A Connecticut-based financial advisor and his firm have agreed to pay more than $3 million over allegations that he
The Securities and Exchange Commission announced on Sept. 14 that it had reached a settlement with the advisory firm GlennCap in Greenwich, Connecticut, and its owner Jonathan Vincent Glenn. The SEC, which regulates more than 15,000 federally registered investment advisors, accused GlennCap and Glenn of running a
According to the SEC, Glenn had discretionary authority over his clients' assets, meaning he had secured their permission to trade on their behalf without needing approval for each individual transaction. Using that authority, he engaged in block trading, meaning he pooled the assets together and invested them without keep track of which accounts the specific transactions were meant for.
Glenn charged his clients an annual fee equal to 1.25% of the assets he managed for them. Besides that, some investors paid an annual incentive fee equal to 20% of their gains in a given year.
The SEC charges he carried out his cherry-picking scheme by allocating more of his investment returns to two clients who paid the additional 20% incentive fees. The SEC also alleged Glenn directed a disproportionate amount of the returns to accounts controlled by himself and his firm, netting them $2.7 million.
The actions were in violation of GlennCap's own code of ethics, which obliged it to divide up investment proceeds among individual accounts at an average price, according to the SEC.
"Glenn allocated millions of dollars from profitable trades to accounts benefiting himself while unloading unprofitable trades on GlennCap's clients," Andrew Dean, the co-chief of the SEC enforcement division's asset management unit, said in a statement.
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Attempts to reach Glenn were unsuccessful.
Bob Pearce, a securities lawyer at the Law Offices of Robert Wayne Pearce in Boca Raton, Florida, said advisors who do block trading usually wait until the end of the workday to allocate returns to individual investors.
"And there is little supervision over them to make sure they are allocating correctly," Pearce said. "Of course, there are some guys who are not honest and allocate the winners — the cherries — to themselves and let others have the sour grapes."
The bulk of GlennCap and Glenn's penalty consists of slightly more than $2.7 million of disgorgement, most of which will be paid back to investors. Without admitting or denying the SEC's findings, they've also agreed to pay $251,357 in prejudgment interest and a civil penalty of $500,000. Glenn also accepted a ban from the industry.
According to the Financial Industry Regulatory Authority's BrokerCheck database, Glenn joined the industry in 1993 with a position at the brokerage firm Kidder, Peabody. He later spent time at UBS, Merrill Lynch and Morgan Stanley, and was at Wells Fargo from 2013 to 2018. There are no customer complaints or other disclosures on his record.
GlennCap has $14 million in assets under management, according to the firm's latest Form ADV, submitted to the SEC on March 23.
