SEC Pursues Adviser for Day Trading Cherry-Picking
The SEC has charged an adviser and its principal with securities fraud in connection with a trade allocation cherry-picking scheme. The SEC charges that the respondent allocated day trading profits to his personal account but would allocate the securities to client accounts if they were not profitable on the trading day. The scheme employed the use of leveraged ETFs designed for day trading. The scheme, which utilized an omnibus account at Schwab, was uncovered by a Schwab program that flagged the personal account for possibly receiving favorable allocations. The SEC contends that the difference in performance in the personal account compared to the client accounts was statistically significant.