A federal court earlier this week issued its final judgment against a Connecticut-based i deliveredInvestment advice and broker / dealer, Westport Capital Markets, and its owner, Christopher E. McClure, who was convicted of paying more than $ 1.5 million in fines and levies. The ruling follows a ruling last March in which McClure and his firm defrauded customers by making unauthorized security purchases and getting paid for additional fees.
The Securities and Exchange Commission originally filed a complaint against McClure in December 2017, accusing him of violating his fiduciary duty to clients by purchasing securities with undisclosed surcharges and fees on top of those already known (and paid by) Fees were. his customers. The complaint argued that these risky investments caused losses of more than $ 1 million for these customers.
According to the lawsuit, Westport’s customer base included “retirees and the elderly” who were dependent on their income from the company. Starting in 2011, the company began partnering with investment banks that offered underwriters on securities offers that Westport then bought shares in at a discount to its own brokerage account before reselling them to customers at the full public offering price.
“As a result, Westport has pocketed a ‘premium’ equal to the difference between the reduced offer price it paid for the shares and the full offer price at which Westport sold the shares to its customers,” the lawsuit said.
The firm continued this from March 2012 to June 2015; In addition, she calculated consulting fees based on clients’ assets. In total, the company raised more than $ 500,000 in surcharges during the period in question and around $ 1.7 million in consulting fees between 2012 and 2015. Overall, customers who have invested in these offerings have lost around $ 1.2 million to date, with about $ 890,000 in realized losses, but Westport and McClure never disclosed to their customers that they were benefiting financially from this agreement .
The firm and McClure also defrauded an undisclosed client by acting against his own goals after telling the advisor that his accounts were “conservatively invested”. Instead, McClure invested heavily in the risky premium securities offerings. This resulted in a loss of approximately $ 245,000 on the customer side.
In addition, Westport invested client assets in share classes of mutual funds that included fees of 12b-1, even when more affordable options with parallel objectives were available to clients, although they did not disclose those fees, according to the lawsuit. The SEC has pursued several lawsuits and settlements over the past year against companies that failed to disclose 12b-1’s fees after completing settlements of cases resulting from its voluntary disclosure initiative regarding disputes with unit classes of mutual funds .
In total, the federal court ordered Westport and McClure to collectively pay $ 632,954 and $ 187,807 in pre-trial interest for a total of $ 820,761. In addition, Westport has to pay a civil fine of $ 500,000 while McClure has to pay a fine of $ 200,000.
McClure was not immediately available for comment.