Rule-breaking broker fired, selling other services

Target 8

GRAND RAPIDS, Mich. (WOOD) — A West Michigan financial planner, fired from a brokerage firm for taking loans from clients, continues to sell his retirement planning skills through invitation-only seminars.

“The worst thing you can do is end up in retirement thinking you have it all figured out and finding out that you don’t,” Jaime Westenbarger told a room of 20 or so prospective clients at a northeast Kent County restaurant Tuesday evening.

“I have an office downtown that you’re welcome to come to,” Westenbarger told the room.

What the guests likely didn’t know: the 42-year-old from Ada is focusing on retirement and asset protection planning because he can no longer sell, nor advise, clients on securities.

ALLEGATIONS OF MISAPPROPRIATIONS OF FUNDS

That’s because the broker dealer through which he was registered fired him for violating its rule against borrowing from clients.

Securities America, Inc, also sent a letter to Westenbarger’s clients at his former West Michigan firm, Forest Hills Financial, advising them to “carefully review” their account statements to “make sure that there has been no unauthorized activity.”

“Securities America Inc would like to inform you that Jaime Westenbarger’s affiliation with our firmed ended on August 14, 2019,” Matthew J. Kinsella wrote in the letter to Westenbarger’s clients.

“At this time, Mr. Westenbarger is the subject of an internal review involving allegations of misappropriation of funds from clients,” Kinsella, Vice President and Chief Compliance Officer at Securities America, continued.

The Nebraska-based firm declined comment when reached by Target 8.

“As a matter of policy, we do not publicly comment on legal or regulatory matters, nor do we publicly discuss individuals who are not affiliated with our firm,” Securities America wrote in an email.

The Securities Exchange Commission and FINRA, the agency that oversees investment brokers, refused to confirm or deny the existence of an investigation.

When Target 8 confronted Westenbarger after the seminar in a hallway outside the meeting room, he said he had never misappropriated any client funds and called any such suggestion “libelous.”

“I took a loan from a client and it’s fully disclosed,” said Westenbarger, who acknowledged he was fired from Securities America for committing a rules violation. “I’m not a bad guy. I’m a good person. I’ve worked in the community. I’ve helped a lot of people. I made a mistake.”

LOAN ‘AGREEMENT’ NOT DOCUMENTED

An attorney for one of the clients in question disputes that characterization.

“The people I represent say it was not a personal loan. It was meant as an investment,” Andrew Rodenhouse told Target 8 in an interview Wednesday.

“The allegation is there was money deposited into Forest Hills Financial that wasn’t put into any investment as it was supposed to be. Rather, according to him, he’s claiming it was a personal loan,” said Rodenhouse, who called Westenbarger’s loan explanation “dubious.”

Rodenhouse also pointed out that Westenbarger did not document the alleged loan agreement.

“I’ve never heard of anyone doing it,” said Rodenhouse, referring to an investment adviser borrowing money from a client. “(But) if you’re going to borrow money from a client, it needs to be well documented because there’s such a big conflict of interest, and, typically, if you were going to do it, it would come with a requirement of a compliance department internally at the firm that would make sure a third party looked at it to make sure it was all above-board and that all the parties were willing participants.”

None of that documentation and oversight occurred in the alleged loans Westenbarger said he took from clients with their knowledge and agreement in 2018.

WESTENBARGER USED $60,000 FOR BILLS

Westenbarger told Target 8 he planned to use the funds — $60,000 in one case — to buy some real estate.

“Last year was a bad year,” Westenbarger explained in an interview at News 8’s station the day after the seminar.

“I had a couple opportunities I wanted to take advantage of. I was frustrated with the process by which I was trying to get commercial loans or whatever. I had a client who was looking for more interest than he was getting in the bank and so I offered to pay him interest on a loan that was higher than what he would receive in his savings account,” he continued.

But it was just a month or so later, said Westenbarger, that his wife Hillary died by suicide in their Grand Rapids Township home after a long struggle with mental health problems. According to Kent County records, the couple had been separated for three to six months at the time of her death.

“The next couple of months were just complete chaos,” he recalled. “I tell people all the time, ‘Don’t make decision when you lose a loved one, give yourself time,’ but I didn’t have a choice. I had to make some decisions. We needed to move. We needed to keep my son in the school district and, you know, things happen.”

Instead of spending the $60,000 he said he borrowed on the real estate deal, Westenbarger said he instead spent it on “various different things.”

“I had to move. I had to handle a funeral. I didn’t work for months because I was trying to keep my kids safe and as happy as possible,” he said. “And honestly, if you’ve ever lost someone close to you, um, you know, most of last summer’s kind of a blur honestly.”

Westenbarger said he intends to pay all of the money back with the 6% interest he said he initially promised.

At the beginning of the interview at News 8, Westenbarger said he had borrowed from a client, who’d agreed to the loan.

By the end of the interview, he had admitted to borrowing funds from two clients and explained that, in one of the cases, it was the client’s power of attorney who agreed to the loan and signed the check.

“So if your angle is that the individual is not of sound mind, that individual did not make the decision,” Westenbarger explained. “Their power of attorney made the decision. The discussion was had with the power of attorney from the beginning because the client has not been able to make decisions for a couple of years.”

In the interest of full transparency, during the investigation of this case, it was discovered that a relative of one of the clients in question is employed by News 8. That employee directed Target 8 to the client’s attorney.

WESTENBARGER: ‘I BROKE THE RULE’

It’s unclear what, if any, penalties Westenbarger might face for borrowing from clients.

“I mean, I broke the rule. There are specific penalties for that depending on how (FINRA, the regulatory agency) feels on it,” he explained. “They can take away my (securities) license, they can suspend me, they can fine me. So it’ll depend on what they decide as they go through their investigation.”

FINRA refused to confirm or deny the existence of an investigation when reached by Target 8.

The agency did say that it regulates more than 626,000 individuals and nearly 3,600 firms. It says that in 2018, it issued 921 disciplinary actions, “not including cases we referred to other jurisdictions, or instances where we worked with firms to correct wrongdoing without taking a formal action.” That worked out to $6 million in fines and $25.5 million in restitution.

In the meantime, Westenbarger, who is still licensed to sell insurance in Michigan, can legally continue to advise people on non-security products like insurance, asset protection and retirement planning.

He no longer works for Forest Hills Financial, the West Michigan firm he founded in 2006.

“The company is being sold off, and I am no a part of it anymore,” explained Westenbarger.

As for any new clients, he said he will disclose the reason he can’t sell securities to each of them when they meet individually for initial planning sessions.

The educational seminar, he said, was not the place to make that disclosure.

“It’s not some massive cover-up. Nothing major. There’s not millions of dollars missing. It doesn’t involved misappropriations,” he said. “I mean, the internet provides all the information that anyone wants to look for if they search my name, so realistically, full disclosure is the only way to about doing it because all you’re going to end up with is somebody calling you later who looked it up anyway.”

Indeed, the online database lists Westenbarger’s recent rules violation, as well as complaints from three prior clients who said he sold them unsuitable investment products.

He denied the allegations.

HOW TO PROTECT YOURSELF

Experts advise you to use the brokercheck database to background your financial adviser, too.

“Every single registered representative in the country has a page on that, and you simply type up a person’s name and it will pull up a profile which would have, for instance, employment history, but the real information you should be looking at are the red flags that have been recorded on there,” explained Dan Broxup, an attorney with Mika Meyers in Grand Rapids.

Disclosures listed on brokecheck can include “customer complaints and arbitrations, regulatory actions, employment terminations, bankruptcy filings and certain civil or criminal proceedings they were part of,” according to the website.

Mika Meyers and other law firms put out investor alerts recently advising Westenbarger’s clients to consult attorneys before accepting potential offers of settlement from Securities America, Inc.

“In these situations, there’s usually some recourse for the investor,” Broxup explained to Target 8.

“Typically you’ll look to the firm with which they were registered because that firm will have an obligation to supervise their representatives… If this happened in the scope of their agency relationship with the brokerage firm then you can go after the brokerage firm to try to recover that money.”

That’s why it’s critical, advised Andrew Rodenhouse, that your financial adviser’s firm is reputable, licensed, and fully insured so it can step in and make you whole if your adviser violates rules.

“The big thing is making sure … the firm that (your adviser) is with — if this happens — can stand up and take responsibility for it, has the necessary insurance coverage to make sure you’re made whole and you’re not just out money,” Rodenhouse explained.

Copyright 2019 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Know something newsworthy? Report It!

News 8 Links