State reaches settlement with Bedford investment adviser, management group
CONCORD - A Bedford investment adviser, accused of taking advantage of elderly widows and older investors, has reached a settlement with the state Bureau of Securities Regulation that will require him to pay restitution and penalties.
Nicholas Rowe and his company, Focus Capital Wealth Management of Bedford, are barred from being licensed in the state as investment advisers or brokers and must pay restitution to clients who suffered losses estimated by the state at $2.4 million.
In addition, Rowe and his firm must pay fines and reimburse the state for investigative costs totalling $20,000.
The Bureau of Securities Regulation first took action against Rowe in August after receiving complaints from clients who'd lost substantial sums of money in what later proved to be high-risk investments in leveraged exchange traded funds, or ETFs.
"While such strategies may be appropriate for clients who have a high tolerance for risk, they are not appropriate for clients with low or moderate risk tolerance," said Jeff Spill, deputy director of the bureau. "In spite of this, Rowe applied these strategies to his clients ... and held the investments for a longer period than recommended."
Rowe was also accused of charging unreasonable fees and misrepresenting his credentials.
"He told clients that their fees were being paid to third parties with close connections to Wall Street," said Spill, "when in fact Rowe was retaining a portion of the fees."
Soon after the state took action against Rowe, he agreed to arbitration with a group of former clients through the Financial Industry Regulatory Agency, FINRA, the independent regulator for securities firms in the United Stations. In November, the FINRA arbitrator ruled against Rowe to the tune of $1.8 million.
He and his firm filed for Chapter 11 bankruptcy in December, according to his attorney, Peter Tamposi of Nashua. The ability of investors to recoup any money now depends on the bankruptcy proceedings.
"We've agreed to the restitution as determined by the bankruptcy court," Spill said. "The agreement is for him to pay us $15,000 in cost and a $5,000 fine, and he has to set up a payment plan with us once the bankruptcy court proceedings have concluded."
Tamposi said investors who line up in bankruptcy court will receive a percentage based on the amount of insurance proceeds divided by the total of claims. He said Rowe has insurance worth $1 million or $2 million, depending on how the policy is interpreted.
"We're in negotiations with the insurance company about that right now," he said.
New Hampshire doesn't have the jurisdiction to prevent Rowe from being licensed in any other state, said Spill, but the FINRA action has the effect of barring him from any securities-related license in the United States.
An administrative hearing on the charges against Rowe had been scheduled for Monday, but an agreement was reached over the weekend. "The stipulation we just entered into speaks for itself," Tamposi said.
"It's detailed and was the result of extensive negotiations."
The case against Rowe involved at least 11 different investors, including a 67-year-old widow from New Castle who had invested with Focus Capital and Rowe since 2004, and is alleged to have lost $793,741 between 2008 and 2011.
The investments Rowe made were legal, but he failed to disclosure their true nature to his investors, the state charged.
"Mr. Rowe and Focus Capital had a duty to act in the best interest of their clients," Spill said.
"Instead, clients were charged for investment strategies that were totally unsuitable and were not being told the entire truth about the fees charged and the investment strategies employed."