IFP Advisors fined $400K for supervision failures in ex-rep’s ‘cherry-picking’ scheme

IFP Advisors and its former investment adviser representative, Richard Keith Robertson of California, agreed to settle charges for the “fraudulent practice of preferentially allocating profitable trades or failing to allocate unprofitable trades to an adviser’s personal accounts at the expense of the adviser’s client accounts,” according to an SEC administrative proceeding.

IFP was fined $400,000, censured, and must retain an independent compliance consultant to review its policies and procedures regarding trade allocation, monitoring, and recordkeeping. The firm did not admit nor deny the agency’s findings.

From January 2011 to December 2018, Robertson’s alleged misconduct took place without the knowledge of IFP because of the firm’s failure to supervise Robertson and implement policies and procedures reasonably designed to prevent unfair trade practices, according to the SEC’s order.

Robertson was never audited during his tenure at IFP, and the firm never reviewed his trading as required by its own compliance manuals, per the order. Instead, it allegedly relied on annual attestations from Robertson and copies of his brokerage records.

IFP was further faulted for misrepresenting in Form ADV the safeguards it had in place to prevent representatives from serving their interests over those of clients.

The duration of Robertson’s alleged misconduct continued beyond his time at IFP and into October 2020, when he was working as a representative at both an SEC-registered investment adviser and separately registered broker-dealer, according to the agency.

Without admitting or denying the SEC’s findings, Robertson agreed to pay disgorgement of $592,437, prejudgment interest of $28,173, and a penalty of $300,000. He also consented to a cease-and-desist order, permanent associational bar, investment company bar, and penny stock bar.

The case originated from the SEC Market Abuse Unit’s Analysis and Detection Center, which uses data analysis tools to detect suspicious trading patterns.

IFP did not respond to a request for comment.