SEC v. Steven J. Susoeff, Steve Susoeff, LLC (dba Meritage Financial Group) — U.S. Securities and Exchange Commission Litigation Release No. 26239, dated February 5, 2025.
Steven J. Susoeff, an investment adviser, engaged in a "cherry-picking" scheme where he allocated winning trades to favored accounts (including his girlfriend's and business associate's) and losing trades to other clients. This resulted in approximately $54,232 in ill-gotten gains for himself and $90,334 for favored accounts, while disfavored clients suffered $144,566 in losses. Susoeff consented to a final judgment permanently enjoining him from violating antifraud provisions and ordered to pay disgorgement, prejudgment interest, and a civil penalty.
In Plain English
Imagine you have a basket of stocks, some that went up in value and some that went down. The investment advisor was supposed to share these fairly among all his clients. Instead, he secretly put the winning stocks into accounts he liked (like his girlfriend's) and the losing stocks into accounts he didn't favor. He did this for about seven months until his broker stopped him.
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
- Managing Client Funds Between January and July 2021, Steven J. Susoeff, through his firm Meritage Financial, managed about $8 million for 59 clients. Susoeff had discretionary authority, meaning he could make investment decisions and execute trades on behalf of his clients.
- Using Block Trading Susoeff utilized a 'block trading account' to aggregate trades for multiple clients. This allowed him to execute a single large trade and then allocate the individual securities to specific client accounts later, even at the end of the trading day.
- The Cherry-Picking Strategy This end-of-day allocation provided an opportunity for Susoeff to 'cherry-pick.' He could choose which client accounts received the profitable trades and which received the losing trades.
- Favoring Specific Accounts Initially, Susoeff disproportionately allocated winning trades to his girlfriend's account (ending in 9566) and to accounts belonging to his business associate (ending in 3610 and 8378).
- Expanding Favoritism After a few months, Susoeff began allocating winning trades to his own personal account (ending in 4264) as well.
- Disadvantaging Other Clients Concurrently, Susoeff consistently allocated the losing trades to the accounts of his other, disfavored clients throughout the entire scheme.
- Broker's Warnings Ignored The broker holding the client accounts repeatedly warned Susoeff that he could not systematically advantage or disadvantage clients and needed fair allocation procedures. Susoeff ignored these warnings.
- Financial Impact of the Scheme Susoeff's cherry-picking resulted in approximately $54,232 in ill-gotten gains for his own account and $90,334 for the favored accounts of his girlfriend and business associate.
- Losses for Disfavored Clients Meanwhile, the disfavored client accounts suffered approximately $144,566 in first-day losses directly attributable to Susoeff's fraudulent trade allocations.
- Scheme Ends Due to Broker The cherry-picking scheme ceased only when the broker eventually removed Susoeff and Meritage Financial from its trading platform due to his conduct.
The Enforcement Action
On December 23, 2024, the SEC obtained a final judgment against Steven J. Susoeff, the sole owner and principal of Steve Susoeff, LLC (dba Meritage Financial Group). Susoeff consented to a final judgment permanently enjoining him from violating antifraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Advisers Act of 1940. He was ordered to pay disgorgement of $54,232, plus prejudgment interest of $11,695, and a civil penalty of $144,566.
Named in this action: Steven J. Susoeff, Steve Susoeff, LLC (dba Meritage Financial Group).