An Illinois asset manager has been charged with a cherry-picking scheme that netted him more than $630,000 while costing his clients money, the Securities and Exchange Commission announced today.
Gregory D. Paris, 51, co-owner and chief operating offiver of Barrington Asset Management (BAM) in Chicago, and the firm have been charged with defrauding clients over a period of four years, the SEC said.
The SEC's complaint, filed in U.S. District Court for the Northern District of Illinois, alleges that between 2015 and 2019 Paris reaped more than $630,000 at his clients' expense by profiting from successful trades and leaving his clients with losing transactions.
Paris allegedly traded securities in Barrington's omnibus account and delayed allocating the securities to specific client accounts until he had observed the securities' performance over the course of the trading day. He allegedly then allocated profitable trades to his own account while allocating unprofitable trades to client accounts. The complaint also charged that Barrington and Paris misrepresented to clients that all trades would be allocated fairly and that the firm reviewed all personal trading by its employees.
On numerous occasions over the four years, Paris carried out the cherry picking scheme that reflected a pattern of trading, the complaint said. As an example, the complaint cited one instance where the 50 best performing trades that Paris placed on one day had first-day returns of between 4.5% and 15.3%, with total first-day profits of $69,355. Paris allocated 47 of the 50 best performing trades to himself, representing 97.6% of the profits from those trades, the complaint said.
The 50 worst performing trades made at the same time had first-day losses of between 3.2% and 9.1%, with total first-day losses of $60,684. Paris allocated 29 of these trades to Barrington clients, saddling them with 68.9% of the first-day losses, the complaint said.
Paris and Barrington also created written order tickets for the trades that usually were inaccurate, incomplete or inconsistent with the information reflected in the electronic order system, the complaint said. Barrington also made false and misleading statements in its brochures concerning trade allocations and review of employee trading. Paris worked with a consultant to draft the brochures, and he reviewed and approved the statements in the brochures, the complaint said.
BAM is registered as an investment advisor in Illinois and Georgia and was previously registered with the SEC, according to the complaint. Paris owns 15% of BAM and, with his brother, oversees its day-to-day operations, the SEC said.