SEC Charges Louisiana-Based Investment Adviser Representative with Cherry-Picking and His Former Firm with Compliance Failures

The Securities and Exchange Commission (SEC) has filed a complaint in the U.S. District Court for the Eastern District of Louisiana against Steven J. Jacobson, an investment adviser representative based in New Orleans. The complaint alleges that Jacobson engaged in fraudulent activities by orchestrating a cherry-picking scheme that harmed his advisory clients. Additionally, the complaint charges Jacobson’s former firm, Advisor Resource Council (“ARC”), with making false and misleading statements in its ADV brochures and failing to implement adequate policies and procedures to ensure equitable trade allocations among its advisory clients.

According to the SEC’s complaint, between July 31 and October 1, 2020, Jacobson used ARC’s block account to selectively choose profitable option trades for himself, his mother, and a select group of preferred accounts, while assigning unprofitable trades to disfavored clients. Jacobson and his mother purportedly gained more than $200,000 in illegal profits from this scheme. The complaint further details that Jacobson’s fraudulent activities were halted when the broker-dealer custodian overseeing the accounts he managed detected suspected cherry-picking and subsequently terminated his access to the platform.

The SEC’s complaint also alleges that ARC made false and misleading statements in its Forms ADV Part 2A. Specifically, ARC misrepresented that its trade allocation procedures would be equitable and fair. Furthermore, ARC purportedly failed to implement the necessary policies and procedures designed to prevent cherry-picking and failed to maintain certain required books and records.

The SEC’s complaint charges Steven J. Jacobson with violating Section 17(a)(1) of the Securities Act of 1933, Section 10(b) of the Exchange Act of 1934, and Rules 10b-5(a) and (c) thereunder, as well as Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. It also alleges that ARC violated Section 17(a)(2) of the Securities Act and Sections 206(2), 206(4), and 204(a) of the Advisers Act, along with Rules 206(4)-7, 204-2(a)(7), and 204-2(a)(14) thereunder. The complaint names Jacobson’s mother as a relief defendant.

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.