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SEC shuts down ex-broker’s attempt to start RIA from jail

This time it’s for real.

Convicted felon David Scott Cacchione, who was barred from the brokerage industry in 2009 for helping orchestrate a $100 million fraud scheme, has been barred again by the Securities and Exchange Commission after he tried, while still incarcerated, to re-enter the securities industry through a registered investment adviser.

Mr. Cacchione, 50, attempted, as others barred from the brokerage industry have, to play on the dual licensing of brokers and investment advisers to resurrect a career in the securities industry.

Mr. Cacchione pleaded guilty in 2009 to securities fraud for pledging the securities of unknowing clients to secure more than $45 million in personal loans for a friend. The scheme eventually resulted in almost $47 million in losses, according to the FBI. He also engaged in unauthorized trading in the accounts of clients, including a local children’s charity and an elderly widow, according to the SEC.

Mr. Cacchione was sentenced to 60 months in jail followed by three years of supervised release and ordered to pay nearly $50 million in restitution. According to the SEC, he had paid only $502 of that as of last August.

Last April, while in prison, he registered Montara Capital Management, according to the records of the California Secretary of State. Mr. Cacchione, who was released from prison on June 9, listed the company’s address as a mailbox at a UPS store.

On June 25, he filed an application with the SEC saying that Montara was a registered investment adviser with the state of California and was seeking SEC approval, according to the agency. Montara reported it had one client, a private fund, and expected to raise $100 million in assets within 120 days. Mr. Cacchione owned more than 50% of Montara and was also a managing member and the chief compliance officer, according to the SEC.

The agency responded in September with an order instituting administrative proceedings and seeking to bar Mr. Cacchione once again.

“While Cacchione may prefer that his criminal conviction and permanent injunction has no consequence in these proceedings, his attempts to sweep under the rug his past conduct and unfavorable evidence only strengthen the need to bar him completely from the securities industry,” the SEC said.

An attorney for Mr. Cacchione, Mauricio S. Beugelmans, did not return a call requesting comment on Thursday.

Dan Bernstein, an attorney with MarketCounsel, a firm that helps investment advisers with compliance, said that with no automatic industry-wide ban, investment professionals usually are barred only from their respective channel, depending on whether they were licensed as a broker or investment adviser. The Financial Industry Regulatory Authority Inc., for example, could bar an individual from the brokerage industry, which it regulates, but the SEC also would have to act to bar that individual from being an investment adviser.

The reason for the difference is to give someone who may have violated a brokerage rule a second chance or allow them to maintain their career, albeit in a different role, Mr. Bernstein said.

Still, some brokers manage to stay in the business as investment advisers before eventually being kicked out altogether.

In fact, Mr. Cacchione actually managed to pull off a hat trick by being barred by a third regulator. The state of California’s department of securities regulation barred him from registering as an investment adviser under the state’s securities laws on March 5, shortly after the SEC’s action.

It’s not clear what the next stop will be for Mr. Cacchione. Of course, there’s always insurance. Or coaching.

The website for Montara is still active, although it provides no background or contact information.

The story was first reported by SFGate a sister-site of the San Francisco Chronicle.

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SEC shuts down ex-broker’s attempt to start RIA from jail Reviewed by on . This time it's for real. Convicted felon David Scott Cacchione, who was barred from the brokerage industry in 2009 for helping orchestrate a $100 million fraud This time it's for real. Convicted felon David Scott Cacchione, who was barred from the brokerage industry in 2009 for helping orchestrate a $100 million fraud Rating:
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