In two separate administrative actions, the SEC barred two state-registered investment adviser for allocating trades in client accounts in a manner that disadvantaged their respective clients. The SEC also fined the heck out of them.
In the Matter of Jeremy Licht d/b/a/ JL Capital Management, the SEC ordered Mr. Licht to disgorge $88,504 in ill-gotten gains from his cherry-picking scheme and pay a civil penalty of $181,071. According to the SEC administrative release, Licht engaged in a fraudulent trade allocation scheme, or “cherry-picking,” that harmed his advisory clients. Licht allocated a disproportionate number of favorable trades (i.e., trades that had a positive first-day return) to his own account and allocated a disproportionate number of unfavorable trades (i.e., trades that had a negative first-day return) to clients’ accounts.
In the Matter of Howarth Financial Services, LLC, and Gary S. Howarth, the SEC ordered Mr. Howarth to disgorge $38,172 in ill-gotten gains from his cherry-picking scheme and pay a civil penalty of $160,000. Howarth disproportionately allocated profitable trades from Howarth Financial Services’ omnibus trading account to his personal accounts, while disproportionately allocating unprofitable or less profitable trades to Howarth Financial Services client accounts. Notably, in testimony, Howarth admitted he breached his fiduciary duties to his clients when he made preferential allocations of certain trades.
When will people learn?