The Securities and Exchange Commission obtained a final judgment against a former California advisor in connection with what was alleged to be a ‘cherry-picking’ scheme, Financial Advisor reported.
57-year-old James D. Burleson, who was managing partner of Burleson & Company in Petaluma, was ordered to pay nearly $2.3 million to settle the matter.
The SEC filed a complaint in November 2024 with the U.S. District Court for the Northern District of California alleging that, from August 2020 to October 2022, “Burleson used his firm’s omnibus trading account to disproportionately allocate profitable option trades to his personal account and disproportionately allocate unprofitable options trades to his clients’ accounts.”
The investigation found that the scheme netted Burleson over $1.8 million in first-day profits while clients lost over $2.8 million, and that his return amounted to 26.5% compared with a –5.1% loss for his clients. The odds of those results occurring randomly were “less than one in a million,” according to the SEC, which added, ““Burleson waited to see whether his options trades were profitable before deciding whether to allocate the trades to his own personal account or those of his clients.”
The commission said Burleson was put on notice by brokerage representatives in March 2021 that “they had identified preferential allocations of options trades made in the block account, but Burleson continued to make options trades … without identifying which client they were made for—and continued to allocate those trades until after the market closed,” and that after the warning he tried to conceal the cherry picking by “including a few client accounts when allocating these trades to his own accounts.”
Burleson consented to a final judgment in which he is permanently enjoined from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, Section 17(a) of the Securities Act, and Sections 206(1) and 206(2) of the Investment Advisers Act.
He agreed to pay disgorgement of $1,837,700, prejudgment interest in the amount of $216,590, and a civil penalty in the amount of $230,464. Burleson also agreed to settle the administrative proceeding the SEC initiated against him, consenting to a bar from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization with the right to apply for reentry after five years.
Burleson did not respond to a request for comment sent to his LinkedIn profile.
The attorneys at Hyman Cotter PC have decades of experience dealing with securities fraud cases and have a deep understanding of how capital markets and financial service firms are intended to work to protect investors. If you think your financial professional or firm engaged in misconduct that caused you investment losses, contact Hyman Cotter PC at 312-291-4600 or through our online contact form for a no-cost evaluation of your matter
