SEC Charges Massachusetts Investment Adviser with Defrauding Clients

Litigation Release No. 25104 / June 1, 2021

Securities and Exchange Commission v. James K. Couture, Civil Action No. 1:21-cv-10908 (D. Mass. Filed June 1, 2021)

The Securities and Exchange Commission charged Massachusetts-based investment adviser James K. Couture with defrauding his advisory clients, including by misappropriating approximately $2.9 million from them.

The SEC's complaint, filed in federal court in Massachusetts, alleges that from approximately 2009 to December 2019, James K. Couture, while operating an investment advisory and brokerage business, fraudulently prompted his advisory clients to sell portions of their securities holdings in order to fund large money transfers to an entity that, unbeknownst to his clients, Couture owned and controlled. According to the complaint, for each transaction, Couture obtained client authorization by falsely claiming that the proceeds would be reinvested for the clients' financial benefit. In reality, Couture's alleged purpose in arranging these transactions was to divert the sale proceeds for his own benefit.

The complaint alleges that, in furtherance of his scheme, Couture lulled clients into believing that their sale proceeds had been reinvested by providing them with fabricated account statements. When clients requested withdrawals, Couture allegedly took assets from his other advisory clients to cover those withdrawals. According to the complaint, in order to hide this misappropriation, Couture transferred client money through a web of third-party accounts to disguise that he was misappropriating money from one client to replace funds he had previously stolen from another.

In a parallel action, the U.S. Attorney's Office for the District of Massachusetts announced criminal charges against Couture.

The SEC's complaint charges Couture with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, and seeks a permanent injunction from future violations of the securities laws, disgorgement and prejudgment interest, and a civil monetary penalty.

The SEC's case is being handled by Rory Alex, Robert Baker, Jennifer Cardello, William Donahue, and Richard Harper II of the SEC's Boston Regional Office. The SEC appreciates the assistance of the U.S. Attorney's Office for the District of Massachusetts, the Federal Bureau of Investigation, and the Internal Revenue Service.