The Securities and Exchange Commission today announced settled fraud charges against GlennCap LLC, a Connecticut-based investment advisory firm, and its owner, Jonathan Vincent Glenn, for allocating profitable securities trades to favored accounts, including GlennCap’s own accounts and 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 and 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, and 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 and GlennCap received at least $2.7 million in profits from the cherry-picking scheme. Further, the SEC order found that Glenn made false and misleading statements regarding GlennCap’s trading practices in documents it provided to clients and 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 and GlennCap did. We use these methods to ensure investor trust in our markets.”
The SEC’s order finds that Glenn and GlennCap violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Section 17(a) of the Securities Act of 1933, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Glenn and GlennCap consented, without admitting or denying the SEC’s findings, to the entry of a cease-and-desist order requiring them to pay more than $3 million in civil penalties, disgorgement, and prejudgment interest.
The SEC’s investigation was conducted by Colin Forbes of the Asset Management Unit and John McCann and Al Day of the Boston Regional Office, with the assistance of Stuart Jackson and Stephen Graham of the Division of Economic and Risk Analysis. The investigation was supervised by Robert Baker of the Boston Regional Office and Mr. Dean and Corey Schuster of the Asset Management Unit. The SEC appreciates the assistance of the Securities and Business Investments Division of the Connecticut Department of Banking.