The Securities and Exchange Commission charged a New Jersey asset management firm and its top executive with defrauding clients in a “cherry-picking scheme” that the regulator claimed involved trades made on the Charles Schwab online trading platform.
In a complaint filed Thursday in the U.S. District Court for the District of New Jersey, the SEC claimed Maplewood, New Jersey-based RRBB Asset Management and Carl S. Schwartz, its president, co-owner and chief compliance officer, traded securities in RRBB’s omnibus account and delayed allocating the securities to specific client accounts until he had observed the securities’ performance over the course of the day.
Schwartz allegedly then allocated profitable trades to favored accounts and allocated less profitable trades and losing trades to RRBB’s other clients. The complaint claimed Schwartz disproportionally allocated unprofitable trades to six client accounts associated with two elderly widows, including a charitable foundation of which Schwartz serves as a trustee.
Schwab declined to comment Monday. Schwartz did not immediately respond to a request for comment.
“Schwartz generally executed and allocated trades through an online platform provided by Charles Schwab,” according to the complaint. However, “in 2017, Schwab terminated RRBB from its platform due to concerns about Schwartz’s use of RRBB’s omnibus trading account,” the SEC said.