The SEC announced Tuesday that U.S. District Judge Mark L. Wolf has entered a final judgment against Massachusetts investment advisor Michael J. Breton in an SEC case that charged Breton with defrauding clients out of more than $1.3 million. The final judgment orders Breton to pay disgorgement and prejudgment interest totaling $1,326,696.
In January of 2017, the SEC charged Breton and his firm, Strategic Capital Management, with fraud for engaging in a cherry-picking scheme whereby Breton placed trades through a master brokerage account and then allocated profitable trades to himself and unprofitable trades to client accounts. According to the SEC complaint, Breton, who had discretion over his clients' accounts, bought shares of companies in an omnibus account just before those firms released earnings and then allocated the shares to either his account, if the earnings led to a higher stock price, or to client accounts if the earnings were a dud.
Between 2010 through 2013, Breton made approximately $850,000 in unrealized overnight profits on the purchases on earnings announcement days, while he would have lost $1,500 had he matched his clients' rate of return, according to the SEC. In the following three years, Breton's trades earned him more than $520,000 in unrealized gains, while his clients' returns would have earned him just $40,000, the SEC said.
In March of 2017, Breton was barred by the SEC from association with any broker, dealer, investment advisor, municipal securities dealer, municipal advisor, transfer agent or nationally recognized statistical rating organization.
In a parallel criminal case, Breton pleaded guilty and was sentenced to two years in prison, two years of supervised release, and ordered to forfeit $1,326,696 and to pay restitution in the same amount.