A Santa Monica, Calif., hedge fund manager and his investment advisory firm have been charged by the Securities and Exchange Commission with conducting a "cherry-picking" scheme that benefited him and favored clients to the detriment of other clients.
He and the firm also have been charged with failing to notify clients of pertinent information in a timely manner.
Peter J. Eichler Jr. and his firm, Aletheia Research and Management, are charged with disproportionately allocating losing trades to the accounts of two hedge funds managed by the firm, resulting in monetary losses for those funds’ investors. Meanwhile, they allocated winning trades to accounts owned by Eichler and Aletheia employees as well as accounts belonging to select clients, the SEC charges.
The complaint was filed in U.S. District Court in Los Angeles. Aletheia had more than $1.4 billion in assets under management and managed two hedge funds. By engaging in a cherry-picking scheme, Aletheia and Eichler violated the fiduciary duties they owed to their advisory clients, the SEC says.
The SEC also alleges that Aletheia breached its fiduciary duties and federal law when it did not disclose its financial troubles until two days before its bankruptcy filing.