The Securities and Exchange Commission has charged a Westport-based investment advisory firm and its principal with breaching their fiduciary duties and defrauding advisory clients.
In a complaint, the SEC said Westport Capital Markets, LLC, 257 Riverside Ave., and principal Christopher E. McClure, 52, of Fairfield repeatedly purchased securities that generated significant amounts of undisclosed compensation.
The SEC said the company repeatedly invested advisory clients’ funds in risky securities that generated hundreds of thousands of dollars in undisclosed markups for Westport and resulted in more than $1 million in losses for clients.
According to the complaint, Westport for several years purchased securities from underwriters at a discount to the public offering price and then, acting as a principal for its own account, resold those same securities to its advisory clients at higher prices without disclosing the markup.
Westport and McClure sometimes held the securities in client accounts for only a short period of time before reselling the securities and then investing client funds in another offering with a markup, the SEC said.
The complaint further alleges that Westport and McClure defrauded a client by acting contrary to the client’s express objectives and instead repeatedly investing the client in risky offerings that generated hidden markups.
In addition, the complaint alleges that Westport and McClure made false and misleading representations to clients regarding the compensation that Westport would receive from their accounts.
The SEC’s complaint alleges that Westport’s advisory clients paid approximately $780,000 in undisclosed markups and fees on top of the advisory fees they paid the firm.
The complaint seeks injunctive relief, disgorgement of ill-gotten monetary gains plus interest, and penalties, an SEC announcement said.
According to the firm’s website, in addition to serving as president and CEO of Westport Capital Markets LLC, McClure serves as chief compliance officer and chief financial officer.
Before joining the firm in 2001, McClure was a first vice president with Prudential Securities from 1997 to 2001. He has also held financial consultant positions with Merrill Lynch Pierce Fenner & Smith and Shearson Lehman Brothers. He began his investment career in 1987 with U.S. Trust Co.
He graduated from Providence College with a BS degree in finance.
