UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Plaintiff Securities and Exchange Commission ("SEC") alleges that Defendant David J.C. Bolton ("Bolton" or "Defendant") falsely marketed to investors a company that he formed to launch exchange-traded funds ("ETFs"), and he fraudulently diverted investor funds to himself in amounts that grossly exceeded his disclosed salary. When Bolton solicited investors to invest in his company, Millennia Shares, LLC ("Millennia Shares"), in 2018 and 2019, Bolton's written disclosures stated that the company would pay him a set monthly salary. Bolton, however, plundered an additional total sum of at least $215,000 - over a quarter of all investor funds - from company bank accounts. Bolton solicited investors in Millennia Shares by telling them, through written memoranda and orally during meetings, that the company would earn revenues by creating and launching ETFs, a type of investment product, to the public. Bolton's memoranda listed operating costs that the company would incur in launching the ETFs, and variously indicated that Bolton would receive a set monthly salary of $7,000 or $10,000. In response to Bolton's solicitations, approximately 10 investors entered into agreements with Millennia Shares under which they invested money in exchange for equity stakes in the company and other potential forms of profit. After investors sent money to Millennia Shares, Bolton withdrew cash or arranged fund transfers from company bank accounts in amounts that far exceeded his disclosed compensation. Bolton did this through numerous, irregular, and sometimes small transactions that he orchestrated, and also by diverting large lump sums of over $20,000 each, all of which he used for personal expenses including, for example, a wedding ring. Bolton took these funds during the same months in which he made his false compensation disclosures to investors or during the months immediately following these disclosures. Bolton also fraudulently took investor funds by receiving payments that ostensibly constituted salary to another Millennia Shares employee who already had resigned from the company and stopped all work activity. And, in late 2019, after Millennia Shares had ceased operations without ever having issued any ETFs, Bolton took for himself a large sum of investor funds when he emptied the company's bank accounts. As a result of the conduct described in this Complaint, Bolton violated Section 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

Judgment Rendered

Disgorgement

$322,565.00

Monetary Penalty other than Fines

Injunction

Client, by counsel, makes allegations of negligent buying and selling of variable annuities and A-shares.

$24,770.00

Kentucky

Selling Unregistered Promissory Notes Omitting or misrepresenting material facts

Order

Cease and Desist

FINRA

Bolton was named a respondent in a FINRA complaint alleging that he engaged in a pattern of short-term mutual fund trading in two customers' accounts, collectively executing over 60 unsuitable short-term trades in Class A mutual funds in their accounts. The complaint alleges that the holding periods for the transactions ranged from 92 to 274 days. Bolton executed these trades without having reasonable grounds for believing that these trades were suitable in light of the nature and frequency of the transactions. The trades were inconsistent with the long-term nature of Class A shares as well as the customers' investment objectives of growth with moderate risk. Bolton understood that Class A shares are long-term investments, yet Bolton repeatedly engaged in short-term trading of Class A shares in the customers' accounts. Moreover, the funds that Bolton recommended all had similar investment objectives and projected returns. In addition, Bolton's recommendation to invest $731,265 in Class A shares of 42 funds in 11 different fund families was unsuitable for one customer because the strategy generated higher sales charges than a similar investment across fewer fund families. The customers incurred at least $24,747 in unnecessary sales charges based on Bolton's unsuitable recommendations. The complaint also alleges that Bolton provided false information to his member firm regarding the purchases and sales in the customer's traditional IRA account. Bolton falsely marked or caused others to falsely mark 104 of the transactions in the customer's IRA as "unsolicited." Bolton knew the transactions were solicited. Additionally, Bolton provided false information to his firm regarding every transaction in the other customer's account. Bolton falsely marked or caused others to falsely mark 26 transactions in the customer's account as "unsolicited." Bolton knew that these 26 transactions were solicited. Based on Bolton's conduct, he caused his firm's books and records to be inaccurate. The complaint further alleges that upon resigning from his firm, Bolton did not return customer documents such as mutual fund switch letters to the firm as required. In fact, when Bolton was preparing to leave his next member firm in early 2016, he destroyed all of his client files. As a result of Bolton's failure to return his customers' files and his subsequent destruction of those records, Bolton's former firm failed to preserve any suitability documentation or mutual fund switch forms for Bolton's customers, and thereby caused the firm to fail to preserve records relating to communications concerning the firm's business. Because Bolton did not return customer files as required, he caused his firm to fail to preserve its books and records as required.

Decision

Bar (Permanent)

All capacities

Indefinite

9/21/2018

Default decision rendered August 24, 2018. The sanction was based on findings that Bolton engaged in unsuitable short-term trading of Class A mutual fund shares in the accounts of his two largest customers, one of whom was the 101 years old mother of the other customer, and unsuitably split one of the customer's mutual fund investments into 42 different funds across 11 fund families. The findings stated that as a result, the customers allegedly paid $24,747 in unnecessary sales charges. Bolton's mutual fund trading was unsuitable for a number of reasons. First, the short-term nature of the trades conflicted with the customers' longer-term investment horizon and made the trades presumptively unsuitable. Second, the $24,747 in sales charges outweighed any marginal benefit from the new mutual funds. Third, the new mutual funds' objectives and risks were similar to the funds that were sold. Fourth, splitting the customer's investment funds into 42 different mutual funds in 11 fund families generated higher sales charges because the customer was unable to take advantage of savings from breakpoints available for larger investments. The findings also stated that in connection with these customers, Bolton allegedly caused his member firm to maintain inaccurate books and records by mismarking or causing others to mismark as "unsolicited" 120 electronic order tickets for trades that he had in fact, solicited. The findings also included that Bolton allegedly caused his firm to fail to preserve accurate books and records by taking the files of his customers with him when he moved from that firm to another firm and later destroyed those files. When Bolton resigned from the first firm, he did not return customer files as required. Then as Bolton prepared to resign from the next associated firm, he destroyed all his customer files. As a result, the first firm failed to preserve mutual fund switch letters, suitability documentation, and other books and records relating to Bolton's customers as FINRA rules required. The decision became final September 21, 2018.

Customer alleges that mutual fund A shares and various equities were not suitable in that they were purchased in the account of an elderly woman; complained about sales loads and commissions involved.

Complainant alleges unsuitable recommendations and poor advice concerning his accounts as well as accounts belonging to his mother

$71,750.61

$14,529.24

Civil

As I was being recruited by Signature Financial, I was promised a book of business in the amount of $10 million. The revenue that would have been generated from that book of business over the time of my affiliation with Signature would have been more than ample to cover the amount that Signature is requesting. After multiple requests for the accounts to be transferred to me, the managing partner said he didn't have the book of business any longer. I subsequently found out that this is a common recruiting tactic of Signature, particularly the agency that I was affiliated with. To my knowledge there was no written agreement to pay back this money.