The Securities and Exchange Commission says it has charged a Delaware registered investment advisor firm and its principal with running a multi-year cherry-picking scheme harming the firm’s clients.
From at least Jan. 1, 2011, to Dec. 31, 2015, M. Cassandra Toroian — principal of Rehoboth Beach, Delaware-based Bell Rock Capital — allegedly traded securities in the firm’s master trading account and delayed allocating them to client accounts until she could see the securities’ performance throughout the course of the day, according to a complaint the SEC filed in the U.S. District Court for the Eastern District of Pennsylvania on Friday.
Toroian then allegedly allocated the profitable trades to accounts belonging to her and her family members and stuck the clients with the losing trades, the regulator says.
As a result of the alleged violations, Toroian was able to boost the accounts belonging to her and her family by more than 2%, for a gain of more than $1 million, between the time she purchased the securities and when she allocated them, according to the complaint. The client accounts, meanwhile, allegedly dropped by more than 1.3%, for a loss of more than $1 million, the SEC says.
The regulator also alleges that Bell Rock and Toroian misrepresented to the clients that they would not put their interests before their clients' and that all transactions would be allocated fairly.
The SEC has charged Bell Rock and Troian with violations of the Securities Act and the Investment Advisors Act and is seeking injunctive relief, disgorgement of the allegedly ill-gotten gains with prejudgment interest and civil penalties, according to the complaint.
Do you have a news tip you’d like to share with FA-IQ? Email us at firstname.lastname@example.org.