Waltham Investment Advisor Sentenced to Prison for Securities Fraud
BOSTON – The managing partner of a Waltham-based investment advisory firm was sentenced today in federal court in Boston in connection with a securities fraud scheme known as “cherry-picking” that netted over $1.3 million.
Michael J. Breton, 50, was sentenced by U.S. District Court Judge Allison D. Burroughs to two years in prison and two years of supervised release. Breton was also ordered to forfeit $1,326,696 and to pay restitution in the same amount. In March 2017, Breton pleaded guilty to one count of securities fraud.
Breton was the managing partner of Strategic Capital Management LLC – a
state-registered investment advisory firm that provided financial planning and portfolio management services to individuals and small businesses. In that capacity, Breton had authority to purchase and sell securities on his clients’ behalf and often did so using a master brokerage allocation account, which allowed him to place block trades and later allocate the trades to specific clients or other accounts.
Beginning in least in 2011 and continuing through July 2016, Breton used the master allocation account to regularly purchase shares in publicly-traded companies the day that those companies announced earnings from the previous quarter. Breton purchased those shares shortly before the earnings announcements were made, but waited to allocate the trades among accounts until after he knew whether the company’s earnings were positive or negative, which determined whether the trade was likely to be profitable in the short term. Throughout the course of 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.
In January 2017, the Securities and Exchange Commission (SEC) filed a parallel civil action against Breton and Strategic Capital Management. Breton 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 William D. Weinreb and Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division, made the announcement today. The U.S. Attorney’s Office received valuable assistance from the SEC. The case was prosecuted by Assistant U.S. Attorney Jordi de Llano, Deputy Chief of Weinreb’s Economic Crimes Unit.