Customer alleges misappropriation of funds between January 2011 and January 2020

$75,000.00

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934 ("Exchange Act") and Section 203(f) of the Investment Advisers Act of 1940 ("Advisers Act") against James K. Couture ("Respondent"). The Commission finds that on September 8, 2022, Couture entered a plea agreement with the court whereby he pleaded guilty to criminal charges, including, among others, one count of investment adviser fraud, in violation of Title 15 United States Code, Sections 80b-6 and 80b-17 before the United States District Court for the District of Massachusetts, in United States v. James Kenneth Couture, Crim. No. 21-cr-10172-NMG (D. Mass.). The indictment to which Couture pled guilty alleged, inter alia, that, from September 2009 through January 2020, Couture misappropriated approximately $2.9 million from approximately six investors. As part of a scheme, Couture advised his clients to transfer their assets to a company called Legacy Financial Group, LLC ("Legacy") for investment purposes, without telling the clients that Legacy was a shell company that he controlled and that did not hold or offer bona fide investment products. Couture did not invest the money his clients transferred to Legacy, as he promised them he would. Instead, he used his clients' funds that they transferred to Legacy for other purposes, including to buy the client list of another investment adviser in or about October 2013. In order to deceive his clients about the fact that he had stolen their money, Couture created fake account statements that purported to reflect investments at Legacy in accounts and investment funds. In fact, those accounts and investments did not exist. As a further part of the scheme, when Couture's clients requested withdrawals or transfers from their purported Legacy accounts, Couture paid them with assets he stole from other clients and disguised the payments as disbursements from profit-sharing or employee benefit plans held at a third-party benefit company.

Order

Bar (Permanent)

association with a broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or NRSRO

Indefinite

11/28/2022

Participating in any offering of a penny stock

Indefinite

11/28/2022

Customer alleges that advisor took money from his accounts to repay another client

$385,000.00

$480,000.00

Customer alleges that former advisor misappropriated investment monies from her between 2011 and 2016 in the total amount of $1.22 million, and over time provided her with falsified statements reflecting her purported investments. Customer demands return of misappropriated monies and also seeks alleged lost investment opportunity.

$3,206,760.22

$2,375,000.00

Customer alleges misappropriation of $270,179.42 in December 2019.

$270,179.42

$270,179.42

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission (the "Commission"), for its Complaint against James K. Couture, alleges that, as an investment adviser, he violated his fiduciary duty to his clients by engaging in a deceptive scheme to misappropriate approximately $2.9 million from them. Couture carried out his scheme by fraudulently prompting his clients to sell portions of their securities holdings in order to fund large money transfers to an entity that, unbeknownst to his clients, he owned and controlled. For each transaction, Couture obtained client authorization under a false pretense that the proceeds would be reinvested for the clients' financial benefit. In reality, Couture's intent and purpose in arranging these securities transactions was to divert the sale proceeds for his own use and benefit. And, once Couture used the fraudulently obtained authorizations to secure the sale of client securities and transfers of the proceeds to his exclusive control, Couture proceeded to spend the money for his own benefit. In furtherance of his scheme, Couture lulled clients into believing that their sale proceeds had been actually reinvested by providing them with fabricated account systems and account holding reviews, which he provided to his clients through electronic email or by U.S. Mail. The fabricated documents reflected securities transactions that never happened, current investments that did not exist, and earnings that the clients never received, all to create the false appearance that Couture had reinvested his clients' money. Further, when clients requested withdrawals, Couture fraudulently took assets from other advisory clients to cover those withdrawals. To hide this later misappropriation, Couture transferred client money through a web of third-party administrator accounts to disguise that he was misappropriating money from one client to replace funds he had previously stolen from another. As a result of his conduct, Couture violated, and unless restrained and enjoined will continue to violate Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.

Judgment Rendered

Injunction

FINRA

Without admitting or denying the findings, Couture consented to the sanction and to the entry of findings that he refused to produce all of the information and documents requested by FINRA in connection with its investigation into the allegations that formed the basis of his termination from his member firm. The findings stated that Couture's firm submitted a Form U5 terminating his registration and alleging that he altered identifying information, account balances and distributions in customer account statements; maintained comingled customer funds; and used an unapproved email address. Initially FINRA received a response to its requests from Couture, however his production was substantially incomplete. Subsequently, Couture decided to cease complying with FINRA's requests.

Acceptance, Waiver & Consent(AWC)

Bar (Permanent)

All Capacities

Indefinite

10/21/2020

MISREPRESENTATION. ACTIVITY PERIOD: 4/21/20 TO 10/20/20.

LPL Financial LLC

Discharged

Altered identifying information, account balances and distributions in customer account statement; maintained comingled customer funds; use of an unapproved email address.

Customer alleges misappropriation of $50,000 in October 2013.

$50,000.00

$50,000.00