Cherry Picking Adviser is Barred for Five

Cherry picking is a practice long targeted by the Commission. At a minimum it is the ultimate conflict of interest.  Viewed for what it is, the practice is at once theft and a lie.  It centers on trading by a securities professional such as an investment adviser to whom clients have given the discretion to trade for them. The adviser, who has a fiduciary duty to the clients, then trades in the client’s account,  At the end of the day the adviser then takes two key steps: 1) The positions traded are liquidated; and 2) those which are profitable are allocated to the adviser;   those with losses are allocated to the clients. SEC v. Burleson,  No. 3:24-cv-08246 (N.D. Cal.)(the settled action is discussed in a brief article on the Commissions website for August 26, 2025; the initial case is discussed in more detail in an earlier post on this blog dated November 21, 2024).

According to the Commission’s complaint in Mr. Burleson’s case, the adviser cherry picked his clients for a period of years, beginning in March 2006.  James Burleson, who founded and owned Burleson & Company,  repeatedly allocated most of the profitable trades to his account. In contrast, most of the accounts with losing positions were allocated to clients.  It should come as no surprise that Mr. Burleson had profits in his account – about $1.8 million.  Equally predictable is the fact that the client accounts had losses which totaled about $3.2 million.

Mr. Burleson settled the Commission’s case against him following about two years of litigation.  He consented to the entry of permanent injunctions based on Exchange Act Section 10(b) and Rule 10b-5 and Advisers Act Sections 206(1) and (2).  He also agreed to pay disgorgement of $1,837,700, prejudgment interest of $216,590 and a penalty of $230,464.  In addition, the adviser agreed to the filing and settlement of a parallel administrative proceeding in which he agreed to the entry of a bar which precludes him from acting as a broker, dealer or other securities professional for a period of five-years. See  Lit. Rel. No. 26385 (August 26, 2025)