Former Hot Springs Investment Adviser Fined $50,000

by Mark Friedman  on Tuesday, Apr. 29, 2014 5:31 pm  

Former Hot Springs investment adviser Michael Hazen Martin was fined $50,000 Tuesday by the Arkansas Securities Department for fraudulent and deceptive business practices.

Martin entered into a consent order with ASD but didn't admit or deny the allegations that he engaged in fraudulent, deceptive, dishonest or unethical business practices while he was a representative of Brookstone Capital Management LLC and operated as Mike Martin Financial Services Inc.

He also received a one-year suspension of his investment adviser representative registration in Arkansas. Martin will have to meet certain criteria before his registration is reinstated, the ASD said in a news release.

The ASD began investigating Martin after he sent an invitation for a dinner seminar to an ASD employee in March 2011, the news release said.

"Martin conducted free lunch or dinner seminars around Arkansas which targeted seniors and retirees," the news release said. "At these seminars, Martin described the securities industry as obsolete and exaggerated the benefits of investing in equity-indexed annuities, highly complex insurance products tied to an equity stock index such as the S&P 500 and sold as investments."

Martin recommended that the seniors liquidate their securities and buy EIAs.

"Martin stated repeatedly that investors could not lose money with an EIA and represented EIAs as the perfect product," the news release said. "However, Martin failed to adequately explain the complexity of EIAs or that EIAs are typically long-term investments carrying surrender charges and withdrawal fees."

Several senior Arkansas investors followed Martin's advice and sold their securities and bought EIAs.

The ASD alleged that Martin made "unsuitable recommendations to senior Arkansas investors to liquidate securities and use the proceeds to purchase EIAs," the news release said.

Martin, though, received commission on the sale of the EIAs.

"With recommendations to liquidate securities and invest in annuities continuing, individuals making these recommendations should expect the full scrutiny of the Department," Theodore Holder, staff attorney for the ASD, said in the news release.



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