A Connecticut-based investment advisory firm has agreed to pay more than $3 million in penalties and accepted being barred from the industry to settle charges that it victimized its clients in a cherry-picking scheme, according to the SEC.
GlennCap, a Greenwich, Conn.-based state-registered investment advisory firm with $14 million AUM and 175 clients, and its owner, Jonathan Vincent Glenn, allocated more profitable trades to favored accounts, including both accounts owned by GlennCap and accounts that paid GlennCap a higher percentage of gains as part of their fees, while disproportionately allocating unprofitable trades to “disfavored” clients, the SEC said.
In all, the scheme netted Glenn and GlennCap $2.7 million in profits, according to the SEC. Glenn was also alleged to have made false and misleading statements regarding his firm’s trading practices in materials given to clients and prospects.
GlennCap and Glenn consented to an SEC cease-and-desist order yesterday without admitting or denying the charges. Glenn also accepted an industry bar and agreed to pay over $3 million in civil penalties, disgorgement and pre-judgement interest., according to the SEC.
“Glenn allocated millions of dollars from profitable trades to accounts benefitting himself while unloading unprofitable trades on GlennCap’s clients,” said Andrew Dean, co-chief of the SEC Enforcement Division’s Asset Management Unit, in a prepared statement. “The SEC has the means to identify investment advisers that abuse their position through cherry-picking, as Glenn and GlennCap did. We use these methods to ensure investor trust in our markets.”
Glenn engaged in the scheme from at least January 2020 to March 2022 via block trading, which allowed him to pool funds from client accounts for trades and then exercise discretion over where the resulting profit or loss would be allocated, according to the SEC. The agency claimed that the probability that Glenn’s favored accounts received the more profitable accounts by chance was statistically near zero.
The SEC ordered Glenn and GlennCap to disgorge $2,743,616 in gains with pre-judgment interest of $251,357, and for Glenn to pay a $500,000 civil monetary penality. Glenn was also given an industry and officer bar: prohibited from associating with any investment advisor, broker-dealer, transfer agent, municipal securities dealer, municipal advisor, or nationally recognized statistical rating organization, as well as from acting as an officer, director, manager, advisor, underwriter or depositor of any such entity.