SEC Fines Irvine Brokerage in Comparator Stock Fraud

Former Irvine brokerage Del Mar Financial Services Inc., its owner and an associate were ordered Wednesday to pay $1.8 million for fraudulently promoting stock of Comparator Systems Corp., which billed itself as a maker of fingerprint identification devices.

SEC Administrative Law Judge Carol Fox Foelak ordered the Irvine brokerage and owner Kevin C. Dills to pay a total of $1.7 million in fines and illegal profit, and barred both from the securities industry, the Securities and Exchange Commission said.

Foelak also ordered Jai Chaudhuri, a Dills associate, to return $103,550 in illegal profit and to cease and desist from violating anti-fraud provisions of the federal securities laws, the SEC said. The principals could not be reached for comment.

Defendants can appeal a law judge’s ruling to the full SEC.

In 1995, Del Mar, Dills and Chaudhuri promoted stock of Newport Beach-based Comparator while Dills received kickbacks that he did not disclose to customers who bought the stock, the SEC said.

Chaudhuri obtained stock at discount prices and Dills sold it through Del Mar to targeted customers at market prices, the administrative law judge said. Dills assured customers he was getting a nominal commission on the sales but actually was getting “substantial” kickbacks, Foelak found.

Chaudhuri kicked back about $500,000 of the profit to Dills and kept $100,000, Foelak said. Del Mar’s trader and clearing firm were absolved of wrongdoing, the SEC said.