SEC Brings Settled Actions Charging Cherry-Picking and Compliance Failures
Aug. 10, 2022
File No. 3-20955
August 10, 2022 - The Commission today announced that IFP Advisors, LLC, a registered investment adviser based in Tampa, Florida, and its former investment adviser representative, Richard Keith Robertson, of Del Mar, California, agreed to settle charges relating to Robertson's multi-year cherry-picking scheme. Cherry-picking is the fraudulent practice of preferentially allocating profitable trades or failing to allocate unprofitable trades to an adviser's personal accounts at the expense of the adviser's client accounts.
The SEC's orders found that from January 2011 to October 2020, Robertson disproportionately allocated profitable trades to his personal and family accounts, and disproportionately allocated unprofitable trades to certain of his clients' accounts. According to the orders, the likelihood of these profitable trades being randomly allocated to Robertson's personal and family accounts is nearly zero.
According to a separate order against IFP, IFP failed reasonably to supervise Robertson and failed to implement policies and procedures reasonably designed to prevent unfair trade allocations. The order found that IFP never conducted a branch office audit of Robertson during his eight years (2011-2018) as an IFP representative and never reviewed his trading as required by its own compliance manuals. The order also found that during the relevant period, IFP's Form ADV contained misleading statements that it had safeguards in place to prevent representatives from placing their own interests ahead of those of IFP's advisory clients.
The SEC's order against Robertson found that he violated the antifraud provisions of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(a) and 10b-5(c) thereunder. Without admitting or denying these findings, Robertson consented to the entry of a cease-and-desist order, and to pay disgorgement of $592,437, prejudgment interest of $28,173, and a penalty of $300,000. Robertson also consented to a permanent associational bar, investment company bar, and penny stock bar.
The SEC's order against IFP found that it violated Sections 206(2) and 206(4) of the Advisers Act and Rule 206(4)-7 thereunder, and failed reasonably to supervise Robertson within the meaning of Section 203(e)(6) of the Advisers Act. Without admitting or denying these findings, IFP consented to the entry of a cease-and-desist order, a censure, a penalty of $400,000, and an undertaking to retain an independent compliance consultant.
The case originated from the SEC Market Abuse Unit's (MAU) Analysis and Detection Center, which uses data analysis tools to detect suspicious trading patterns. The SEC's investigation was conducted by Andrew Palid and Michele T. Perillo of the MAU in the Boston Regional Office (BRO) and David D'Addio of the BRO, with assistance from Hugh Beck. The case was supervised by Joseph Sansone, Chief of the MAU. Data analysis was performed by Stuart Jackson and Frank Brown of the SEC's Division of Economic and Risk Analysis.