SEC Obtains Partial Summary Judgment Against Investment Adviser and Principal On Undisclosed Compensation Claims

Litigation Release No. 24633 / October 2, 2019

Securities and Exchange Commission v. Westport Capital Markets, LLC and Christopher E. McClure, Civil Action No. 3:17-cv-02064 (D. Conn., filed December 11, 2017)

On September 30, 2019, a federal district court in Connecticut granted partial summary judgment in the Securities and Exchange Commission's favor in the SEC's pending action against Westport Capital Markets, LLC, a Connecticut-based investment advisory firm, and its principal, Christopher E. McClure. The SEC's complaint alleges that the defendants breached their fiduciary duties and defrauded their advisory clients by repeatedly purchasing securities that generated significant amounts of undisclosed compensation, enriching themselves at their clients' expense. The complaint seeks injunctive relief, disgorgement of ill-gotten monetary gains plus interest, and penalties.

The court's order holds that defendants acted at least negligently when they failed to disclose their conflicts of interest, and that the SEC therefore is entitled to summary judgment on its claims that defendants violated Section 206(2) of the Investment Advisers Act of 1940 and that Westport Capital violated Section 206(3) of the Advisers Act, and McClure aided and abetted that violation. The court reserved for trial questions of material fact as to whether defendants acted intentionally, knowingly, or recklessly under the antifraud provisions of Section 206(1) of the Advisers Act, and as to whether defendants acted willfully under the antifraud provisions of Advisers Act Section 207.

In a separate order, the court denied without prejudice the defendants' motion to dismiss the SEC's disgorgement claim.

The SEC's ongoing litigation is being led by Michael Moran of the SEC's Asset Management Unit and Boston Regional Office and Senior Trial Counsel, Kathleen Shields.