A Dallas wealth management firm and its advisor-owner have been charged by the Securities and Exchange Commission with cheating clients through a cherry-picking scheme that worked to the advantage of the advisor, the SEC said today.
TH Wealth Management and Brian Keat Hobbs, its sole owner and principal, defrauded four clients out of more than $275,000 in profits that TH Wealth Management and Hobbs received, the complaint said.
The scheme ocurred from at least December 2016 through March 2019, when Hobbs placed options trades using TH Wealth's omnibus trading account, which is intended to facilitate purchases of securities for multiple client accounts, the SEC said.
Hobbs allegedly placed the option trades early in the trading day but did not allocate the trades to specific clients or Hobbs's personal accounts until the end of the day. The complaint said Hobbs then disproportionately allocated profitable trades to his personal accounts and allocated the unprofitable trades to his clients' accounts. The complaint said Hobbs was the only person at TH Wealth with the authority to determine trades and allocations.
The firm’s brochures and other disclosures claimed the trades were being fairly and equitably allocated among the client accounts, the complaint said.
The SEC's fraud charges were filed in the U.S. District Court for the Northern District of Texas. The complaint seeks permanent injunctions, disgorgement with prejudgment interest and civil penalties.