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Florida Business, Whistleblower, & Securities Lawyers / Blog / SEC / SEC Charges California Investment Advisor in Cherry Picking Scheme

SEC Charges California Investment Advisor in Cherry Picking Scheme

The Securities and Exchange Commission (“SEC”) has charged a San Diego-based investment advisory firm and its president with engaging in a scheme to cherry pick the most favorable trades and award those to accounts in which the firm’s president had a financial interest.

According to the SEC, from June 2008 to November 2009, J.S. Oliver Capital Management and its president Ian Mausner purposely delayed the allocation of block trades until after the close of trading in order to see which securities were the winners and losers. Typically, investment advisory firms trade a large block of a security in the firm’s own account, and then allocate the individual shares to its individual clients’ accounts. For example, the firm will purchase 1,000 shares of XYZ Corp. in its own account, and then allocate 500 shares to Client A, 200 shares to Client B and 300 shares to Client C.

By delaying the allocation of trades until after the market had closed, J.S. Oliver was able to see which securities had appreciated or declined in value. The SEC claims that J.S. Oliver deliberately awarded the more favorably priced securities to hedge funds in which Mausner and his family had personally invested, to the determinant of its other clients. According to the SEC’s Order Instituting Administrative and Cease-and-Desist Proceedings dated August 30, 2013, the clients who received the less favorably priced securities suffered over $10 million in harm.

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