The Securities and Exchange Commission charged a registered investment adviser with running a cherry-picking scheme that diverted over $4.7 million in profitable IPO allocations to personal accounts while steering losers to client portfolios. The enforcement action, filed in federal court, marks the latest in a series of SEC crackdowns on allocation fraud targeting retail investors.
What happened
The SEC complaint alleges that the adviser used discretionary authority over client accounts to purchase shares in hot IPOs and secondary offerings between 2022 and 2025. After observing which allocations appreciated in the first hours of trading, the adviser systematically assigned profitable positions to personal and family accounts. Losses were pushed into client portfolios.
Cherry-picking schemes exploit the time lag between trade execution and allocation. The adviser placed block orders for new issues, then waited to see price direction before deciding which accounts received which shares. In one documented instance, shares of a 2024 technology IPO gained 38% on the first day. The adviser’s personal account received 95% of that position. When another offering declined 22%, 100% of the loss fell to client accounts.
Key facts
The SEC enforcement action includes several damning details:
- Total ill-gotten gains: $4.7 million across three years of trading
- Number of affected client accounts: approximately 180, many held by retirees aged 60+
- Profit allocation ratio: the adviser’s personal accounts received profitable first-day trades 87% of the time — a statistical near-impossibility in fair allocation
- Disproportionate harm: clients over 65 suffered aggregate losses of $2.1 million on positions they should never have held
- Related FINRA Rule 2111 (suitability) and Rule 3110 (supervision) violations also cited
Regulatory response
The SEC seeks permanent injunctions, disgorgement of $4.7 million in ill-gotten gains plus prejudgment interest, and civil monetary penalties. The regulator also requests a bar preventing the adviser from associating with any broker-dealer or investment adviser in the future.
FIRS and FINRA coordinated with the SEC on the investigation. FINRA separately initiated disciplinary proceedings against the adviser’s firm for failing to supervise the allocation process, assessing a $1.2 million fine and requiring independent compliance consultants.
What investors should do
If your investment adviser placed you in IPO allocations or secondary offerings that consistently underperformed, you may have been a cherry-picking victim. Request a full trade confirmation history for any new-issue purchases in your account. Compare your performance on IPO day-one positions against the broader allocation results.
Red flags include: concentration of first-day losses in your account while your adviser’s other clients fared better, frequent IPO allocations that immediately declined, and trade confirmations showing average prices rather than specific lot assignments.
How to recover your losses
Investors who suspect they were victims of cherry-picking or trade allocation fraud have options. FINRA arbitration allows individual investors to pursue claims up to six years after the offending trades. The process typically takes 12–18 months and does not require going to federal court.
Haselkorn & Thibaut fights for investor recovery
The securities attorneys at Haselkorn & Thibaut focus exclusively on investment fraud and misconduct cases. With a 98% success rate, over 95 years of combined experience, and more than $520 million recovered for investors, the firm holds an AV Preeminent rating — the highest peer review distinction available. Haselkorn & Thibaut operates on a contingency fee basis: no recovery, no fee.
Contact Haselkorn & Thibaut today
Call 1-888-885-7162 for a free consultation or visit htattorneys.com to learn more about your rights.
This article is for informational purposes only and does not constitute legal or financial advice. Past results do not guarantee future outcomes.
