Missouri-Based Investment Adviser Buttonwood Financial Group Accused of Investing Clients in Higher Cost Mutual Funds to Avoid Transaction Fees

The SEC charged Buttonwood Financial Group and its president, Jon Michael McGraw.

The SEC charged Kansas City, Missouri investment adviser Buttonwood Financial Group and its president, Jon Michael McGraw, in connection with investing client assets in more expensive mutual funds so the firm could avoid paying certain transaction costs. 

The SEC’s complaint alleged that many of Buttonwood’s clients held wrap accounts and Buttonwood had agreed to pay all client transaction fees as part of the wrap fee agreement. To avoid paying these transaction costs, the firm focused client investments in more expensive mutual funds that did not charge Buttonwood transaction fees.

The complaint further alleges that, in November 2016, McGraw initiated an agreement with its unaffiliated broker in which Buttonwood committed to investing no less than 60% of its client assets in (non-transaction fee) NTF mutual funds in exchange for the broker not charging Buttonwood transaction fees on any client trades in mutual funds or equity stocks. However, the allegations state that neither Buttonwood nor McGraw disclosed this agreement or related material facts and financial conflicts of interest to their advisory clients, and that they violated their duty to seek best execution by selecting the more expensive mutual fund share class for clients when a lower-cost share class for the same mutual fund was more favorable for clients.

The SEC charged Buttonwood and McGraw with with violating the anti-fraud provisions of Sections 206(1) and 206(2) of the Advisers Act, and charges Buttonwood with also violating the anti-fraud provisions of Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder. The complaint seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties.

Contact Us Today

The Sonn Law Group is currently investigating allegations surrounding Buttonwood Financial Group. We represent investors in claims against negligent brokers and brokerage firms. If you or your loved one experienced investment losses, we are here to help. For a free consultation, please call us now at 866-827-3202 or complete our contact form.