Top executives at Penson Financial Service are facing charges filed by the Securities and Exchange Commission (SEC). The SEC has charged four officials for their role in the improper authorization of margin loans and accused of improper accounting and disclosure failures.

According to a press release, Penson Financial Services provided nearly $100 million in margin loans that were secured by risky unrated municipal bonds. It is alleged that some of the loans to customers were used to fund a horse race track in Texas. The SEC further alleges that in the wake of the financial crisis, instead of accounting properly for the loan losses and disclosing the situation to Penson’s investors they extended more loans to customers. Consequently this violated federal margin regulations.

Penson was banking on the state of Texas changing gambling laws to allow slot machines at horse racetracks. The laws however did not change and Penson’s loan losses purportedly reached $60 million.

Philip A. Pedegraft, Penson’s co-founder and director of Penson Worldwide agreed to pay a $100,000 penalty and was barred from the securities industry.

Kevin W. McAleer, CFO of Penson Worldwide, agreed to pay a $25,000 penalty and is suspended for a year.

Thomas R. Johnson, director of Penson Worldwide and the company that operated the horse race track, agreed to a $25,000 penalty.

Charles W. Yancey, Penson’s president and CEO, agreed to a $25,000 penalty and a six month suspension.

The foregoing information, which is publicly available, is being provided by The White Law Group.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Vero Beach, Florida.

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