Strong Investment Management and Laurel Wealth Advisors Settle Cherry Picking Allegations
A final judgment has been reached in the US Securities and Exchange Commission’s (SEC) fraud case against Strong Investment Management. The investment adviser, based in California, and its owner James Bronson are accused of running a cherry picking scam that harmed clients and went on for over four years. Now, they will pay $1.2M.
Strong has more than six dozen clients and Bronson had sole discretion regarding how to allocate trades that the firm made. The SEC brought its complaint against both of them early last year, with Bronson accused of using the investment adviser’s omnibus account to trade securities while delaying their allocations to different client accounts until he’d seen how the trades had performed throughout the day. Bronson would then allegedly “cherry pick” the trades by giving himself a disproportionate amount of the profitable trades while a similar disproportionate number of unprofitable ones were sent to clients. As a result, Bronson “reaped substantial profits” that he would not have otherwise.
Bronson and Strong are also accused of misrepresenting their allocation and trading practices in their Form ADV, which falsely stated that no accounts had been given preference when trades were divvied up. Now, they are liable for nearly $961K of disgorgement and over $100K of prejudgment interest. They must pay a $184,767 civil penalty.