Investment Adviser Charged with Failing to Disclose Conflicts

(HedgeCo.Net) The U.S. District Court for the District of Massachusetts has entered a final consent judgment against Bolton Securities Corporation, d/b/a Bolton Global Asset Management, in connection with the SEC’s allegations that Bolton Securities failed to disclose material conflicts of interest related to mutual fund 12b-1 fees and principal trading compensation generated from client investments.

On November 4, 2019, the SEC charged Bolton Securities with failing to adequately disclose conflicts of interest arising from the receipt of 12b-1 fees associated with mutual fund share classes held by Bolton Securities clients, including when less expensive share classes of the same mutual funds that did not charge 12b-1 fees were available. The SEC alleged in its complaint that those 12b-1 fees were paid to an affiliated broker-dealer that was under common ownership and control with Bolton Securities, which in turn paid some of the fees to Bolton Securities’ investment adviser representatives. In addition, the SEC’s complaint alleged that Bolton Securities used the principal trading account of its affiliated broker-dealer to engage in self-dealing transactions with its advisory clients, which generated principal trading compensation for the broker-dealer. As alleged, Bolton Securities engaged in these transactions without obtaining client consent and without providing disclosure sufficient for clients to provide informed consent for such transactions.

Without admitting or denying the allegations of the SEC’s complaint, Bolton Securities consented to the entry of the final judgment enjoining it from violating Sections 206(2), 206(3), and 206(4) of the Investment Advisers Act and Rule 206(4)-7 thereunder, and ordering it to pay disgorgement and prejudgment interest of $224,994 and a civil penalty of $225,000. The judgment provides that those monetary remedies will be distributed to harmed investors from a Fair Fund.

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