SEC Wins Bench Trial Against Advisory Firm and Its Co-Owners for Cherry-Picking Scheme and Misrepresentations to Clients
SEC v. World Tree Financial, LLC, et al., Case No. 6:18-cv-01229-MJJ-CBW (W.D. La., filed Sept. 18, 2018)
On January 15, 2021, following a week-long, live bench trial, the U.S. District Court for the Western District of Louisiana entered final judgment in favor of the SEC against investment advisory firm, World Tree Financial, LLC and its co-owners Wesley Kyle Perkins and Priscilla Perkins. The SEC charged Wesley Perkins and World Tree on September 18, 2018 with perpetrating a fraudulent cherry-picking scheme. The SEC also charged Wesley Perkins, World Tree, and Priscilla Perkins for misrepresentations to investors regarding the firm's trading policies.
The court found that between July 2012 and July 2015, Wesley Perkins and World Tree engaged in a cherry-picking scheme in which Wesley Perkins intentionally allocated profitable trades to favored accounts, including his own, while allocating unprofitable trades to two accounts with substantial assets controlled by one client. In addition, the court found that Wesley Perkins, Priscilla Perkins, and World Tree falsely represented to clients that World Tree and the Perkinses were not trading in the same securities as World Tree's clients, and further found that the defendants' scheme violated the firm's stated trading policies.
Wesley Perkins and World Tree were found liable on all counts, including that they violated the antifraud provisions of Sections 17(a)(1) and (2) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and (2) of the Investment Advisers Act of 1940. The court ordered Wesley Perkins and World Tree to pay civil penalties of $160,000 and $300,000, respectively, ordered them to disgorge, $347,947 plus prejudgment interest jointly and severally, and enjoined them from future violations of the charged provisions. The court also found that Priscilla Perkins violated the anti-fraud provisions of Section 17(a)(2) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and ordered her to pay civil penalties of $80,000.
The case was tried in-person in Lafayette by Joshua A. Mayes and Jason P. Reinsch, with remote assistance from Los Angeles by Lynn M. Dean and Michael Sew Hoy. The litigation was supervised by Amy Jane Longo. Paralegals Buffy Lochmandy and Sarah Mitchell supported the trial team. This action arose out of an enforcement initiative to combat cherry-picking led by the SEC's Los Angeles Regional Office and supported by the Division of Economic and Risk Analysis. The SEC appreciates the support provided by Karen J. King of the U.S. Attorney's Office for the W.D. of Louisiana, Lafayette Division, who served as local counsel to the SEC.