(Article from Registered Funds Regulatory Update, April 2026)
For more information, please visit the Registered Funds Resource Center.
On February 10, 2026, the SEC entered into a settlement order with a state-registered investment adviser and its CCO, who was also a minority-owner and executive vice president of the investment adviser, for improper trade allocations.
From December 2015 through October 2019, the CCO allegedly breached his fiduciary duties, and caused the investment adviser to breach its fiduciary duties, by batching client orders and executing securities transactions through block-trading omnibus accounts, rather than through individual accounts over which he had discretionary authority, in order to allocate profitable first-day trades disproportionately to his personal account and unprofitable trades to advisory accounts. As a result, the CCO allegedly allocated $78,490 in excess first-day gains to himself.
In addition, the Order notes that the investment adviser’s brochure throughout the relevant period conflicted with Defendants’ practices specifically by stating that: (i) the adviser and its employees would seek “to minimize the risk that any advisory client could be systematically advantaged or disadvantaged in connection with… batching [of client orders]”; (ii) no employee would place its own interest over that of a client; and (iii) employee trading was reviewed on a regular basis. Contrary to those disclosures, clients were allegedly systematically disadvantaged as a result of the CCO’s batching and allocation of orders and the investment adviser’s failure to conduct any review of his trading.
Considering the facts and conduct described, the SEC found that Defendants willfully violated the anti-fraud provisions of Section 206(2) of the Advisers Act. Without admitting or denying the SEC’s findings, Defendants each consented to a cease-and-desist order. In addition, the CCO consented to (i) a six-month suspension from association with, among others, any broker, dealer, or investment adviser, (ii) a six-month ban from serving or acting as an employee, officer, or director of an investment adviser or principal underwriter for a registered investment company or any of their affiliates; and (iii) a civil monetary penalty of $40,000, as well as disgorgement and prejudgment interest. The investment adviser also consented to a censure.
In the Matter of Barrington Asset Management, Inc., et al., SEC Admin. File No. 3-22590
(Feb. 10, 2026), available at:
https://www.sec.gov/files/litigation/admin/2026/34-104793.pdf.