Close Close
Sign In
Newsletters
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards
Podcast Center Video Center Webcasts Resource Center Events
About ThinkAdvisor Contact Us Advertise With Us Asset & Logo Licensing Sitemap Terms of Service Privacy Policy Copyright © 2024 ALM Global, LLC. All Rights Reserved.
ThinkAdvisor

Regulation and Compliance > Federal Regulation > SEC

Advisor Gets 2 Years in Prison for Cherry-Picking Scheme

By Melanie Waddell

X
Your article was successfully shared with the contacts you provided.

A Massachusetts investment advisor has been sentenced to two years in prison and two years of supervised release for engaging in an illegal cherry-picking scheme.

Michael J. Breton was sentenced on June 21 by U.S. District Judge Allison D. Burroughs and was also ordered to pay $1.3 million in restitution to defrauded clients.

The SEC previously charged Breton and his firm Strategic Capital Management LLC on Jan. 25. Breton allegedly placed trades through a master brokerage account and then allocated profitable trades to himself while placing unprofitable trades into the client accounts, according to the complaint.

Cipperman Compliance Services notes that in January, the SEC included 10b-5 charges to allow for criminal prosecution, and the strategy appeared to be “successful as the defendant faces two years behind bars.”

Joseph Sansone, co-chief of the SEC Enforcement Division’s Market Abuse Unit, said in January that Breton “assured clients that he would put their interests first but did just the opposite, taking the firm’s most profitable trades for himself and dumping the losing trades on his clients.”

The SEC’s “probing analytical work will continue to root out investment advisors who subject their clients to cherry-picking.”

The Market Abuse Unit’s analysis of Breton’s trading showed that he defrauded at least 30 clients during a six-year period as outlined in the SEC’s complaint. 

Breton allegedly purchased securities for his own accounts and the client accounts through a block trading or master account on days when public companies scheduled earnings announcements. He typically delayed allocation of those trades until later in the day after learning the substance of the announcement, the complaint said.

Breton pleaded guilty to one count of securities fraud on March 3. In a separate proceeding the SEC barred Breton from the securities industry on March 13.

The SEC charged that the advisor used omnibus accounts and allocated trades at the end of the trading day. The agency has not yet imposed civil penalties, which will likely include “a significant financial penalty,” according to Cipperman.

— Check out SEC Makes Its First Bust in New Data-Driven Push on ThinkAdvisor.

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.