SEC charges Caris Investment Partners in alleged cherry-picking scheme

The SEC alleges an Encinitas advisor ran an alleged cherry-picking scheme that steered winning trades to his account and losses to clients.

In a complaint filed October 6, 2026, the Securities and Exchange Commission charged Darren J. Caris and his firm, Caris Investment Partners Inc., with what the filing calls a "cherry-picking" scheme carried out between December 2023 and April 2024. According to the complaint, Caris - the firm's founder, sole owner, and only employee - used a shared block trading account to allocate profitable trades to his own personal account while directing unprofitable trades to 16 client accounts.

Block trading, in plain terms, means an advisor places trades through a single pooled account and then decides afterward how to split them among individual accounts. The complaint alleges Caris took advantage of that gap - waiting to see which way prices moved before deciding where to send each trade.

The numbers in the SEC's filing are stark. According to the complaint, about 95.8% of block trades allocated to his personal account were profitable, compared with just 14.9% of trades sent to client accounts. Over the period, the filing says, the personal account gained approximately $158,458 in first-day profits while the 16 client accounts collectively lost approximately $143,754 - across more than $44 million in total block trading.

A statistical analysis cited in the complaint puts the odds of that pattern occurring by chance at "less than one in a million."

The SEC walks through specific examples. On March 5, 2024, according to the filing, Caris used the block account to buy 1,000 shares of Albemarle Corporation at approximately $112.09 per share, then bought another 1,000 shares of the same stock at approximately $106.70. The complaint says the higher-priced shares were allocated to three client accounts, which collectively lost more than $5,200 in paper value. The lower-priced shares, the filing alleges, went to his personal account, which sold them the same day at approximately $109.85 per share - locking in a profit of more than $3,100.

The firm's own disclosures told a different story, the SEC alleges. CIP's Form ADV brochures - public-facing regulatory filings that investment advisors must provide to clients - stated: "We will not favor any account over any other account." The same brochures stated the firm would "prepare a written statement" specifying how trades would be allocated before orders were placed, and that each account would "participate at the average share price." The SEC alleges all three statements were false.

Then came a key call. According to the filing, a Broker A employee contacted Caris on or about April 4, 2024, and raised concerns about "preferential block trade allocation[s] . . . made after the outcome of the trade is known." When asked for evidence that allocations had been recorded before trade outcomes were known, Caris responded that he did not have any such evidence, according to the complaint. The filing says the pattern of allocations continued after that call.

When Broker A formally notified the firm by letter on April 29, 2024, that it was ending the relationship due to "concerns with trading," the complaint alleges Caris told clients a different version. In an email sent May 1, 2024, he wrote: "After considerable thought, I have decided to move platforms." He cited "a lack of adequate customer service," "late processing," and "repeated trading errors" at Broker A, according to the filing. The SEC alleges none of those reasons reflected why the relationship ended, and that Broker A - not Caris - set the 90-day transition timeline without any input from the firm.

Caris Investment Partners is a California corporation based in Encinitas. The complaint says the firm has been registered as an investment advisor with California since September 2019 and with Hawaii since May 2025, and had 64 clients and $54.6 million in regulatory assets under management as of 2025. Caris, 55, is described in the filing as having worked in the securities industry since 1993, including approximately 18 years at various broker-dealers.

The SEC is seeking a court order to permanently ban Caris from the industry, force both defendants to return profits plus interest, and impose civil penalties.

The allegations in the complaint have not been tested, and no court has ruled on the merits.