In a settlement reached with the US Securities and Exchange Commission (SEC), Financial Sherpa and its principal James L. Beyersdorf will pay more than $232K of disgorgement, over $15K of prejudgment interest, and a $188K penalty for allegedly defrauding investment advisory clients by engaging in a cherry picking scam. The regulator contends that Beyersdorf allocated a disproportionate amount of option trades that were profitable to himself and his wife while distributing the unprofitable ones to the firm and his clients. Beyersdorf oversaw some $6.7M in assets for 13 individual investors.
According to the SEC, he purchased options in the firm’s omnibus trading account during the morning, distributing the trades later in the day. The regulator claims that because of the allegedly illegal trading, over six months– from October 2017 and April 2018– Beyersdorf and his wife ended up with a net positive one-day return of more than 45% on the options trades that were sent to their accounts. Meantime, the negative one-day return for the firm’s individual clients that received the unprofitable trades was also 45%. The Commission said that the odds of the “disparate performance” occurring by chance was under one-in-a million.
Also, while the registered investment advisory’s strategy for the majority of its clients involved placing about 90% of each of their assets in exchange-traded funds (ETFs) and 10% in short term options trading, the account of Beyersdorf’s wife traded nearly exclusively in options and did not hold any ETF positions.
The SEC said that Beyersdorf’s ill-gotten gains from the cherry picking scam was $232,166. While not denying or admitting to the SEC charges, Financial Sherpa and Beyersdorf consented to the cease-and-desist order. Beyersdorf also agreed to a permanent company bar and a permanent collateral association bar.
Previous to founding Financial Sherpa, Beyersdorf was a registered broker with Charles Schwab, WJ Nolan & Co., Corporate Securities Group, and Meyers Pollock Robbins, which was expelled by the Financial Industry Regulatory Authority (FINRA) in 2001.
Cherry Picking Fraud Lawyers
Our investment adviser fraud law firm represents investors who have suffered financial harm because of the negligent or fraudulent actions of their adviser or broker. Contact our cherry picking fraud attorneys at Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) if Financial Sherpa was your investment adviser and you would like to explore your legal options.