Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Wednesday, October 3, 2007

SEC Obtains Injunctive Relief Against Long Island Investment Adviser

The SEC announced today that on August 27, 2007, the United States District Court for the Eastern District of New York entered a preliminary injunction order ("Order") against Peter J. Dawson, BMG Advisory Services, Inc., and Ethan Thomas Co., Inc. The Order also freezes the Defendants' assets and the assets of Defendant Dawson's spouse, Lisa Dawson.

The Commission's complaint, filed on November 30, 2006, alleges that the Defendants misappropriated more than $2 million from at least seven investment advisory clients. Dawson, the president and sole shareholder of BMG and Ethan Thomas, targeted primarily elderly investors living on Long Island, and advised these clients to surrender existing variable annuity policies, mortgage their residences, and transfer the proceeds to Ethan Thomas for Dawson to manage through BMG, his investment advisory firm. In connection with Dawson's advisory services, Dawson made materially false and misleading statements to his clients about their investments and the use of their funds. Dawson promised between a 12 and 15 percent guaranteed return on each investment, and he assured clients that he would arrange to pay their mortgages and/or pay monthly "returns" on the investments. To the extent that the 12 to 15 percent return exceeded the client's mortgage obligation, Dawson promised that excess return would be accrued in the client's account. Rather than investing the money as promised, Dawson withdrew over $100,000 of his clients' funds for his own benefit. At the same time, Dawson failed to make investors' mortgage payments as he had promised. In October and November 2006, because some investors received notices that their mortgages were not being paid, they complained to Dawson, who refused to return their calls and closed BMG's office.

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