The Certified Financial Planner Board of Standards is revoking a Waltham, Mass. advisor’s credentials after he allegedly defrauded clients out of $1.3 million.
The CFP Board announced on Thursday that it was revoking credentials from Michael J. Breton effective April 14 as an automatic response to a U.S. Securities and Exchange Commission order barring him from associating with any broker, dealer advisor or statistical rating organization.
On March 3, Breton pleaded guilty in federal district court in Massachusetts to one count of securities fraud in connection with the cherry-picking scheme. He is scheduled to be sentenced in that case in May.
In its initial civil complaint filed in January, the SEC alleged that Breton and his firm, Strategic Capital Management, allocated clients’ profitable trades to his own accounts, and unprofitable trades to client accounts, as he traded more than $100 million in securities via his firm, reaping $1.3 million in profits in the process.
The SEC says that Breton defrauded at least 30 clients as part of his scheme.
According to the SEC, Breton did not designate whether trades would allocate to his accounts or his client accounts until he had some information about whether the trades would be profitable.
Using the information, Breton allegedly “cherry-picked” profitable trades. When companies announced positive earnings that could lead to an increase in stock value, Breton “disproportionately” allocated trades to his own accounts, according to the SEC. When companies announced negative earnings, Breton would “disproportionately” allocate those trades to client accounts, the agency said.
The SEC alleges that Breton misled his clients and breached the fiduciary duty he owed to his clients. In addition to the industry bar and an order restraining Breton from any additional misconduct, the SEC’s complaint seeks payment of disgorgement and civil penalties.
Breton consented to being barred from the industry on March 15 as a partial judgment in the SEC’s civil case against him. A federal judge will decide whether to order monetary penalties against Breton at a later date.
Breton’s credentials have been suspended as a result of the CFP Board’s disciplinary rules, which require an interim suspension to be issued without a hearing when a CFP certification holder is convicted by a court or disciplined by another professional body.
Breton’s interim suspension will continue pending a CFP Board investigation and possible further disciplinary proceedings, the board said.