Love at first fraud: Advisors stole from clients, then married, SEC says

Sometimes, orchestrating an alleged multimillion-dollar fraud can bring two people together.

Two advisors met while working at Chase Investments and later founded an RIA that defrauded $4.5 million from clients by “cherry picking” winning trades and stiffing clients with the losses, the SEC says.

Then, they got married a couple years later.

Wesley Kyle Perkins and his now-wife Priscilla Gilmore Perkins used their jointly-founded RIA, World Tree Financial, to set up an omnibus account for approximately 277 clients, according to the complaint. The couple then funneled profits from favorable trades into at least nine accounts they controlled, the regulator says.

Omnibus accounts let advisors trade securities on behalf of multiple clients at the same time in a “block trade” without identifying to the broker which trade was made for which client. Since stock prices fluctuate throughout the day, advisors who use this method are supposed to allocate the trades to the proper accounts using an average price.

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The millions in losses constituted both realized and unrealized losses, depending on whether the securities were sold at the time of the alleged fraud, the regulator says.

The action is the sixth cherry-picking case the regulator has brought in a recent initiative. This month, a New Jersey-based broker was accused of misusing client funds and profiting at least $700,000 in illegal trades, says the SEC.

“The Commission has brought numerous cases in recent months aimed at protecting unsuspecting retail investors from investment advisers who allegedly cheat their clients by cherry-picking profitable trades,” says Michele Wein Layne, director of the SEC’s Los Angeles Regional Office. “This action, which alleges that World Tree and Perkins cherry-picked trades to their clients’ detriment for over four year, reflects our commitment to ferreting out this practice.”

In the case of World Tree Financial, one high-net-worth client with more than $20 million in assets with the firm, was handed the majority of the losses, according to the complaint. The account was large enough to absorb the losses without the client becoming suspicious, the SEC says.

“In doing so, they breached the fiduciary duties they owed their clients,” according to the complaint. “Perkins took profits for himself and others, while at the same time causing substantial losses for the disfavored client.”

After meeting at Chase Investments, the couple co-founded the Lafayette, Louisiana-based World Tree Financial in 2009, the SEC says. They eventually married in 2017, according to the complaint.

The couple misused the omnibus account from March 2011 until September 2015, according to the complaint. In April 2015, the firm’s broker-dealer used sampling analysis to determine that when trading the same securities, the accounts held by Perkins and Gilmore substantially outperformed other accounts, the SEC says. The broker terminated the relationship after World Tree did not produce requested documents showing how the firm was allocating the trades, according to the complaint.

“This action, which alleges that World Tree and Perkins cherry-picked trades to their clients’ detriment for over four year, reflects our commitment to ferreting out this practice," says Wein Layne.

During the time of the alleged fraud, Perkins was registered with the Albany, New York-based Purshe Kaplan Sterling Investments, according to FINRA BrokerCheck records. The firm did not return a request for comment.

According to the SEC, there is less than a one-in-a-million chance that the disparate returns that affected disfavored clients’ accounts, when compared to World Tree's other accounts, were the product of mere random chance.

As of March 2018, World Tree managed $54 million in assets with 161 advisory clients, 11 of which were high-net-worth individuals, according to SEC filings. World Tree has two employees, namely Perkins and Gilmore, who together oversaw all the advisory functions acting as chief investment officer and chief compliance officer, the SEC says.

Neither Perkins nor World Tree returned a request for comment. Reached by phone, Gilmore declined to comment.

The SEC also alleges the couple misrepresented material information by telling clients that trades would be allocated fairly and that the couple would not be trading in the same securities as their clients, the SEC says. The complaint seeks permanent injunctions, disgorgement and civil penalties.

Perkins has four disclosures on record dating back to 2007, per FINRA BrokerCheck records. The latest settlements from June and July 2016 allege a failure to disclose material facts and misrepresentation, respectively, per BrokerCheck. They were both settled for $55,000 each.

Legal representation for the defendants was not immediately available.