On September 28, 2020, the U.S. Securities and Exchange Commission (“SEC”) filed a complaint against an investment adviser representative located in Nebraska for allegedly cherry picking profitable trades for his personal investment account, while disproportionately assigning unprofitable trades to investment advisory client accounts. During the alleged scheme, which ran from January 2017 to March 2018, the SEC asserts that the investment adviser representative earned a 4.4% return on his personal investment account while his disfavored clients earned a negative 12.56% return. Click here to read the SEC’s complaint.
March 28, 2018
In March 2018 the U.S. Securities and Exchange Commission (SEC) instituted an administrative cease-and-desist proceeding against an investment adviser firm in response to an alleged fraudulent “cherry-picking” scheme. The SEC asserts that from 2012-2015 the investment adviser firm disproportionately allocated profitable trades to a personal account, while disproportionately allocating unprofitable trades to client accounts. The firm, which had approximately $7.5-$9 million in assets under management, was fined $48,000 by its state securities regulator for failure to enforce its own supervisory procedures concerning trade allocation. Specifically, the state regulator found the investment adviser firm did not always pre-allocate block trades and did not retain a record of how block trades were pre-allocated. Click here to read the SEC’s full action.
A former investment adviser firm and its principal recently settled claims by the U.S. Securities and Exchange Commission (SEC), admitting that the investment adviser firm principal cherry picked profitable trades for a select number of favored friends, clients, and family members of the firm’s principal.