SEC Obtains Final Judgment Against Investment Adviser in Cherry-Picking Scheme
Litigation Release No. 24589 / September 10, 2019
Securities and Exchange Commission v. Strategic Capital Management, LLC and Michael J. Breton, No. 1:17-cv-10125 (D. Mass. filed Jan. 25, 2017)
United States v. Michael J. Breton, No. 1:17-cr-10017 (D. Mass.)
On September 6, 2019, U.S. District Judge Mark L. Wolf entered a final judgment against Massachusetts investment adviser Michael J. Breton in an SEC case that charged Breton with defrauding clients out of more than $1.3 million.
On January 25, 2017, the SEC charged Breton and his firm Strategic Capital Management, LLC 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. On February 17, 2017, the court entered partial judgments by consent against Breton and Strategic Capital, enjoining them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, as well as Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. On March 13, 2017, Breton was barred by the Commission from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization. In a parallel criminal case, Breton pled 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.
The final judgment in the SEC's case orders Breton to pay disgorgement and prejudgment interest totaling $1,326,696. His payment obligation is deemed satisfied by entry of the restitution order entered against him in the parallel criminal case.
The SEC's investigation was conducted by Caitlyn M. Campbell, Eric Forni, David Makol, and Michele T. Perillo of the Market Abuse Unit in the Boston Regional Office with assistance from John Rymas of the Market Abuse Unit and Stuart Jackson and Raymond Wolff in the Division of Economic and Risk Analysis. The SEC appreciates the assistance of the FBI and the U.S. Attorney's Office for the District of Massachusetts.