The Securities & Exchange Commission today announced settled fraud charges against GlennCap LLC, a Connecticut-based investment advisory firm, & its owner, Jonathan Vincent Glenn, for allocating profitable securities trades to favored accounts, including GlennCap’s own accounts & client accounts that paid GlennCap a higher percentage of positive returns in fees, while allocating a disproportionate amount of unprofitable trades to disfavored clients, a practice known as cherry-picking.
According to the SEC’s order, between at least January 2020 & March 2022, Glenn, who was also an investment adviser representative of GlennCap, engaged in block trading, which allowed him to pool funds from multiple clients’ accounts into trades, & then, after seeing whether a position increased or decreased in value, he allocated the more profitable trades to accounts that he favored. The probability that the favored accounts received the more profitable trades by chance was statistically nearly zero. The SEC’s order finds that Glenn & GlennCap received at least $2.7 million in profits from the cherry-picking scheme. Further, the SEC order found that Glenn made false & misleading statements regarding GlennCap’s trading practices in documents it provided to clients & prospective clients.
“Glenn allocated millions of dollars from profitable trades to accounts benefitting himself while unloading unprofitable trades on GlennCap’s clients,” said Andrew Dean, Co-Chief of the SEC Enforcement Division’s Asset Management Unit. “The SEC has the means to identify investment advisers that abuse their position through cherry-picking, as Glenn & GlennCap did. We use these methods to ensure investor trust in our markets.”
The SEC’s order finds that Glenn & GlennCap violated Section 10(b) of the Securities Exchange Act of 1934 & Rule 10b-5 thereunder, Section 17(a) of the Securities Act of 1933, & Sections 206(1) & 206(2) of the Investment Advisers Act of 1940. Glenn & GlennCap consented, without admitting or denying the SEC’s findings, to the entry of a cease-&-desist order requiring them to pay more than $3 million in civil penalties, disgorgement, & prejudgment interest.
The SEC’s investigation was conducted by Colin Forbes of the Asset Management Unit & John McCann & Al Day of the Boston Regional Office, with the assistance of Stuart Jackson & Stephen Graham of the Division of Economic & Risk Analysis. The investigation was supervised by Robert Baker of the Boston Regional Office & Mr. Dean & Corey Schuster of the Asset Management Unit. The SEC appreciates the assistance of the Securities & Business Investments Division of the Connecticut Department of Banking.