Waltham Financial Advisor to Plead Guilty to Securities Fraud
BOSTON – A Waltham-based financial advisor has agreed to plead guilty in connection with defrauding his clients by engaging in a multi-year “cherry-picking” scheme.
Michael J. Breton, 52, the managing partner of an investment advisory firm, Strategic Capital Management, LLC (SCM), was charged in an Information with securities fraud.
It is alleged that from 2011 through at least July 2016, Breton, using a master brokerage account, regularly purchased shares in publicly-traded companies the day that those companies announced earnings from the previous quarter. Breton allegedly purchased shares in those companies shortly before the earnings announcements and then allocated the shares after the earnings announcements. Thus, Breton allocated the shares to one of his accounts or to the client accounts after knowing whether the company had announced positive or negative news about its earnings, which determined whether the trade was likely to be profitable in the short term. Throughout the scheme, Breton allocated more profitable trades to himself and allocated unprofitable trades to his clients, thereby stealing more than $1.3 million in potential profits from his clients.
“Investment advisory clients, by necessity, entrust their advisors with great discretion over their life savings,” said Acting United States Attorney William D. Weinreb. “As today’s charges demonstrate, when advisors abuse that trust—by stealing from their very own clients—they will be held criminally accountable.”
“Motivated by greed, Mr. Breton used his clients’ trust against them,” said Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division. “By making the conscious decision to place his own interests above theirs, his behavior undermined the financial security of hard-working individuals. The FBI will do everything it can to protect investors, while rooting out fraud like this.”
The securities fraud statute provides for a sentence of no greater than 25 years in prison, five years of supervised release and a fine of $5 million. Actual sentences for federal crimes are typically less than the maximum penalties. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.
Breton has agreed to plead guilty to securities fraud and pay forfeiture of $1,326,696. The U.S. Attorney’s Office has agreed to recommend a sentence of no greater than three years in prison.
The Securities and Exchange Commission today filed a parallel civil action. Breton has agreed to partially resolve the SEC’s claims by, among other things, agreeing to the entry of an SEC order permanently barring him from working in the securities industry.
Acting U.S. Attorney Weinreb and FBI SAC Shaw made the announcement today. The U.S. Attorney’s Office received valuable assistance from the Securities and Exchange Commission. Sarah E. Walters, Chief of Weinreb’s Economic Crimes Unit, is prosecuting the case.