The US Securities and Exchange Commission (SEC) has sharpened its focus on “cherry-picking,” a practice in which investment advisers allocate profitable trades to favored accounts – sometimes their own – while assigning less profitable trades to unfavored clients and funds. Financial penalties are only part of the cost for advisers caught up in these enforcement actions.
Below, we take a closer look at enforcement actions against cherry-picking and set out key takeaways for investment advisers.
Recent enforcement highlights
In the recently settled cases against Eric Cobb (July 2025) and SeaCrest Wealth Management (December 2024), the SEC found that, between 2019 and 2022, Cobb, a former investment adviser at SeaCrest, used an omnibus trading account to delay trade allocations until he could assess their performance. Profitable trades were routinely allocated to his personal and his wife’s accounts, while unprofitable trades were assigned to client accounts. He was barred from the securities industry and ordered to pay over $160,000 in disgorgement, interest, and civil penalties. The SEC’s order against SeaCrest found that the firm failed to implement policies and procedures reasonably designed to prevent violations of securities laws and failed to supervise Cobb’s activities. SeaCrest was censured and ordered to pay a $375,000 penalty.
In June 2025, the SEC brought an action against investment adviser Gregory A. Zandlo and North East Asset Management Group. From 2020 to 2022, Zandlo allocated winning trades to himself, his family members, and the firm’s proprietary account, while assigning losing trades to 78 client accounts. The firm and Zandlo traded securities in blocks on behalf of multiple client accounts and purchase orders filled at different prices throughout the trading day. The SEC’s analysis showed that 91 percent of trades in favored accounts were profitable, compared to only 31 percent in client accounts. Zandlo and the firm settled the fraud charges, agreeing to pay over $250,000 in combined penalties and disgorgement. The firm was censured, and Zandlo was barred from the industry.
In another resolved case announced in February 2025, the SEC charged Steven Susoeff and Meritage Financial Group with engaging in a similar cherry-picking scheme from 2018 to 2021. Susoeff used a block trading account at Meritage to allocate profitable trades to favored accounts and his personal account and losing trades to unfavored client accounts. Susoeff carried out this scheme by executing trades in the block trading account and taking advantage of the time he had to allocate those trades in order to determine the security’s intraday performance. The SEC obtained a final judgment against Susoeff, which included over $210,000 in disgorgement, interest, and civil penalties, and a permanent injunction against future violations of antifraud provisions. Meritage liquidated its assets and closed during the proceeding.
How the SEC detects cherry-picking
The SEC detects cherry-picking schemes through several methods, including trade blotter analysis. One key indicator is the delay in trade allocations from omnibus or block trading accounts, which allows advisers to assign trades after observing their performance. The SEC also employs statistical analysis to identify patterns, such as a disproportionate number of profitable trades in adviser accounts compared to client accounts. Client complaints and whistleblower tips can also trigger investigations. Additionally, the SEC looks for unusual performance patterns that are inconsistent with market conditions, which may suggest manipulation.
Risks for investment advisers
Investment advisers who engage in – or fail to prevent – cherry-picking face significant risks. These include civil penalties and disgorgement of ill-gotten gains, industry bars or suspensions, and reputational damage that can affect future business. Advisory firms may be held liable for supervisory failures if they lack adequate controls to prevent such misconduct. Firms also may find the reputational harm from their Form ADV enforcement disclosures – reportable for ten years or more – to ultimately be costlier than the fines.
Key takeaways for investment advisers
The SEC is sending a clear message that cherry-picking is an enforcement priority. Investment advisers are encouraged to proactively review their compliance controls, trade allocation procedures, and employee training programs to ensure alignment with regulatory expectations.
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