Stock Fraud Case Continues to Build after Stockbroker's Death

New London, CTA recent case of stockbroker fraud that was thought to have ended with the tragic suicide of the primary suspect in the case has not, in fact, stopped with his death.

It was last month that the late New London stockbroker Edwin F. Rachleff was linked to the disappearance of nearly $12 million from the New London Security Federal Credit Union. The missing funds triggered the eventual demise of the institution after the National Credit Union Administration declared insolvency. Rachleff jumped to his death from the roof of an apartment tower on the same day the credit union failed.

Now, the New London Day has revealed that Rachleff was accused of fraud in the alleged misappropriation of $7.5 million from one of his clients.

The basis of the alleged fraud is unclear.

Rachleff was employed as a broker by Wachovia and AG Edwards—two companies that have since been taken over by Wells Fargo. On October 2 the company received a complaint from an attorney through the Financial Industry Regulatory Authority (FINRA) on behalf of an unidentified client of misappropriation through fraud.

It should be noted that the fraud to which Rachleff has been allegedly linked is cloudy at best, considering that no details were forthcoming. Observers told the Day that "misappropriation through fraud" could mean anything from excessive trading in a client's account to siphoning money from an account for personal use.

"Any client of any broker who feels like he has been wronged somehow should go to the compliance officer of the firm first to try to get some satisfaction," said FINRA spokesman Herb Perone, referring to the complaint process.

A complaint that cannot be resolved through a brokerage firm moves along in the form of a complaint to FINRA. The complaint is reviewed, and if an investigation and/or enforcement is considered warranted, the complaint is referred to the appropriate division within FINRA.

Perone, in addressing the complaint process, was not speaking to the Rachleff case specifically. However, if an investigation uncovered wrongdoing on the part of Rachleff, a three-person stockbroker arbitration panel could order restitution from a brokerage firm on behalf of an investor who incurred unnecessary losses.

The stock fraud arbitration process usually takes about a year to complete.