The Securities and Exchange Commission has filed a complaint against Orange County, California Strong Investment Management and its president and sole owner, Joseph B. Bronson, for allegedly operating a “cherry picking” scheme, which defrauding Strong’s clients. The complaint alleges that Bronson’s brother and former chief compliance office of Strong, John B. Engebretson, abdicated his compliance responsibilities and ignored numerous red flags raised during the course of the scheme.
The complaint claims that for more than four years, Bronson traded securities in Strong’s omnibus account, but delayed allocating the securities to client accounts, until he observed the performance of the trades over the course of the day. It is alleged that Bronson earned substantial profits at his clients’ expense by “cherry picking” the trades. He is accused of allocating the profitable trades to himself, while allocating the unprofitable trades to Strong’s clients.
It is also alleged that Strong and Bronson misrepresented their trading and allocation practices in the firm’s Forms ADV. The SEC argues that Engebretson failed in his role as chief compliance officer. At this point in time, the defendants are innocent until proven guilty beyond a reasonable doubt in a court of law. Further details can be found here.