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Financial services

SEC Imposes $160,000 Penalty on Eric Cobb for Cherry-Picking Scheme

Strategic Insights

— 1 min read

The US Securities and Exchange Commission (SEC) has imposed a $160,000 penalty on Eric Cobb, a former South Carolina-based investment adviser representative, for engaging in a long-running fraudulent trade allocation scheme commonly referred to as "cherry-picking." The scheme involved Cobb disproportionately allocating profitable trades to his personal and wife's accounts, while allocating unprofitable trades to certain client accounts. According to the SEC's complaint, Cobb executed the scheme by buying securities in an omnibus account and waiting a day or longer to allocate the trades, allowing him to see whether the securities had increased in price.

Key Takeaways:

  • The SEC issued a final judgment against Eric Cobb, a former investment adviser representative, alleging that he engaged in a fraudulent trade allocation scheme.
  • Cobb allegedly allocated profitable trades to his personal and wife's accounts, while allocating unprofitable trades to certain client accounts from at least June 2019 to mid-April 2022.
  • Cobb was ordered to pay $114,093 in disgorgement plus $22,293.33 in prejudgment interest and a civil monetary penalty of $25,000.
  • The SEC's investigation was conducted by Bennett Ellenbogen, James Flynn, Richard Primoff, and Lindsay S. Moilanen and was supervised by Sheldon L. Pollock.
  • The litigation was led by Mr. Ellenbogen and Mr. Primoff and supervised by Alex Vasilescu.

Statistics:

  • The penalty imposed on Eric Cobb was $160,000.
  • The disgorgement ordered was $114,093.
  • The prejudgment interest was $22,293.33.
  • The civil monetary penalty was $25,000.
  • The scheme allegedly occurred from at least June 2019 to mid-April 2022, a total of 31 months.
  • Theomallocation scheme was conducted on an omnibus account.
  • Cobb allegedlyplaced clients in highly volatile and risky investments that were inconsistent with their investment profiles.

Sources:

  • SEC Litigation Release No. 1:24-cv-09494; S.D.N.Y. filed Dec. 12, 2024
  • https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26342

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