CHERRY-PICKING SCANDAL! Advisor STOLE WINNERS, GAVE LOSERS TO CLIENTS!

SEC v. Eric McKenzie Cobb — U.S. Securities and Exchange Commission Litigation Release No. 26201, dated December 20, 2024.

The SEC charged Eric Cobb, a former representative of SeaCrest Wealth Management, with a fraudulent cherry-picking scheme. Cobb allegedly allocated profitable trades to his own accounts while assigning losing trades to his clients, and also placed clients in risky investments unsuitable for their profiles. The SEC seeks to hold him accountable for violating antifraud provisions.

In Plain English

Imagine a stockbroker who gets to decide which of their clients gets a winning lottery ticket and which gets a losing one. This broker, Eric Cobb, allegedly did something similar with stock trades. He would buy stocks and then, after seeing if they went up or down, decide which client's account would get the profitable trade and which would get the losing one. He also allegedly put clients into very risky investments that weren't a good fit for them.

Disclaimer: all facts are drawn from the SEC's own filings; the claims described are allegations unless and until a court rules or the parties settle, and some cases end in dismissal.

How the Alleged Scheme Worked

1. Acquiring Securities Eric Cobb, while working for SeaCrest Wealth Management, would buy securities in a bulk account. This allowed him to purchase a block of shares without immediately assigning them to specific clients.
2. Waiting for Price Movement After buying the securities, Cobb would often wait. This waiting period allowed him to see if the price of the securities went up or down in the market.
3. Allocating Profitable Trades If the securities increased in price, Cobb allegedly allocated the profitable trades to his personal account and his wife's account. This ensured he personally benefited from the gains.
4. Allocating Unprofitable Trades Conversely, if the securities decreased in price, Cobb allegedly allocated the unprofitable trades to the accounts of his other clients. This shifted the losses onto unsuspecting investors.
5. Unsuitable Investments In addition to cherry-picking, Cobb allegedly placed clients into highly volatile and risky investments. These investments were often inconsistent with the clients' stated investment profiles and risk tolerance.

The Enforcement Action

The SEC charged Eric McKenzie Cobb with cherry-picking and unsuitable investment recommendations. The complaint alleges violations of antifraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Advisers Act of 1940.

Named in this action: Eric McKenzie Cobb.

Original SEC litigation release ↗ · Browse all cases