46-year-old investment advisor Jeremy A. Licht of Sherman Oaks, California engaged in a fraudulent trading scheme during which he allocated a disproportionate number of favorable trades to his account while allocating a disproportionate number of unfavorable trades to clients' accounts, according to an SEC order barring Licht from the industry and ordering he pay disgorgment of $88,504 in ill-gotten gains from his fraudulent scheme, plus a $181,071 civil penalty,.
Licht served as founder, chief compliance officer, and sole owner of JL Capital Management, similarly located in Sherman Oaks, CA.
According to the findings, Licht (CRD #2771591) perpetuated his fraudulent scheme by day-trading in an omnibus account, but delaying allocation of those trades until he had an opportunity to observe the security's performance over the course of the day during which the trade occurred. The SEC wrote that Licht sometimes sold the security the same day if its stock price rose, locking in a day-trading profit for the sale, which he allocated to himself.
By contrast, the report continues, Licht disproportionately allocated unprofitable purchases—those whose price dropped —to clients, which the SEC says caused Licht's clients to lose money. Licht purportedly waited several hours and/or until after trade business hours to allocate trades from his omnibus account to either his or his clients' accounts.
In other words, according to the SEC, if Licht's trades turned a profit, he disproportionately directed the proceeds to go to himself, while financially damaging trading losses were funneled into customer accounts. The SEC found that the likelihood that the allocations were due to random chance (as opposed to Licht's involvement or nefarious manipulation) was "less than one in a trillion."
The following two time periods illustrate the notable difference between Licht's returns and his clients' significant losses.
January 2011 - September 2012
- Licht's Returns: +$35,933 (+1.01%)
- Licht's Clients' Returns: -$77,700 (-2.15%)
October 2012 - March 2016
- Licht's Returns: +$52,731 (+2.07%)
- Licht's Clients' Returns: -$72,816 (-1.06%)
Investigators also found that Licht made false and misleading statements to his clients—not only did he fail to disclose his trading scheme, he falsely stated that no investor, account or fund would be favored over any other account or fund in allocations.
Licht's IAPD report lists his affiliation with JL Capital Management of Sherman Oaks, California since 1996.
If you have invested with Los Angeles-area investment adviser Jeremy A. Licht or with any broker or representative who engaged in a cherry-picking or other illicit trade/profit manipulation scheme, and this fraud has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.