SEC sanctions advisor for deceptive cherry-picking scheme

The Securities and Exchange Commission (SEC) has concluded its action against Richard Keith Robertson and IFP Advisors, LLC, sanctioning them for a deceptive cherry-picking scheme that unfairly allocated trades to the detriment of their clients.

According to a news release, between January 2011 and October 2020, Richard Keith Robertson, 58, engaged in a scheme where he allocated profitable trades to his personal and family accounts, relegating unprofitable trades to his clients’ accounts. The SEC stated this misconduct directly violated his fiduciary duties, causing significant financial harm to his clients.

The SEC determined that IFP Advisors, LLC failed to supervise Robertson adequately. The agency emphasized the firm lacked effective policies and procedures to prevent such violations of the Advisers Act and its rules. The SEC also found that IFP Advisors, LLC made false and misleading statements in its Forms ADV, claiming to have safeguards to prevent investment advisor representatives from prioritizing their interests over those of their clients.

Legal issues

In the statement, the SEC highlighted their findings alongside their decision:

Cherry-picking scheme: Robertson’s manipulation of trade allocations to benefit his accounts at the expense of his clients was the primary legal issue. This unethical and illegal practice breaches fiduciary duties and undermines trust in the advisory relationship.

Failure to supervise: IFP Advisors, LLC faced scrutiny for not establishing and enforcing adequate supervisory procedures. The firm’s inability to detect and prevent Robertson’s actions demonstrated significant compliance deficiencies.

Misleading disclosures: The SEC also addressed misleading disclosures in the firm’s regulatory filings. IFP Advisors, LLC falsely claimed to have effective measures to prevent conflicts of interest, as evidenced by Robertson’s actions.

The SEC imposed several penalties and remedial actions against Robertson and IFP Advisors, LLC:

• Robertson must pay disgorgement of $592,437, prejudgment interest of $28,173.12, and a civil penalty of $300,000.
• IFP Advisors, LLC must pay a civil penalty of $400,000.

In addition to these financial penalties, the SEC established a Fair Fund under Section 308(a) of the Sarbanes-Oxley Act of 2002 to distribute the collected penalties and disgorgement to the harmed investors. The Fair Fund, totaling $1,320,610, will be managed by SS&C GIDS, Inc., as the appointed fund administrator.

The SEC is a federal agency responsible for enforcing securities laws and regulating the securities industry.