Tarek D. Bahgat, a former investment advisor associated with Gradient Securities, LLC (CRD# 127701), is facing serious allegations of misappropriating approximately $378,000 from his clients. The Securities and Exchange Commission (SEC) has filed a civil injunctive action against Bahgat in the United States District Court for the Southern District of New York, which could have significant implications for investors.
The Seriousness of the Allegation and Its Impact on Investors
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According to the SEC’s complaint, from December 2014 through September 2016, Bahgat allegedly accessed his clients’ brokerage accounts and transferred funds to accounts under his control. This misappropriation of client funds is a grave violation of the trust placed in investment advisors and can have devastating consequences for investors.
The Court’s Decision and Judgment
On May 17, 2023, the Court granted the SEC’s motion for a default judgment against Bahgat, finding that the Commission’s efforts to serve him with the complaint in Egypt satisfied due process requirements. Subsequently, on June 6, 2023, the Court entered a Final Judgment, which:
- Enjoined Bahgat from violating Sections 206(1) and 206(2) of the Advisers Act
- Ordered Bahgat to disgorge $378,021.97 in net profits gained from the alleged conduct
- Ordered Bahgat to pay $142,057.43 in prejudgment interest
- Imposed a civil penalty of $378,854 on Bahgat
Explaining the Allegation and FINRA Rule Violations
Investment advisors have a fiduciary duty to act in their clients’ best interests and to manage their funds responsibly. Misappropriating client funds for personal gain is a clear breach of this duty and violates FINRA rules and federal securities laws.
FINRA Rules Prohibiting Misappropriation of Client Funds
FINRA Rule 2150 prohibits the improper use of customer funds or securities, stating that no member or associated person shall make improper use of a customer’s funds or securities. Additionally, FINRA Rule 2010 requires members to observe high standards of commercial honor and just and equitable principles of trade in the conduct of their business.
The Importance of Advisor Integrity for Investors
Bahgat’s alleged actions underscore the importance of working with trustworthy and ethical financial advisors. Investors rely on their advisors to manage their hard-earned money and help them achieve their financial goals. When an advisor breaches this trust, it can have severe consequences for investors, both financially and emotionally.
Protecting Yourself from Investment Fraud
To safeguard against investment fraud, investors should be vigilant and watch for red flags, such as:
- Advisors who promise guaranteed returns or claim to have inside information
- Pressure to make quick investment decisions
- Difficulty accessing account statements or withdrawing funds
- Inconsistencies between verbal communications and written documents
Recovering Losses Through FINRA Arbitration
Investors who have suffered losses due to advisor misconduct may be able to recover their losses through FINRA arbitration. Haselkorn & Thibaut, a national investment fraud law firm with offices in Florida, New York, North Carolina, Arizona, and Texas, is currently investigating Tarek D. Bahgat and Gradient Securities, LLC.
With over 50 years of combined experience and a 98% success rate, Haselkorn & Thibaut has a proven track record of helping investors recover their losses. They offer free consultations and work on a contingency basis, meaning there are no fees unless they recover money for their clients.
If you believe you have been a victim of investment fraud or misconduct, contact Haselkorn & Thibaut at 1-800-856-3352 for a free consultation.
