Investment Adviser Settles Charges for Cheating Clients in Fraudulent Cherry-Picking Scheme

The Securities and Exchange Commission today announced settled charges against an Austin, Texas-based investment adviser for defrauding his clients through a “cherry-picking” scheme.  The adviser, Robert Mark Magee, who is the principal, sole owner, and sole employee of Valor Capital Asset Management LLC, has agreed to be banned from the securities industry and pay more than $715,000 to resolve the charges.

According to the SEC’s order, for almost three years, Magee traded securities in Valor’s omnibus account but waited to allocate the trades to client accounts until after the securities’ performance changed over the course of the day.  Magee then “cherry-picked” the trades, disproportionately allocating profitable trades to his accounts and unprofitable trades to his clients’ accounts, reaping substantial profits for himself at his clients’ expense. The SEC’s order found that for most of the three-year period there was less than a one-in-a-trillion chance that the outsized performance of Magee’s personal account, compared to that of his clients’ accounts, was due to chance.

“This case echoes the several actions our office has brought in recent months aimed at protecting unsuspecting retail investors from investment advisers who allegedly cheat their clients by cherry-picking profitable trades,” said Michele Wein Layne, Director of the SEC’s Los Angeles Regional Office.  “The settled order here finds that Magee and Valor cherry-picked trades to their clients’ detriment for almost three years.” 

The SEC’s order found that Magee and Valor each violated antifraud provisions of the federal securities laws.  Without admitting or denying the SEC’s findings, Magee and Valor agreed to the entry of a cease-and-desist order and to pay disgorgement, prejudgment interest, and civil penalties totaling $715,871.57. Magee also agreed to be barred from the securities industry. 

This is the fourth action arising out of an enforcement initiative to combat cherry-picking led by the SEC’s Los Angeles Regional Office and supported by the agency’s Division of Economic and Risk Analysis (DERA).  The previous actions were announced on Sept. 12, 2017 and Feb. 21, 2018. 

The investigation was conducted by Manuel Vazquez and supervised by Robert Conrrad.  Data analysis was performed by Scott Walster and Raymond Wolff in DERA.