The complaint also alleged "that from November 2014 through at least March 2019, Bolton Securities used the principal trading account of [Bolton Global Capital] to engage in self-dealing transactions with its advisory clients that generated principal trading compensation for the broker-dealer" and failing to disclose this to clients. The deals involved more than $325 million worth of fixed-income securities and earned $505,000 for one broker who was under common control of both companies, the complaint said.
A Bolton Securities executive said the SEC charges were unwarranted and that the firm plans to fight them in court.
"Contrary to the allegations in the complaint, the firm believes that it made appropriate disclosures of all conflicts of interest throughout the relevant time period and that the vast majority of the mutual fund positions in question were purchased at the client’s previous investment firm," Steven C. Preskenis, Bolton Securities president and general counsel, said in an email. Preskenis went on to argue that the enforcement action has no basis in law.
The SEC complaint said that Bolton Securities argued in a written response to the agency that it fulfilled its obligations in a 2014 disclosure that stated “a portion of fees charged by mutual fund companies (trails) are distributed to adviser agents and therefore also represent a potential conflict of interest.” Bolton Securities also denied that it had a duty to disclose the availability of non-12b-1 shares to advisory clients whose mutual fund holdings had been transferred in from other advisory firms, the SEC said.
"From Bolton Securities’ asserted perspective, it was acceptable to conduct annual account reviews that disclosed disparate treatment of certain clients who received the financial benefit of being invested in Non 12b-1 Shares, but remain silent about the availability of those share classes for other similarly situated clients paying 12b-1 fees, a portion of which landed in the pockets of Bolton Securities’ affiliated broker," the complaint said.
The complaint seeks disgorgement of ill-gotten gains, prejudgment interest, financial penalties and permanent injunctions against Bolton Securities, the SEC said.