The SEC is keeping up scrutiny of cherry-picking trades, most recently barring a former investment advisor and ordering him and his firm to pay close to $1.3 million in relation to the practice, the regulator says.
For more than four years, Joseph Bronson allegedly traded securities in the omnibus account of Strong Investment Management, the RIA he owned, delaying the allocation of securities and then disproportionately allocating winning trades to himself and losing trades to his clients, according to a litigation release published by the SEC.
The firm and Bronson also allegedly falsely stated in the RIA’s Forms ADV that the trade allocations didn’t favor any specific account, the regulator says.
In addition to barring Bronson, the SEC ordered him and the firm to jointly and severally pay $960,656 in disgorgement and $100,501 in prejudgment interest, according to the litigation release.
Bronson must also pay a civil penalty of $184,767, the SEC says.
The SEC had also charged John Engebretson, Bronson’s brother and Strong’s former chief compliance officer, for allegedly failing in his job responsibilities and ignoring numerous red flags raised by Bronson’s cherry-picking scheme, according to the litigation release.
As part of a settlement reached in June 2018, Engebretson agreed to be barred from the industry and to pay a civil penalty of $15,000, the SEC says.
The regulator has been aggressively targeting cherry-picking in recent months.
Earlier in September, it ordered a Massachusetts investment advisor to pay $1.3 million in disgorgement and prejudgment interest for alleged cherry-picking.
In August, the SEC barred two other advisors over the practice.