in the Matter of Buckman Advisory Group, LLC and Harry J. Buckman, Jr., Administrative Proceeding File No. 3-21069
SEC Brings Settled Actions Charging Cherry-Picking and Compliance and Supervisory Failures
Litigation Release No. 25502 / September 13, 2022
Securities and Exchange Commission v. Scott Adam Brander, No. 2:22-cv-05506 (D.N.J. filed September 12, 2022)
The Securities and Exchange Commission today announced that Scott Adam Brander, of Delray Beach, Florida, Brander's former employer Buckman Advisory Group, LLC, a New Jersey based investment advisory firm, and Henry J. Buckman, Jr., Brander's former supervisor, each agreed to settle charges related to Brander's multiyear cherry-picking scheme. Cherry-picking is the fraudulent practice in which an adviser preferentially allocates profitable trades to the adviser's personal account at the expense of the adviser's client accounts.
The SEC's complaint against Brander, filed in federal district court in New Jersey, alleges that from 2012 through 2017, Brander disproportionately allocated profitable trades to his own account and unprofitable trades to certain client accounts, to enrich himself at the expense of his clients. The complaint further alleges that Brander often traded highly leveraged securities and disproportionately allocated unprofitable trades in these securities to his clients. Brander made these allocations without performing any analysis as to whether these potentially volatile securities were suitable for his clients or discussing the risks with them. According to the complaint, Brander improperly received more than $800,000 of ill-gotten gains as a result of his fraudulent scheme. The complaint charges Brander with violating the antifraud provisions of Section 17(a)(1) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and (c) thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Without admitting or denying the allegations, Brander consented to the entry of a judgment, subject to court approval, that permanently enjoins him from violating these provisions and orders him to pay disgorgement of $812,876, prejudgment interest of $169,089.83, and a civil penalty of $200,000.
The SEC also instituted a related settled administrative proceeding against Buckman Advisory Group and its CEO Buckman, based on their failures to implement policies and procedures reasonably designed to prevent violations of the Advisers Act and on their failures in supervising Brander. The SEC's order charges Buckman Advisory Group with violating, and Buckman with causing its violations of, Advisers Act Section 206(2); the firm with violating, and Buckman with aiding and abetting and causing its violations of, Advisers Act Section 206(4) and Rule 206(4)-7; and both the firm and Buckman with failure to reasonably supervise Brander within the meaning of Sections 203(e)(6) and 203(f) of the Advisers Act. Without admitting or denying the findings in the SEC order, both Buckman Advisory Group and Buckman agreed to the entry of cease-and-desist orders; the firm agreed to a censure, a penalty of $400,000, and an undertaking to retain and adopt the recommendations of an independent compliance consultant; and Buckman agreed to a penalty of $75,000 and a limitation on acting in a supervisory capacity for twelve months.
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 Rachael Clarke, Jay A. Scoggins, Patrick McCluskey, and Simona K. Suh of the MAU, with assistance from Hugh Beck in the SEC's Office of the Chief Data Officer and Diego Brucculeri of the SEC's New York office. The case was supervised by MAU Chief Joseph G. Sansone. Data analysis was performed by Maxwell Clarke and Judy Tran of the SEC's Division of Economic and Risk Analysis. The SEC appreciates the assistance of Financial Industry Regulatory Authority in this matter.