ADVISER BARRED FOR PRINCIPAL TRADING VIA MATCHED ORDER SCHEME
The SEC barred an investment adviser from the industry for using a matched order scheme to engage in principal trades and misappropriate client funds. The adviser placed simultaneous orders in the accounts of his clients and his own margin account, which purchased the securities at a discount in after-hours trading. The SEC claimed violations of the Advisers Act and Section 10(b) of the 1934 Act for failing to disclose the principal trading.
OUR TAKE: This is more of a conflict of interest case than a disclosure case. We are not sure that disclosure would inoculate a trading scheme that benefits the adviser to the detriment of his clients.
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