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Regulation and Compliance > Litigation

Ex-LPL Rep Pleads Guilty to Wire Fraud and Identity Theft

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What You Need to Know

  • The former LPL broker allegedly misappropriated about $2.9 million from multiple clients.
  • He was terminated from LPL in June 2020 and barred from the industry by FINRA in October 2020.
  • The DOJ and SEC filed parallel actions against him in Massachusetts late last month.

A former LPL Financial broker pleaded guilty on Friday to three counts of wire fraud and one count of aggravated identity theft after he allegedly misappropriated about $2.9 million from his clients, according to the Securities and Exchange Commission, the U.S. Justice Department and court documents.

As part of a plea agreement, James K. Couture, 42, of Sutton, Massachusetts will be incarcerated for a total of not less than 66 months and not more than 91 months.

He also agreed to 36 months of supervised release, restitution of at least $1.92 million or as determined by the court, a mandatory special assessment of $400 to be paid to the clerk of the court by the date of sentencing, an unspecified fine, and forfeiture of $2.87 million that will be returned to his victims.

Couture was a broker for LPL from 2009-2020, according to his report on the Financial Industry Regulatory Authority’s BrokerCheck website. He first became a registered broker in 2001, when he became a representative for Morgan Stanley, where he stayed for just one year. He then became a rep for New England Securities and Lincoln Financial Securities, each for three years, before joining LPL.

Couture also founded his own firm, The Private Wealth Management Group, in 2010, with offices in Springfield and Worcester, Massachusetts to provide investment advisory services and sell insurance products.

LPL terminated Couture on June 17, 2020, after he allegedly altered identifying information, account balances and distributions in a customer account statement, “maintained comingled customer funds” and used an unapproved email address, according to a disclosure on his report.

LPL did not immediately respond to a request for comment on Wednesday.

Without admitting or denying FINRA’s findings, Couture signed a FINRA letter of  acceptance, waiver and consent on Oct. 16, 2020, in which he agreed to be barred from associating with any FINRA member in any capacity. FINRA signed the letter on Oct. 21, 2020. He is no longer a registered broker or advisor, according to BrokerCheck.

More Details

The Justice Department filed criminal charges against Couture on June 1 in U.S. District Court for the District of Massachusetts.

In its action, DOJ pointed out that Couture also started a firm called Legacy Financial Group in New Hampshire in or about September 2009 and operated a third-party administrator of retirement plans that managed the retirement plan of a law firm based in Worcester.

Victims “A through F” were clients of the financial services company whose accounts Couture managed, DOJ said in its action, without identifying that firm by name as LPL.

In a parallel action, the SEC filed a complaint against Couture on the same date, in the same court, alleging he defrauded his advisory clients.

From about 2009 to December 2019, Couture, while operating his investment advisory and brokerage business, fraudulently convinced his advisory clients to sell portions of their securities holdings to fund large money transfers to an entity that, unknown to his clients, he owned and controlled, the SEC charged in its complaint.

According to the SEC complaint, for each transaction, Couture obtained client authorization by falsely claiming the proceeds would be reinvested for his clients’ financial benefit. In reality, however, his alleged purpose in arranging the transactions was to divert the sale proceeds for his own benefit, the SEC alleged.

To further his scheme, Couture “lulled clients into believing that their sale proceeds had been reinvested by providing them with fabricated account statements,” the SEC said Tuesday in announcing its complaint.

When clients requested withdrawals, Couture allegedly took assets from his other clients to cover the withdrawals, according to the SEC complaint. To hide that misappropriation, he transferred client money via a web of third-party accounts to cover up the fact that he was misappropriating money from one client to replace funds he had previously stolen from another, the SEC alleged.

Through his actions, Couture violated the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, the SEC alleged.

The SEC sought a permanent injunction from future violations of the securities laws, disgorgement and prejudgment interest, and a civil monetary penalty.

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