SEC Charges Investment Adviser for Failing to Disclose Conflicts
Litigation Release No. 24660 / November 6, 2019
Securities and Exchange Commission v. Bolton Securities Corporation d/b/a Bolton Global Asset Management, Civil Action No. 4:19-cv-40143 (D. Mass., filed November 4, 2019)
The Securities and Exchange Commission charged Bolton Securities Corporation d/b/a Bolton Global Asset Management, a registered investment adviser and broker-dealer based in Bolton, Massachusetts, with failing to disclose material conflicts of interest related to mutual fund 12b-1 fees and principal trading compensation generated from client investments.
According to the SEC's complaint, from August 2014 through at least the end of March 2018, Bolton Securities invested advisory clients in mutual fund share classes that charged 12b-1 fees, and which had an available share class without 12b-1 fees. Those 12b-1 fees were paid to an affiliated broker-dealer under common ownership and control with Bolton Securities, which in turn paid some of the fees to Bolton Securities' investment adviser representatives. Bolton Securities, however, did not disclose to clients that it purchased or held share classes for its clients that generated 12b-1 fees for Bolton Securities' affiliate when different share classes of the same mutual fund were available that did not carry 12b-1 fees. In addition, the SEC alleges that from November 2014 through at least March 2019, Bolton Securities used the principal trading account of the broker-dealer under common ownership and control to engage in self-dealing transactions with its advisory clients that generated principal trading compensation for the broker-dealer, without providing disclosure sufficient for clients to provide informed consent to the conflicted transactions, and without obtaining required client consent.
The Complaint alleges that Bolton Securities violated Sections 206(2), 206(3), and 206(4) of the Investment Advisers Act and Rule 206(4)-7 thereunder. The SEC seeks disgorgement of ill-gotten gains, prejudgment interest, financial penalties, and permanent injunctions against Bolton Securities.
The SEC's investigation was conducted by Asset Management Unit staff in Boston, including Robert Baker and Michael Moran. The litigation will be led by Senior Trial Counsel Richard Harper of the Boston Regional Office.