A former Florida advisor has agreed to pay more than $1 million in penalties to settle fraud charges related to a cherry-picking scheme, the U.S. Securities and Exchange Commission announced.
The advisor's former firm and its CEO also settled charges related to the scheme, the regulator said.
Former advisor Scott Adam Brander, 54, of Delray Beach, Fla., who settled the charges with the agency without admitting or denying guilt, received more than $800,000 in ill-gotten gains from January 2012 to June 2017 as a result of the scheme, which involved disproportionately allocating profitable trades to his own account and unprofitable trades to certain client accounts, the SEC said.
Brander consented to the entry of a judgment, subject to court approval, ordering him to pay disgorgement of $812,876, prejudgment interest of $169,089.83 and a civil penalty of $200,000, the SEC said.
Brander's former employer, Buckman Advisory Group LLC, a New Jersey based investment advisory firm, and its CEO, Henry J. Buckman Jr., have settled charges that they failed to prevent Brander’s five-year cherry-picking spree, the SEC said.
Buckman Advisory Group (BAG) and Buckman settled the charges without admitting or denying guilt and agreed to the entry of cease-and-desist orders. The firm agreed to a censure and a penalty of $400,000, and the firm agreed to retain and adopt the recommendations of an independent compliance consultant. Buckman agreed to a penalty of $75,000 and a limitation on acting in a supervisory capacity for 12 months, according to the SEC.
To facilitate the scheme, Brander used an average-price account to place block trades on behalf of his clients’ accounts, as well as the accounts he and he and his wife held jointly at the firm, without specifying at the time of the purchase whether he was purchasing the security for himself or for one or more of the clients, many of whom worked with him on a discretionary basis, the SEC said.
Brander frequently failed to provide allocation instructions for some trades until several hours after the trades were executed, and in some cases not until the following day, even though BAG’s written compliance manual until 2015 required that trade orders include instructions for how the shares were to be allocated, the SEC said.
Brander, who worked with BAM from January 2012 until June 2017, allocated 90% of winning trades with a positive performance between the time of execution and the time of allocation to his accounts, the SEC said in its complaint.
“Because of Brander’s cherry-picking scheme, his allocations to the Brander Accounts were generally profitable in the short term, with first-day gains of 1.84%, while allocations to [cliebnts] were generally unprofitable in the short term, with first-day losses of –3.24%,” the SEC said.