SEC Charges Nebraska Investment Adviser and its Majority Owner with Disproportionately Allocating Certain Profitable Trades

ADMINISTRATIVE PROCEEDING
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SEC Charges Nebraska Investment Adviser and its Majority Owner with Disproportionately Allocating Certain Profitable Trades

September 30, 2024 – The Securities and Exchange Commission today announced settled proceedings against Gemini Capital Partners LLC, an investment adviser located and registered in Nebraska, and Kabir Gangahar, Gemini’s majority owner, finding that they disproportionately allocated certain profitable trades to themselves in a way that disadvantaged their advisory clients.

According to the SEC’s order, from January 2020 through December 2022, Gemini and Gangahar often allocated block trades among advisory clients and themselves at or near the end of the trading day. The SEC’s order finds that, when options day trades achieved significant gains, Gemini and Gangahar more frequently allocated these trades to their own accounts than to client accounts. As a result, the order finds, Gemini and Gangahar achieved a return on these trades that was more than double what participating advisory clients achieved. The order also finds that, as a result of this disproportionate trade allocation, Gemini and Gangahar breached their fiduciary duties and failed to comply with Gemini’s disclosed policy of allocating trades on a pro rata basis.

The SEC’s order finds that Gemini and Gangahar violated the antifraud provisions of Section 206(2) of the Investment Advisers Act of 1940. Without admitting or denying the findings, Gemini and Gangahar consented to a cease-and-desist order. Gemini also agreed to pay disgorgement of $122,602 with prejudgment interest of $19,537 and consented to a censure. Gangahar agreed to pay disgorgement of $130,322 with prejudgment interest of $22,803 and consented to a 12-month industry suspension. The SEC did not impose civil monetary penalties in light of Gemini and Gangahar’s financial condition.

The SEC’s investigation was conducted by John Chisholm of the Denver Regional Office, with the assistance of Judy Tran and Ross Goetz of the Division of Economic and Risk Analysis. The investigation was supervised by Laura Metcalfe, Nicholas Heinke, and Jason Burt of the Denver Regional Office.