002 to Investors Capital.
When asked about his father’s seminars to retirees and his being barred from the industry, Jason Ullom said, “You’ve got to get your facts straight,” and referred questions to his father.
David Ullom did not return phone messages left last Thursday and Friday at his business, Sound Retirement Strategies in Greene, R.I., nor did he respond to questions sent via e-mail to an address listed on his business card.
It’s not unprecedented for a broker or adviser who has been kicked out of the industry to work openly without securities regulators — or clients — catching on.
Take the recent case of William “Jay” Zubick of Carmel, Calif., formerly affiliated with Linsco/Private Ledger Corp. of San Diego and Boston.
Barred for life
In 2000, NASD barred him for life from working with a broker-dealer in any capacity. According to NASD, Mr. Zubick made private securities transactions without the approval of LPL, reportedly conducting about 160 unauthorized transactions.
He kept working with wealthy investors, describing himself as “a successful day trader” and “hedge fund manager,” sources said.
In March, 29 investors, including friends and associates, filed a lawsuit against Mr. Zubick. According to the civil lawsuit, the friends and associates, who had invested more than $15 million with him from 1999 to 2006, discovered, as he was recovering from a near-fatal heart infection, that their money was not being used to buy securities.
On June 13, California authorities arrested Mr. Zubick, 42, and charged him with 71 felony counts, including grand theft, money laundering theft by false pretenses, and securities and tax law violations.
He is being held in Monterrey County Jail on $2 million bail.
According to the SEC, Mr. Ullom was aware in 2000 that the broker under his supervision, Dennis Herula, was conducting business for a suspect venture and took no steps to address Mr. Herula’s actions. In 2004, Mr. Herula pled guilty in Rhode Island to criminal fraud and was sentenced to more than 15 years in prison and ordered to pay more than $13 million in restitution.
To start the presentation last Tuesday night, Mr. Ullom introduced his son, Jason, who passed out papers and collected forms but did not speak, Ms. Nealon said.
At the end of the evening, the elder Mr. Ullom at first was coy in responses to direct questions about how he would be paid, she said. “He answered, ‘I’ll speak to you in private,” Ms. Nealon said. Later, at her table, Mr. Ullom mentioned the various securities licenses he once had and then discussed a potential consultation, she said.
