SEC charges Strong Investment Management and owner with 'cherry-picking' trades

Says Yorba Linda, Calif.-based RIA allocated profitable trades to owner, losers to clients.
FEB 22, 2018

The Securities and Exchange Commission has filed a complaint in federal court in California against Yorba Linda, Calif.-based Strong Investment Management and its president and sole owner, Joseph B. Bronson, for operating a scheme that defrauded Strong's clients. The complaint alleges that for more than four years, Mr. Bronson traded securities in Strong's omnibus account but delayed allocating the securities to specific client accounts until he had observed the securities' performance over the course of the day. Mr. Bronson reaped "substantial profits at his clients' expense by cherry-picking" the trades, and allocating the profitable ones to himself and the unprofitable trades to clients, the SEC charged. In a release, the SEC said the complaint also alleges that John B. Engebretson, Mr. Bronson's brother and the firm's former chief compliance office, ignored many warning signs raised during the course of the fraudulent scheme. In addition, the SEC alleges that the brothers misrepresented their trading and allocation practices in the firm's Forms ADV. The SEC said this is the third action arising out of an enforcement initiative to combat cherry-picking led by its Los Angeles regional office.

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