SEC Charges Rehoboth Beach, Bell Rock Capital, LLC, and M. Cassandra Toroian for operating a multi-year cherry-picking scheme
Washington, DC (STL.News) The Securities and Exchange Commission today filed charges against Rehoboth Beach, Delaware-based Bell Rock Capital, LLC, and its principal, M. Cassandra Toroian, for operating a multi-year cherry-picking scheme that defrauded Bell Rock clients.
The SEC’s complaint alleges that from at least January 1, 2011, through December 31, 2015, Toroian traded securities in Bell Rock’s master trading account and delayed allocating the securities to specific client accounts until after she had observed the securities’ performance over the course of the day. She allegedly then disproportionately allocated profitable trades to accounts that belonged to her and her family members and allocated less profitable and losing trades to client accounts. According to the SEC’s complaint, the securities that Toroian allocated to accounts held by Toroian and her family members increased in value by more than 2%, or a gain of over $1 million, between the time Toroian purchased them and when she allocated them. By contrast, the securities that Toroian allocated to her clients’ accounts decreased in value by -more than 1.3%, or a loss of over $1 million, between the time Toroian purchased them and when she allocated them. The complaint further alleges that Bell Rock and Toroian misrepresented to clients that all trades would be allocated fairly and that Bell Rock and Toroian would not put their interests before their clients’ interests. The complaint also alleges that Bell Rock failed to implement policies and procedures designed to prevent Toroian’s cherry-picking.
The SEC’s complaint, filed in the United States District Court for the Eastern District of Pennsylvania, charges Bell Rock and Toroian with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Section 17(a) of the Securities Act of 1933, and Sections 206(1), 206(2) of the Investment Advisers Act of 1940. It also charges Bell Rock with failing to adopt and implement adequate compliance policies in violation of Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder and charges Toroian with aiding and abetting those violations. The SEC seeks injunctive relief, disgorgement of Toroian’s ill-gotten gains with prejudgment interest, and civil penalties.
The SEC’s investigation was conducted by Han Nguyen and Julia C. Green of the Division of Enforcement’s Market Abuse Unit in the Philadelphia Regional Office, with assistance from John Rymas in the Market Abuse Unit’s Analysis and Detection Center and Raymond Wolff and Stuart Jackson in the Division of Economic and Risk Analysis. The litigation will be led by John T. Crutchlow and Spencer Willig. Joseph G. Sansone, Market Abuse Unit Chief, and Scott A. Thompson, Acting co-Regional Director of the Philadelphia Regional Office, are supervising the action.