The Securities and Exchange Commission has charged Buttonwood Financial Group, a Kansas City, Missouri-based registered investment adviser, and Jon Michael McGraw, its president, chief compliance officer and majority owner, with investing client assets in generally more expensive mutual funds so that Buttonwood could avoid paying certain transaction costs.
According to the SEC’s complaint, most Buttonwood clients were in wrap accounts, for which, the firm agreed to pay all client transaction costs as part of its wrap-fee agreement. Instead, the SEC charged that from at least 2014 until 2019, Buttonwood took steps to avoid paying transaction costs by focusing client investments in more expensive mutual funds, for which, its unaffiliated broker did not charge Buttonwood a transaction fee.
In many cases, the SEC charged, Buttonwood could have invested clients in a lower-cost share class of the exact same mutual fund, in which case Buttonwood would have paid a transaction fee.
The complaint seeks permanent injunctions, disgorgement with prejudgment interest and civil penalties.
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