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The SEC filed another offering fraud action, a staple of enforcement. This action centers on two recidivist radio talk show hosts selling interest in life settlements based on enhancements of their investment credentials, omissions of their regulatory history and a series of misrepresentations. SEC v. Novinger, Civil Action No. 4:15-cv-00358 (N.D. Tex. Filed May 11, 2015).
The defendants names in the action are: Christopher Novinger, licensed by the Texas Department of Insurance; Brady Speers, also licensed by the Texas Department of Insurance; NFS Group, LLC, d/b/a Novers Financial which is the name Messrs. Novinger and Speers conduced business under prior to the firm’s formation in late 2012; Ican Investment Group, LLC, a firm formed by Mr. Novinger in the Fall of 2013; and Speers Financial Group, LLC formed by Mr. Speers, which then established Speers Financial to receive commissions on the sales of life settlement interests to investors.
Messrs. Novinger and Speers began working together in the late 1990s, selling various goods, services and investment interests. In early 2012 the two men were introduced to life settlements, fractionalized interest in the benefits payable under life insurance policies that are payable on the death of the insured. The interests are securities.
The two men hosted a weekly radio show called the “Retirement Experts Radio Show” in the Dallas/Fort Work area. Messrs. Novinger and Speers represented themselves as “licensed consultants,” or “licensed financial strategists.” They also employed slogans to describe themselves such as “The Low Risk, Safe Money Guys” or retirement experts or “the largest non-risk investment consulting firm in the Southwest.”
From February 2012 through January 2014 Defendants Novinger, Speers and NFS Group, d/b/a Novers Financial, offered and sold life settlement interest. In soliciting investors the two men assured them that: 1) the interests were safe and guaranteed; 2) had annualized average returns of 7-11%; 3) were as safe as a CD; and 4) they were federally insured.
Investors were not told that despite their claimed titles, Mr. Novinger and Mr. Speers had little expertise or training in the area. Also omitted was their regulatory history. In September 2013 the Oklahoma Department of Securities issued a cease-and-desist order against Messrs. Novinger and Speers and Novers for their fraudulent offer of unregistered life settlements in that state. Also not disclosed were the facts that the Texas Attorney General, the FCC and the State of California each took regulatory action against a prior company owned, managed and directed by Defendants Novinger and Speers which had participated in a fraudulent scheme to mass-market discount health plans.
Investors were told that they had to be “accredited.” That term is defined under Rule 501 of Regulation D which requires the investor’s net worth or income meet certain thresholds. To help investors meet those thresholds Messrs. Novinger and Speers used a “Net Worth Calculator” which improperly included the tabulation of 20 years’ worth of future social security, pension and other similar payments.
As a result Messrs. Novinger and Speers and Novers sold more than $4.3 million of life settlement interests to 26 investors. At least three were not accredited investors. These sales generated about $515,000 in commissions that were paid directly to Ican Investment and Speers Financial. The complaint alleges violations of Securities Act Sections 5(a), 5(c) and 17(a) and Exchange Act Sections 10(b) and 15(a). The case is pending.
For more news and commentary on developing securities issues, visit SEC Actions, a blog by Thomas Gorman.
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