A former LPL Financial registered broker-dealer and investment advisor defrauded his clients of about $2.9 million and used a portion of the money to buy a book of advisory clients from another investment advisor rep, according to a complaint by the Securities and Exchange Commission.
James K. Couture, 42, of Sutton, Mass., owned the Private Wealth Management Group (PWMG), which had offices in Worcester and Springfield. The firm, which employed eight people and provided investment advisory services and sold insurance, was not registered with the commission or any state regulator, the SEC said.
The complaint said that from about 2009 to December 2019, Couture, while operating PWMG, fraudulently prompted his advisory clients to sell portions or all of their securities holdings to fund large money transfers to an entity, Legacy Financial Group LLC, which, unbeknownst to his clients, was owned and controlled by Couture.
Couture faces criminal charges in a parallel action announced by the U.S. Attorney's Office for the District of Massachusetts.
The SEC complaint said Couture formed Legacy Financial Group (a third-party sub-advisor) in 2009 to “purchase, own and hold ownership interests in other companies.” Couture also owns and operates CWM Retirement Plan Services LLC, another third-party business that manages the administration of certain employee benefit and retirement plans, the complaint said.
The agency noted that Couture used CWM to create fake employee benefits, through which he could filter payments from one client to another and give the false impression that the payments were part of an employment relationship.
The SEC said Couture deceived his clients and persuaded them to authorize transactions, claiming that the proceeds would be reinvested for their financial benefit. Instead, Couture intended to divert the sale proceeds for his own use. According to the complaint, Couture tricked clients into believing that their sale proceeds had been reinvested by providing them with fabricated account statements.
The complaint said clients’ requests for withdrawals would be covered with borrowed assets from other clients’ accounts. Couture further hid the misappropriations by transferring the money through a web of third-party accounts to disguise that he was stealing from one client to replace funds he had previously stolen from another, the complaint said.
In one instance, the complaint said Couture repeatedly prompted a married couple, who became brokerage clients of his when he moved to LPL in 2009, to sell portions of their securities holdings to fund money transfers to Legacy Financial. The SEC said he directed them to sign withdrawal request authorizations that he had pre-filled for the issuance of three checks totaling $700,000 between September 2009 and February 2015.
The complaint said the sub-advisor was required to sell several of the clients’ security holdings for their accounts to meet the requested amounts for the checks. Couture deposited the money in Lagacy Financial Group’s bank account and proceeded to use it for his personal benefit. He spent a portion to expand his business by buying a book of advisory clients from another investment advisor representative, the complaint said.
The New Hampshire Department of State dissolved Legacy Financial Group in August 2013.
Couture was fired by LPL in June 2020, and the Financial Industry Regulatory Authority barred him in October 2020 for refusing to comply with its requests for information and documents related to the investigation of the alleged fraud.
The SEC's complaint charges Couture with violating the antifraud provisions of the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940. It seeks a permanent injunction from future violations of the securities laws, disgorgement and prejudgment interest, and a civil monetary penalty.