The allegations read: The securities and exchange commission ("commission"), for its complaint against defendants douglas macwright ("macwright"), of short hills, nj, and highlander capital management, llc ("hcm"), alleges as follows: defendant macwright, through sec-registered investment adviser hcm and an affiliated broker-dealer (the "broker"), both owned and controlled by macwright at the time of the alleged wrongdoing, engaged in a long-running fraudulent trade allocation scheme - commonly referred to as "cherry-picking." in carrying out this scheme, macwright disproportionately allocated trades that had increased in value during the day, collectively worth more than $1 million, to a preferred account in the name of an entity that he and his family members controlled (the "preferred account").
macwright traded through a so-called average price account used by hcm and the broker to purchase securities on behalf of numerous client and customer accounts (the "average price account"). To carry out the cherry-picking, macwright would open a securities position in the average price account. If the position increased in value during the day, macwright generally closed out the position, thereby locking in the same-day profit, and allocated the trades and the resulting profits to the preferred account; but if the position decreased in value during the day, macwright generally allocated the trades to one or more accounts held by other hcm clients or broker customers, including accounts owned by macwright, macwright's family members, or entities he partially owned (the "non-preferred accounts").
hcm's written policies and procedures prohibited trade allocations that favored certain accounts and, prior to the entry of an order that was to be allocated to more than one account, required written order tickets to be completed that identified for which accounts the order was being placed and the proposed allocation of the order. Macwright was able to engage in the cherry-picking scheme because he failed to comply with these policies and procedures.
between april 22, 2015, and june 30, 2022 (the "relevant period"), the preferred account received over $1 million in illicit profits through the scheme.
by virtue of the foregoing conduct, defendants macwright and hcm violated section 10(b) of the securities exchange act of 1934 ("exchange act"), rules 10b-5(a) and (c) thereunder, and sections 206(1) and 206(2) of the investment advisers act of 1940 ("advisers act"). In addition, defendant hcm violated, and macwright aided and abetted hcm's violation of, section 206(4) of the advisers act and rule 206(4)-7 thereunder.
