'Cherry-picking' advisor pleads guilty in federal court

An investment advisor who previously agreed to pay the SEC $3 million to settle "cherry-picking" charges has now pleaded guilty in federal court to the same allegations.

Jonathan Vincent Glenn, the 54-year-old founder of Greenwich, Connecticut-based GlennCap, pleaded guilty in federal court in Hartford, Connecticut, on Friday to defrauding 45 clients of more than $2.7 million. Glenn admitted to carrying out the fraud using a "cherry-picking scheme" that allowed him to steer the best results from trades he made on behalf of favored clients to their accounts, as well accounts belonging to him and his family. The worst results, meanwhile, were reserved for his least-favored clients, according to prosecutors.

In its charges against Glenn, the Securities and Exchange Commission alleged that his cherry-picking was enabled by a practice known as block trading. In essence, Glenn was authorized to pool together his clients' assets and trade them together in bulk without paying particular attention to which account the money was being drawn from.

His firm's code of ethics obliged him to pay each of his clients the average return from a given day's trading. By reserving the best results for himself and favored investors, the SEC charged, he violated the basic promise he had made to all of his clients.

The SEC said some of Glenn's investors paid him and GlennCap an annual incentive that was equal to 20% of their gains in a year. That came on top of annual fees that were paid by all clients and were equal to 1.25% of the assets he had under management.

In neither admitting nor denying the SEC's charges, Glenn and his firm agreed on Sept. 14 to pay more than $2.7 million in disgorgement, most of which will be paid back to investors. He also consented to pay $251,357 in prejudgment interest, a civil penalty of $500,000 and to a ban from the industry.

In his federal case, Glenn pleaded guilty to one count of securities fraud carrying a maximum prison term of 25 years and a fine of nearly $5.4 million. His sentencing is scheduled for Dec. 28.

According to the Financial Industry Regulatory Authority's BrokerCheck database, Glenn joined the industry in 1993 with a position at the brokerage firm Kidder, Peabody. He later spent time at UBS, Merrill Lynch and Morgan Stanley, and was at Wells Fargo from 2013 to 2018. There are no customer complaints or other disclosures on his record.