The Securities and Exchange Commission has charged a Henderson, Nev.-based investment advisor repp and the firm he owns and operates with fraud for allegedly running a cherry-picking scheme that allowed the 20-year veteran broker to allocate winning trades in the firm’s $8 million portfolio to his and his girlfriend’s accounts, while clients got the trades that lost money.

The SEC charged investment advisor representative Steve Susoeff and his firm, Meritgage Financial Group, a state registered investment advisor registered in both Nevada and California that managed about $8 million for 59 clients, in U.S. District Court in Nevada yesterday, the regulator announced today.

“For approximately seven months, Susoeff and his advisory firm engaged in a cherry-picking scheme. It began with Susoeff disproportionately allocating winning trades to an account of his girlfriend ... and to accounts of his business associate. Susoeff also started disproportionately allocating winning trades to his own account. Meanwhile, throughout the scheme, Susoeff was consistently allocating losing trades to his disfavored clients’ accounts,” the SEC said in the complaint.

In total, Susoeff’s cherry-picking scheme, which ran from January 2021 and July 2021, “enabled him to obtain approximately $54,232 in ill-gotten gains for his own account, and approximately $90,334 in ill-gotten gains for the favored accounts of his girlfriend and business associate,” the SEC said.

At the same time, the disfavored accounts suffered about $144,566 in first-day losses attributable to the fraud, according to the SEC.

Cherry-picking, which allocates winning trades to favored accounts, and losing trades to disfavored accounts, is fraud and violates the fiduciary duties that an investment advisor owes to clients, including Susoeff’s duty of care and duty of loyalty to his, the SEC said.

“Nevertheless, that is exactly what Susoeff and Meritage Financial did in this case,” the agency alleged.

A message left on Susoeff’s phone at Meritage Financial Group was not returned. Susoeff also failed to reply to a message sent to his Linkedin account. The firm’s website domain, www.meritagefinancialgroup.com, is for sale.

The SEC said that between January 2021 and July 2021, the long-time rep, who had discretionary authority over his clients’ accounts, executed many client trades through what is commonly called a ‘block trading account,’ which gave Susoeff the opportunity to cherry-pick at the end of each day.

Susoeff’s broker-dealer, which executed his trades and custodied his assets, is referred to only as “Broker A” in the SEC claim.

According to the SEC, “’Broker A’ repeatedly warned Susoeff that he could not allocate trades in a manner that systematically advantaged or disadvantaged clients, and that Susoeff had to have procedures in place designed to ensure that trades were allocated in way that all clients were treated fairly and equitably.

“Susoeff ignored all of these warnings and continued to cherry-pick favorable trades” and “Susoeff’s cherry-picking ceased when ‘Broker A’ eventually removed Susoeff and his advisory firm from its trading platform,” the SEC said.

The regulator is seeking permanent injunctive relief against Susoeff and Meritage, disgorgement of ill-gotten gains along with prejudgment interest on a joint-and-several basis and civil penalties.