U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23867 / June 23, 2017
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.)
Investment Adviser Sentenced in Cherry-Picking Scheme
On June 21, 2017, Massachusetts-based investment adviser Michael J. Breton was sentenced by U.S. District Judge Allison D. Burroughs 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 in a criminal action for illegal cherry-picking. Breton pled guilty to one count of securities fraud on March 3, 2017.
The SEC previously charged Breton and his firm Strategic Capital Management, LLC on January 25, 2017. The SEC’s complaint alleges that Breton and Strategic Capital defrauded clients out of more than $1.3 million. Breton allegedly placed trades through a master brokerage account and then allocated profitable trades to himself while placing unprofitable trades into the client accounts.
The SEC’s litigation against Breton and Strategic Capital continues. On February 17, 2017, the court entered partial judgments by consent against Breton and his firm, 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. The court will decide whether to order monetary sanctions at a later date. The SEC’s complaint seeks disgorgement plus prejudgment interest and civil penalties. In a separate proceeding. the SEC barred Breton from the securities industry on March 13, 2017.