A Greenwich investment advisor pleaded guilty to defrauding investment clients through a “cherry-picking” securities scheme.
“Cherry-picking” involves investment advisors who execute trades without assigning those trades to a particular trading account until the individual determines whether or not the trade has become profitable or suffered losses. The responsible individual then allocates the profitable trades to favored accounts – often the individual’s own accounts – and assigns unprofitable trades to disfavored client accounts.
Jonathan Vincent Glenn, who owned Glenn Capital LLC (also known as GlennCap LLC), managed his advisory clients’ accounts and was authorized to make trading decisions on each client’s behalf without seeking approval for each trade. Glenn placed trades on behalf of advisory clients, himself, or family members by trading directly in the relevant individual account, or by placing block trades in Glenn Capital’s omnibus account and allocating the block trades among the relevant individual accounts.
In pleading guilty, Glenn admitted that he defrauded clients by retroactively allocating profitable omnibus-account trades to favored clients, family, and personal accounts, and unprofitable omnibus-account trades to non-favored-client accounts. Glenn did not inform his clients that he was “cherry picking,” but instead gave the false impression that he allocated trades fairly and according to a pre-determined allocation methodology.
Through this scheme, Glenn defrauded more than 45 clients of a total of more than $2.7 million. Glenn pleaded guilty to one count of securities fraud, which carries a maximum term of imprisonment of 25 years, and a fine of up to approximately $5.4 million.
Glenn is released pending sentencing, which is scheduled for Dec. 28.
