Complaint,Petition: Mds Wealth Advisors, Llc vs. Steven Michael Diamond

On May 12, 2022 a Complaint,Petition was filed involving a dispute between Mds Wealth Advisors, Llc, and Steven Michael Diamond, for Contract / Business Cases in the District Court of Berkshire County.

Preview
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

5/13/2022
5/13/2022
5/13/2022
COMMONWEALTH OF MASSACHUSETTS

BERKSHIRE SUPERIOR COURT DEPT.
CIVIL ACTION NO.

MDS WEALTH ADVISORS, LLC,

Plaintiff,
v.

STEVEN MICHAEL DIAMOND,

Defendant.

COMPLAINT

Plaintiff, by and through its attorneys, Cohen Kinne Valicenti & Cook LLP, for its

complaint against defendant, states as follows:

PARTIES

1. Plaintiff MDS Wealth Advisors, LLC (“MDS” or “Plaintiff”), is a

Massachusetts limited liability company with a principal place of business at 1166 Main

Street, Williamstown, Massachusetts.

2. Defendant Steven Michael Diamond (“Diamond” or “Defendant”) is an

individual residing at 462 Henderson Road, Williamstown, Massachusetts.

BACKGROUND

3. MDS is wealth management company that has provided investment advice to

individuals and businesses since 2014.

278125_2
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

4. The wealth management industry is extremely competitive, and the barriers to

entry are fairly low. There are often dozens or more companies competing for the same clients.

5. To succeed, MDS spent years and devoted substantial money and resources,

among other things, to develop proprietary and confidential investing methods and strategies,

and to develop and cultivate its client base.

6. In or about June of 2016, MDS hired Diamond as an investment adviser

representative (“IAR”) to provide investment advice to MDS’s clients.

7. In connection with his employment, Diamond registered as an IAR, as required

under the Massachusetts Uniform Securities Act, Mass. Gen. Laws c. 110A (the “Act”), and

regulated by the Securities Division of the Office of the Secretary of the Commonwealth of

Massachusetts (the “Division”).

8. In connection with his employment for MDS, Diamond signed an Employment

Agreement (“Employment Agreement”) and a Non-Competition, Non-Solicitation, Non-

Disclosure and Inventions Agreement (“Non-Compete Agreement”), which are attached

hereto as Exhibits A and B respectively.

9. During his employment, Diamond received extensive training and supervision

from MDS to learn about MDS’s services, investment strategies and information, research

and development efforts, competitive intelligence, target lists and data on existing and

prospective clients.

10. Armed with the knowledge he learned from MDS, Diamond was provided

significant and often exclusive access to MDS’s existing and potential clients, and was

entrusted to develop and maintain meaningful relationships with MDS’s key clients and

contacts.

2
278125_2
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

11. MDS entrusted Diamond as its employee to work with its private individual

and business clients, which MDS has developed over years.

12. In December 2020, after approximately four-and-a-half years of working for

MDS, Diamond abruptly submitted his letter of resignation.

13. According to his letter, Diamond decided to resign in order to pursue a more

lucrative position, although he offered MDS no additional details.

14. Unknown to MDS at the time, prior to his resignation, Diamond had begun

performing outside business activities and using MDS’s proprietary information in violation

of the Employment Agreement, the Non-Compete, and his duties as an employee to MDS.

15. Diamond’s registration as an IAR terminated on December 31, 2020, and he

never renewed it or applied for any other form of securities industry registration.

16. Upon leaving MDS, Diamond decided to steal MDS’s clients and began

operating an under-the-table investment advisory business free from the prying eyes of

regulators to service those clients.

17. Since leaving MDS, Diamond has continued to receive payment from many of

MDS’s private individual and business clients in exchange for advising them on securities

investments or for providing discretionary management of securities accounts.

18. Diamond presented his clients with invoices and investment advisory

agreements bearing the name, “Diamond36 Asset Management, LLC” (“Diamond36”).

19. Diamond36, purportedly based in Massachusetts, is not a real limited liability

company, or any other type of registered business entity for that matter; it is an entirely

fictitious construct that Diamond invented in order to dupe MDS’s clients.

3
278125_2
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

20. In addition to misrepresenting the existence of Diamond36 as a Massachusetts

limited liability company, the investment advisory agreements that Diamond presented to his

clients falsely claimed that Diamond36 was in the process of registering as an IA and

misleadingly suggested that Diamond himself was already a registered securities professional.

21. Diamond’s conduct came under scrutiny of regulators and, in the course of

investigating Diamond, the Division issued a subpoena requiring him to testify under oath

before the Division.

22. During his testimony, Diamond misrepresented the nature of the services that

he provides to clients now that he is no longer registered as an IAR. Namely, Diamond

testified that he merely places securities trades in his clients’ brokerage accounts at their

direction and that he does not offer any advice as to which trades to place. The reality is that

multiple former MDS clients, including those located in Massachusetts, paid Diamond fees

during 2021 as compensation for discretionary management of their securities brokerage

and/or retirement account.

23. Diamond’s conduct resulted in an administrative complaint (“Administrative

Complaint”) commenced by the Division, which seeks, among other things, an order

permanently barring Diamond in Massachusetts from registering as, associating with, or

acting as (i) a broker-dealer; (ii) a broker-dealer agent; (iii) an investment adviser; (iv) an

investment adviser representative; (v) a Securities and Exchange Commission registered

investment adviser; (vi) an investment adviser exempted from registration; (vii) a person

relying on an exclusion from the definition of “broker-dealer” or “investment adviser” in any

capacity; (viii) an issuer; (ix) an issuer-agent; or (x) a partner, an officer, a director, or a

4
278125_2
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

control person of any of the foregoing, and imposing an administrative fine upon Diamond.

A copy of the Administrative Complaint is attached hereto as Exhibit C.

24. As a result of Diamond’s breaches of the Employment Agreement and Non-

Compete Agreement, MDS incurred lost revenue in 2021 of at least $151,549.62. The

consequential damages calculated as a result of lost revenue over time is at least $757,748.20.

COUNT I
BREACH OF CONTRACT
(Employment Agreement)

25. Plaintiff repeats and realleges each allegation set forth herein.

26. By the conduct alleged herein, Defendant breached the Employment

Agreement.

27. These breaches proximately caused damages to Plaintiff in an amount to be

determined at trial.

COUNT II
BREACH OF CONTRACT
(Non-Compete Agreement)

28. Plaintiff repeats and realleges each allegation set forth herein.

29. By the conduct alleged herein, Defendant breached the Non-Compete

Agreement.

30. These breaches proximately caused damages to Plaintiff in an amount to be

determined at trial.

COUNT III
BREACH OF THE IMPLIED COVENANT OF GOOD FAITH
AND FAIR DEALING

31. Plaintiff repeats and realleges each allegation set forth herein.

5
278125_2
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

32. The agreements between Plaintiff and Defendant contained an implied

covenant of good faith and fair dealing.

33. Defendant violated the implied covenant of good faith and fair dealing with

conduct including, but not limited to, the allegations set forth in this complaint.

34. As a result of this conduct, Plaintiff has been denied the bargained for benefits

of the contracts.

35. These breaches proximately caused damages in an amount to be determined at

trial.

36. Defendant’s actions were intentional, reprehensible, and egregious, and an

award of punitive damages is warranted.

COUNT IV
BREACH OF FIDUCIARY DUTY AND DUTY OF LOYALTY

37. Plaintiff repeats and realleges each allegation set forth herein.

38. Plaintiff placed Defendant in a position of trust and confidence within its

business by giving him access to MDS’s confidential information, business methods,

techniques, strategies, means of operation, customer lists and other trade secrets, as well as

access to MDS’s clients.

39. Defendant owed a duty of good faith and loyalty to MDS in carrying out his

duties while employed with MDS.

40. By and through his Employment Agreement and Non-Compete Agreement,

Defendant’s duty of good faith and loyalty continued after his termination from MDS,

including the duty not to divert business from MDS and the duty not to exploit to MDS’s

detriment confidential or proprietary information obtained during his employment with MDS.

6
278125_2
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

41. Defendant breached his duty of good faith and loyalty to MDS by misusing

MDS’s confidential information and misappropriating MDS’s trade secrets directly or

indirectly to compete unfairly with MDS.

42. Defendant’s breaches of his duty of good faith and loyalty has caused MDS

continuing and irreparable harm, including harm to its reputation, goodwill, and customer

relationships, and damages in the form of lost commission, referrals and other business

opportunities.

43. Defendant’s unlawful conduct also has caused MDS to expend substantial

resources combating his unfair and unlawful conduct, cooperating with the Division

investigation, and protecting its confidential and proprietary information.

44. MDS is entitled to damages from Diamond and injunctive relief, as well as all

other remedies provided under law.

COUNT V
TORTIOUS INTERFERENCE WITH
ADVANTAGEOUS AND/OR CONTRACTUAL RELATIONSHIPS

45. Plaintiff repeats and realleges each allegation set forth herein.

46. As a result of many years of effort, the excellent quality of services and the

specialization of its services to fit specific clients, Plaintiff has developed economic

relationships with its clients.

47. Defendant was aware of and has intentionally interfered with Plaintiff’s

economic relationships, without justification, and by the utilization of improper means,

including, inter alia, by using confidential information and taking other unlawful actions to

the benefit of Defendant and to obtain an improper competitive advantage.

7
278125_2
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

48. Defendant’s conduct constitutes intentional and improper interference with

contractual and advantageous relationships with prospective clients and others.

49. As a consequence of the foregoing, Plaintiff has suffered damages, and will

continue to suffer, irreparable harm and loss.

COUNT VI
UNFAIR COMPETITION

50. Plaintiff repeats and realleges each allegation set forth herein.

51. The foregoing acts of Defendant constitute unlawful conduct, unfair trade

practices, and unfair competition because he has misappropriated the goodwill of Plaintiff and

the benefit of the skill and funds expended in the development of the confidential information.

52. Plaintiff has suffered, is suffering and will continue to suffer damages and

irreparable harm as a result of Defendant’s activities, including a diversion of revenue, assets

and clients, and the lessening of the goodwill residing in Plaintiff’s business.

COUNT VII
UNFAIR AND DECEPTIVE PRACTICES

53. Plaintiff repeats and realleges each allegation set forth herein.

54. Defendant is engaged in trade and commerce in Massachusetts.

55. Defendant’s conduct as set forth above, constitutes unfair and deceptive acts

or practices in trade or commerce that violate Mass. Gen. L. c. 93A § 11.

56. Defendant’s unfair and deceptive acts or practices, perpetrated in

Massachusetts, proximately caused Plaintiff to suffer monetary damages.

8
278125_2
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

WHEREFORE, Plaintiffs request that this Court enter judgment as follows:

a. Against Defendants in an amount to be determined including punitive damages,
multiple damages, interest, and reasonable costs and attorneys’ fees incurred in
connection with this matter;

b. Entering appropriate injunctive relief and orders; and

c. Granting such further relief as the Court finds equitable and just.

PLAINTIFFS DEMAND A TRIAL BY JURY ON ALL ISSUES SO TRIABLE.

Dated: May 12, 2022 Plaintiffs,

By Their Attorneys,

/s/ Christopher M. Hennessey
Christopher M. Hennessey (BBO# 654680)
COHEN KINNE VALICENTI & COOK LLP
28 North Street, 3rd Floor
Pittsfield, Massachusetts 01201
Telephone: (413) 443-9399
Facsimile: (413) 442-9399
Email: chennesseyi@cohenkinne.com

9
278125_2
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

EXH IBIT A
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

EXH IBIT B
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

EXH IBIT C
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

COMMONWEALTH OF MASSACHUSETTS
OFFICE OF THE SECRETARY OF THE COMMONWEALTH
SECURITIES DIVISION
ONE ASHBURTON PLACE, ROOM 1701
BOSTON, MASSACHUSETTS 02108

)
IN THE MATIER OF: )
)
STEVEN MICHAEL DIAMOND, ) Docket No. E-2022-0003
)
RESPONDENT. )
)

ADMINISTRATIVE COMPLAINT

I. PRELIMINARY STATEMENT·

The Securities Division of the Office of the Secretary of the Commonwealth of

Massachusetts (the "Division") files this Administrative Complaint (the "Complaint") to

commence an Adjudicatory Proceeding against Steven Michael Diamond ("Diamond" or

"Respondent") for violations of the Massachusetts Uniform Securities Act, Mass. Gen.

Laws c. 11OA (the "Act"). The Division alleges that Respondent operated an umegistered

investment advisory business in Massachusetts, made false and misleading representations

in advisory agreements and invoices in order to deceive clients as to the legitimacy and
I

legal status of that business, made materially false statements while testifying under oath

before the Division, and willfully disobeyed a subpoena from the Division.

The Division seeks a Final Order: (1) finding as fact all allegations set forth in

Sections IV through VI, inclusive, of this Complaint; (2) concluding that Respondent

violated the Act as alleged in Section VII of this Complaint; (3) finding that all of the

sanctions and remedies requested herein are in the public interest and necessary for the

protection of Massachusetts investors; (4) requiring Respondent to permanently cease and

1
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

. desist from further conduct in violation of the Act; (5) censuring Respondent; (6) requiring

Respondent to provide a verified accounting of all proceeds which were received as a result

of the wrongdoing, along with the full name, address, telephone number, and e-mail

address of each client who contributed any portion of those proceeds; (7) requiring

Respondent to disgorge all profits and other direct or indirect remuneration received as a

result of the wrongdoing; (8) permanently barring Respondent in Massachusetts from

registering as, associating with, or acting as (i) a broker-dealer; (ii) a broker-dealer agent;

(iii) an investment adviser; (iv) an investment adviser representative; (v) a Securities and

Exchange Commission registered investment adviser; (vi) an investment adviser exempted

from registration; (vii) a person relying on an exclusion from the definition of "broker

dealer" or "investment adviser" in any capacity; (viii) an issuer; (ix) an issuer-agent; or (x)

a partner, an officer, a director, or a control person of any of the foregoing; (9) imposing

an administrative fine upon Respondent in an amount and upon such terms and conditions

as the Director of the Division (the "Director") may determine; and (10) taking any such

further action which may be necessary or appropriate in the public interest and for the

protection of Massachusetts investors.

II. SUMMARY

In December 2020, after four-and-a-half years of working as an investment adviser

representative (an "IAR") of MDS Wealth Advisors, LLC ("MDS") in Williamstown,

Massachusetts, Diamond abruptly submitted his letter of resignation. According to his

letter, Diamond decided to resign in order to pursue a more lucrative position, although he

offered his soon-to-be former employer no additional details. Diamond's registration as an

2
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

IAR terminated on December 31, 2020, and he never renewed it or appli d for any other

form of securities industry registration.

Instead of continuing to work in the securities industry in a registered capacity,

Diamond decided to flout the law and began operating an under-the-table investment

advisory business free from the prying eyes of regulators. Since leaving MDS, Diamond

has continued to receive payment from private individuals and businesses in exchange for

advising them on securities investments or for providing discretionary management of

securities accounts. Many of those individuals had been Diamond's clients at MDS whom

he poached upon leaving the firm. Having worked as a registered IAR of multiple firms for

roughly twelve years of his life, Diamond knew that he was breaking the law, but that did

not deter him.

Although Diamond sought to subvert the securities laws designed to protect

investors, he knew that he could attract and retain more clients if his work as an investment

adviser (an "IA") had some imprimatur oflegitimacy. To that end, Diamond presented his

clients with invoices and investment advisory agreements bearing the name, "Diamond36

Asset Management, LLC" ("Diamond36"). Diamond36, purportedly based in

Massachusetts, is not a real limited liability company, or any other type of registered

business entity for that matter; it is an entirely fictitious construct that Diamond invented

in order to dupe his clients. In addition to misrepresenting the existence of Diamond36 as

a Massachusetts limited liability company, the investment advisory agreements that

Diamond presented to his clients falsely claimed that Diamond36 was in the process of

registering as an IA and misleadingly suggested that Diamond himself was already a

registered securities professional.

3
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

In the course of investigating Diamond, the Division issued a subpoena requiring

him to testify under oath before the Division. During his testimony, Diamond

misrepresented the nature of the services that he provides to clients now that he is no longer

registered as an IAR. Namely, Diamond testified that he merely places securities trades in

his clients' brokerage accounts at their direction and that he does not offer any advice as to

which trades to place. The reality is that multiple clients, including those located in

Massachusetts, paid Diamond fees during 2021 as compensation for discretionary

management of their securities brokerage and/or retirement accounts.

.Following his on-the-record testimony, the Division issued a subpoena to Diamond

requiring him to produce information and documents related to his business activities since

leaving MDS.· Despite multiple accommodations, Diamond never pro,duced any

information or materials responsive to the Division's subpoena. The Division repeatedly

called and e-mailed him throughout the several weeks that followed, but received no

meaningful response. The Division now brings this action which is necessary and

appropriate in order to alert investors to Diamond's illegal practices, obtain compensation

for those clients whom he deceived, and preve_nth im from committing future securities

related misconduct in Massachusetts.

III. JURISDICTION AND AUTHORITY

1. The Division has jurisdiction over matters relating to securities pursuant to the

Act, codified at Massachusetts General Laws Chapter 11OA.

2. The Division brings this action pursuant to the authority conferred upon the

Division by Sections 407A, 412, and 414 of the Act, which empower the Division to

conduct an Adjudicatory Proceeding to enforce the provisions of the Act and the

4
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

regulations promulgated thereunder at 950 Code Mass. Regs. 10.01-14.413 (the

"Regulations").

3. The Division files this Complaint in accordance with Section 10.06 of the

Regulations.

4. The Division reserves the right to move to amend this Complaint pursuant

to Section 10.06 of the Regulations.

5. The Division reserves the right to bring additional Administrative Complaints to

reflect information discovered during its current and ongoing investigation into this matter.

IV. RELEVANT TIME PERIOD

6. Except as otherwise expressly stated, the conduct described herein occurred during

the approximate time period of December 31, 2020 to present, inclusive (the

"Relevant Time Period").

V. RESPONDENT

7. Steven Michael Diamond ("Diamond") is an individual with a last known address

in Williamstown, Massachusetts. He has a Financial Industry Regulatory Authority

Central Registration Depository ("CRD") number of 5246020.

VI. STATEMENT OF FACTS

A. Background

8. Diamond first registered in Massachusetts as an investment adviser representative

(an "JAR") on November 14, 2006.

9. The investment adviser (an "IA") that employed Diamond later re-registered under

a different CRD number, and on October 18, 2007, Diamond's JAR registration transferred

over.

5
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

10. On January 1, 2012, Diamond voluntarily terminated his employment with the IA.

11. On June 7, 2016, Diamond once again became registered in Massachusetts as an

IAR, this time under an IA called MDS Wealth Advisors, LLC ("MDS").

12. In December 2020, Diamond abruptly submitted his letter of resignation to

the President ofMDS.

13. At the time of his resignation, Diamond was a Senior Vice President & Portfolio .

Manager ofMDS.

14. In his letter of resignation, Diamond stated that he had decided to leave MDS in

order to pursue a more lucrative position.

15. On December 31, 2020, Diamond's registration as an IAR terminated m

Massachusetts.

B. Diamond Provided Unregistered Investment Advice in Massachusetts under
the Name of a Fictitious Business Entity and Furnished Fraudulent Documents
to Clients in Order to Give His Activities the Appearance of Legitimacy.

16. Diamond has not been registered as an JAR (or as a broker-dealer agent) in any

jurisdiction since December 31, 2020.

17. Despite no longer being registered in the securities industry in any capacity,

Diamond nonetheless began operating an investment advisory business out of his home in

Williamstown, Massachusetts under the name of a fictitious business entity that he called,

"Diamond36 Strategic Asset Management, LLC" ("Diamond36").

18. Soon after Diamond left MDS, several of the firm's clients to whom Diamond had

previously provided services informed the firm's President that they would be taking their

business elsewhere.

6
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

19. Despite having signed a non-compete agreement with MDS, Diamond continued

to provide investment advisory services to the aforementioned clients.

i. Client 1, Client 2, and Client 3

20. "Client l" is an individual resident of Iowa who received discretionary brokerage

and retirement account management services from Diamond during the Relevant Time

Period.

21. "Client 2" is an individual resident of Iowa who received discretionary brokerage

and retirement account management services from Diamond during the Relevant Time

Period.

22. Client 1 and Client 2 have been married to one another throughout the entirety of

the Relevant Time Period.

23. "Client 3" is an Iowa nonprofit foundation operated by Client 1 that received

discretionary brokerage account management services from Diamond during the Relevant

Time Period.

24. Client 1 learned about Diamond through an advertisement in a monthly publication

and subsequently arranged to have MDS manage the investments in the respective

securities accounts of Client 1, Client 2, and Client 3.

25. As an IAR of MDS, Diamond provided discretionary management services to the

following four (4) accounts connected to Client 1, Client 2, and Client 3:

• Client 1 and Client 2's joint brokerage account ("Client 1 & Client
2's Joint Account");
• Client 1's individual retirement account (an "IRA") ("Client 1's
IRA");
• Client 2's IRA ("Client 2's IRA"); and
• Client 3's brokerage account ("Client 3's Account").

7
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

26. As of September 30, 2020, the total combined assets of Client 1, Client 2, and

Client 3's respective accounts equaled $630,590.04.

27. When Diamond left MDS, Client 1, Client 2, and Client 3 left as well.

a. Diamond Created and Presented an Investment Advisory
Agreement to Client 1 and Client 2 that Contained Fraudulent
Misrepresentations about the Legal Status of His Business.

28. On May 3, 2021, Client 1 and Client 2 signed a document entitled, "Investment

Advisory Agreement" (the "Agreement"), which Diamond had presented to them after he

resigned from MDS.

29. Diamond created the Agreement himself, the preamble to which read:

This Investment Advisory Agreement ("Agreement") is between the
undersigned ("Client") and Steven M. Diamond of Diamond36 Strategic
Asset Management, LLC (Investment Adviser, CRD#5246020), a
Massachusetts limited liability company ("DSAM"), with its principal place
of business [in] ... Williamstown, Massachusetts. Subject to the terms and
conditions below, Client appoints DSAM as investment advisor with
discretion to invest and re-invest the assets held in Client's investment
account(s) under management by DSAM (collectively, the "Account").

30. Diamond36 is not a Massachusetts limited liability company, and it has never

been organized or otherwise registered as any type of business entity in any jurisdiction.

31. Diamond has never been registered as an IA.

32. At the time when he presented the Agreement to Client 1 and Client 2, Diamond

was not registered as an IAR (or as a broker-dealer agent) in any jurisdiction.

33. Section 1 of the Agreement provided:

1. Investment Advisory Services. DSAM will provide investment
supervisory services for Client's Accounts. DSAM will direct, in its
discretion and per [C]lient's investment objectives, the purchase, sale,
investment and reinvestment of registered investment companies (including
mutual funds and exchange-traded funds), cash, and other investments in
Client's Account.

8
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

(Emphasis in original).

34. Section 3 of the Agreement identified a broker-dealer as the custodian of Client 1

and Client 2's account assets.

35. Section 10 of the Agreement provided:

10. Advisory Fees: Client will pay in advance an advisory fee to
DSAM at the beginning of each calendar quarter based upon the value of
the assets in Client's Account at the inception of the account and, thereafter,
as of the end of the previous quarter.

(Emphasis in original).

36. On the fee table included in Section 10 of the Agreement, Diamond handwrote,

"Starting July 1st[,] 2021."

37. Section 13 of the Agreement provided:

13. Disclosure Statement: Client understands DSAM is in the
process of formerly [sic] submitting Registered Investment Advisory (RIA)
applications per the appropriate state & federal guidelines. Once the RIA
application process is completed, copies of the DSAM Form ADV Part II
Disclosure Statement (including its Privacy Statement) will be forward [sic]
immediately.

(Emphasis in original).

38. Diamond36 has always been a fictitious business entity, and thus, could not

have been in the process of submitting Form ADV to any jurisdiction.

39. Diamond has not filed an application for registration, either on behalf of himself or

on behalf of Diamond36, with any securities regulator during the Relevant Time Period.

b. During the Relevant Time Period, Diamond Traded Securities in
Client 1, Client 2, and Client 3's Respective Accounts Pursuant to
His Discretionary Authority under the Agreement.

40. Client 1 gave Diamond the broker-dealer website login credentials in order to

place trades in Client 1, Client 2, and Client 3's respective accounts.

9
Date Filed 5/12/2022 3:41 PM
Superior Court - Berkshire
Docket Number

41: On October 6, 2021, Diamond logged into the broker-dealer's website using the

credentials he received from Client 1 and sold thirty-five (35) shares of ARK Innovation

ETF ("ARKK") held in Client 2's IRA.

42. On October 6, 2021, while logged into the broker-dealer's website, Diamond

bought ninety-four (94) shares of VanEck Morningstar Wide Moat ETF ("MOAT") for

Client 2's IRA.

43. On October 6, 2021, while logged into the broker-dealer's website, Diamond sold

202.0746 shares of Invesco Wilde

Case Info

Judge

John A. Agostini Track Judge’s New Case

Case No.

(Subscribe to View)

Document Filed Date

May 12, 2022

Case Filing Date

May 12, 2022

County

Parties

For full print and download access, please subscribe at https://www.trellis.law/.

Complaint,Petition: Mds Wealth Advisors, Llc vs. Steven Michael Diamond

Preview

Related Topics

Case Info

Parties