An investment adviser was sentenced to 2 years in prison plus another 2 years of supervised release for engaging in an illegal cherry-picking scheme that favored his personal accounts over his clients. He was also ordered to pay $1.3 Million in restitution. The SEC charged that the adviser used omnibus accounts and allocated trades at the end of the trading day. The SEC has not yet imposed civil penalties, which will likely include a significant financial penalty and an industry bar.
OUR TAKE: When we reported this case back in January, we noted that the SEC included 10b-5 charges to allow for criminal prosecution. Apparently, this strategy was successful as the defendant faces 2 years behind bars.