SEC settles case against Bell Rock Capital and its principal
The Securities and Exchange Commission (SEC) has reached settlements in its case against Bell Rock Capital, LLC, and its principal, M. Cassandra Toroian, for operating a multi-year “cherry-picking” scheme that defrauded Bell Rock clients.
Among other things, Defendants agreed to pay disgorgement of $883,597, prejudgment interest of $185,451, and combined civil penalties of $440,000.
The SEC’s complaint alleged that, from at least January 1, 2011, through December 31, 2015, Toroian defrauded Bell Rock clients through a cherry-picking scheme. Specifically, the SEC’s complaint alleged that Toroian placed trades through a master trading account and disproportionately allocated profitable trades to accounts belonging to herself and her family members, and disproportionately allocated unprofitable trades to many of Bell Rock’s clients.
The complaint further alleged that Toroian made material misrepresentations to clients in Bell Rock’s Form ADV and other communications, including, for instance, that Bell Rock and its associated persons would always act in their clients’ best interest and not put their interests before the interests of clients.
The complaint also alleged that Bell Rock failed to adopt and implement written policies and procedures reasonably designed to prevent cherry picking in violation of Section 206(4) the Investment Advisers Act of 1940 (“Advisers Act”) and Rule 206(4)-7 thereunder, and that Toroian aided and abetted Bell Rock’s failure.
Without admitting or denying the allegations, Toroian has agreed to the entry of a final judgment: (i) that permanently restrains and enjoins her from violating Section 17(a) of the Securities Act of 1933 (“Securities Act”), Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act, and from aiding and abetting an investment adviser’s violations of Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder; (ii) ordering her to pay disgorgement of $883,597, plus prejudgment interest of $185,451; and (iii) ordering her to pay a penalty of $220,000.
Without admitting or denying the allegations, Bell Rock has agreed to the entry of a final judgment: (i) that permanently restrains and enjoins it from violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, Sections 206(1), 206(2), and 206(4) of the Advisers Act and Rule 206(4)-7 thereunder; and (ii) ordering it to pay a penalty of $220,000.
The settlements are subject to court approval.