RIA, Owner to Pay $2M to Settle SEC’s Cherry-Picking Charges

Douglas MacWright and his firm, Highlander Capital Management, ran a multi-year scheme that produced more than $1 million in fraudulent gains, the SEC alleged.

A New Jersey–based advisor has settled Securities and Exchange Commission charges that he and his firm ran a long-term cherry-picking scheme.

Douglas MacWright, a 42-year industry veteran, and his firm, Highlander Capital Management, agreed to pay a total of nearly $2 million to resolve the allegations, according to an SEC litigation release published this week. MacWright and his firm neither admitted nor denied the regulator’s allegations. MacWright as of Wednesday was no longer registered as a broker or investment advisor, according to his registration records.

From April 2015 to June 2022, MacWright would open a position and close out the trade on the same day if its value increased, allocating profits to a preferred account owned by him and his family members, but if the trade’s value decreased during the day, MacWright would disproportionately stick the loss on client accounts, as well as non-preferred accounts owned by him and his family members, the SEC alleged.

Prior to a trade affecting more than one account, HCM’s policies required written order tickets that included the specific accounts the order would be allocated to and the proposed allocation amount. “MacWright did not follow this requirement and provided allocation instructions for these trades only after the trades were executed,” the SEC said.

The first-day returns of preferred accounts were 0.83% while returns for non-preferred accounts were negative 1.03%, according to the SEC.

“The likelihood that MacWright would have earned these returns for himself in the absence of cherry-picking, with trade allocations determined by chance, is less than one in a billion,” the SEC said in its complaint.

The SEC accused MacWright and his firm of generating $1 million in profits from the illegal practice.

The regulator ordered MacWright to pay $1,118,718 in disgorgement, $253,903 in prejudgment interest and a civil penalty of $400,000. HCM must pay a civil penalty of $150,000.

HCM declined to comment on the case.

MacWright entered the industry as a broker in 1981 with Ryan, Beck & Co., moved in 1991 to Highlander Capital Group, an associated broker-dealer of HCM, and first registered as an investment advisor with HCM in 2004, according to his BrokerCheck record and the SEC’s Investment Adviser Public Disclosure database.

HCM, based in Short Hills, New Jersey, oversees about $230 million in client assets, according to the company’s Form ADV.

HCG’s withdrawal as a brokerage firm, initiated last month, is pending, according to the firm’s BrokerCheck record.

If you suspect your advisor mismanaged your money or committed negligence or fraud, call Sonn Law Group for a free consultation at 833-912-3000 today.