New York Securities Lawyer Blog
The Securities and Exchange Commission Enforcement Division (“SEC”) filed an Order Instituting Administrative And Cease-And-Desist Proceedings (“Order”) which alleges that J.S. Oliver Capital Management (“J.S. Oliver”), its President Ian O. Mausner, and a portfolio manager and chief compliance officer Douglas Drennan, were involved in a cherry-picking scheme in which J.S. Oliver, Mausner and Drennan would attribute profitable trades to hedge funds which were affiliated with J.S. Oliver. The SEC Order also claims that Mausner misappropriated over $1.1 million in “soft dollars,” which was not disclosed to customers. According to the Order, “[s]oft dollar credits arise from the client commission arrangement between an investment adviser and the broker-dealer that handles the trades for the adviser. Generally, a client’s investment assets are used to pay additional commissions – called ‘soft dollar credits’ – that the broker-dealer sets aside as payment for legitimate research and brokerage expenses of the adviser.” Further, the Order alleges that from June 2008 through November 2009, J.S. Oliver’s clients lost $10.7 million from the cherry-picking scheme. In a press release issued by the SEC, Marshall S. Sprung, Co-Chief of the SEC Enforcement Division’s Asset Management Unit stated, “Mausner’s fraudulent schemes were a one-two punch that betrayed his clients and cost them millions of dollars . . . Investment advisers must allocate trades and use soft dollars consistent with their fiduciary duty to put client interests first.”
Lax & Neville LLP has nationally represented small broker-dealers, investment advisers, financial services professionals and securities industry companies in regulatory matters and securities-related and commercial litigation. Additionally, Lax & Neville has extensive experience in successfully prosecuting claims on behalf of customers and investors who have suffered losses. Please contact our team of attorneys for a consultation at (212) 696-1999.