“The likelihood that Brander would have earned these returns for himself in the absence of cherry-picking, with trade allocations determined by chance, is less than one in a million,” the agency added.
Brander used block trades in shares of highly leveraged exchange traded funds (ETFs) in his cherry-picking scheme, the SEC said. The price volatility of these leveraged ETF’s presented a higher risk to clients, all of whom had indicated they were seeking conservative investments in their account opening forms, the regulator said.
“Brander, as an investment adviser, was required to act in the best interest of his clients when selecting securities for their accounts. To act in the best interest of his clients, Brander was required to analyze whether his clients were willing to tolerate risks of the particular investments in the context of the clients’ stated objectives and risk tolerances,” the SEC said.
The advisor had worked with two firms that were expelled by Finra since 2001 and was barred from registering as an advisor in by the state of Utah in 2000 for “omission of fact, churning and acting as an unlicensed agent,” according to his BrokerCheck record.
The SEC’s Market Abuse Unit's (MAU) Analysis and Detection Center detected Brander’s scheme, using data analysis tools to detect suspicious trading patterns, the SEC said.