A Massachusetts investment adviser charged with securities fraud has agreed to be banned from the securities industry after the Securities and Exchange Commission uncovered an illegal cherry-picking stock scheme.
The SEC filed fraud charges Wednesday in federal district court in Massachusetts against Michael J. Breton and his firm Strategic Capital Management, alleging they defrauded clients out of approximately $1.3 million.
From 2011 to last July, Mr. Breton, 52, allegedly placed trades through a master brokerage account and then allocated profitable trades to himself while placing unprofitable ones into client accounts.
Mr. Breton also agreed Wednesday to plead guilty to a securities fraud charge brought by the Justice Department and to pay a forfeiture of $1.3 million. The U.S. Attorney's Office has agreed to recommend a sentence of no greater than three years in prison.
Mr. Breton's attorney, Daniel Cloherty, said he had no comment on the matter.
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Mr. Breton allegedly purchased shares in publicly traded companies shortly before their earnings announcements and then allocated the shares after the earnings announcements, according to the Justice Department. He allocated the shares to one of his accounts or to client accounts after knowing whether the company had announced positive or negative news about its earnings, which determined whether the trade was likely to be profitable in the short term, according to the Justice Department.
Throughout the scheme, Mr. Breton allocated more-profitable trades to himself and unprofitable trades to his clients, thereby stealing more than $1.3 million in potential profits from clients, the Justice Department said in a statement.