RIA Ordered to Cease-and-Desist and Fined on Charges of Unlawful Cross and Principal Trading

The SEC found that respondent, a registered investment adviser, arranged cross trade transactions in which three of its traders sold fixed-income securities from certain advisory client accounts to counterparty broker-dealers, and then the next day repurchased the same securities from the same broker-dealers for the accounts of other advisory clients. These cross trades caused certain advisory clients to unlawfully conduct trades with affiliates. Respondent also was found to have unlawfully acted as a principal for trades involving certain clients, as a result of the affiliations/ownership relationships existing between companies and clients.