The SEC brought charges against an investment adviser for
allegedly (i) "cherry-picking" profitable trades for his
own accounts, and (ii) misleading senior clients and others about
fees and risks. The SEC alleged that the adviser purchased
equities and options in an omnibus account for the firm and waited
to see which trades were profitable before allocating the trades to
accounts. The adviser then allocated the profitable trades to
his own accounts and the unprofitable trades to those of his
In addition, the SEC Cease-and-Desist Order stated that the
adviser collected advisory and fund management fees from clients
while assuring them that they would not be charged both types of
fees. The SEC estimated that the adviser collected more than half a
million dollars in ill-gotten gains by siphoning winning trades
from his clients' accounts and withdrawing the excess fees.
SEC San Francisco Office Director Jina L. Choi noted the
Investment advisers breach their fiduciary duty when they favor
their own interests and force clients to take less profitable
trades without their knowledge.
The SEC also specified that the matter will be scheduled for a
public hearing before an administrative judge, whose initial
decision will detail any remedial actions to be taken.
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