Jul. 27—A former New London-based financial adviser has been ordered to pay more than $11 million in restitution to investors — including many on fixed incomes — who lost money on high-risk securities.
Thomas M. Chadwick of Chadwick & D'Amato, LLC, has 30 days to request a hearing to contest the allegations in a petition by the state's Bureau of Securities Regulation. Secretary of State David M. Scanlan issued the order.
If Chadwick doesn't request a hearing, a default judgment will be entered.
In addition to restitution, Chadwick was ordered to pay interest, a fine and investigation and enforcement costs.
Scanlan's order also bars Chadwick from being licensed to trade securities in New Hampshire.
The Bureau of Securities Regulation alleges that Chadwick committed investment adviser fraud that resulted in more than $11.1 million in client losses.
According to the Secretary of State's office, Chadwick's clients were primarily low- to moderate-risk investors, with most categorized as elderly and retired individuals relying on fixed-income disbursements.
According to the petition, between the fall of 2017 and December 2021, Chadwick invested most of his clients' funds into "a risky, complex security product" that was traded under the ticker symbol REML.
REML was composed of unsecured debt securities not backed by collateral.
REML's prospectus, which acts essentially as a warning label for the product, emphasized its volatility and stated investors could lose some or all their investment, especially if they held it in their accounts for longer than a month.
Additionally, the prospectus did not recommend the product to investors who require fixed income payments from their investment accounts, the petition states.
"Despite this, Chadwick frequently concentrated between 50 to 92 percent of his clients' total investment portfolio values on REML," Bureau of Securities Regulation officials said in a statement. "He held REML shares in their accounts for an average of 386 days."
REML's share price fell steadily from the mid-$20 range in late February 2020 to just $0.52 per share — its lowest value — on March 18, 2020.
At that time, securities regulators claim, Chadwick sold approximately 580,600 of his clients' REML shares.
"Less than six days later, Chadwick encouraged his clients to repurchase REML shares with the hope that REML would recover," securities officials said.
REML ultimately was called in December 2021, with shareholders receiving $5.98 per share, regulators said.