In re SEACREST WEALTH

 
 UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES ACT OF 1933 
Release No. 11338 / December 12, 2024 
 
INVESTMENT ADVISERS ACT OF 1940 
Release No. 6788 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-22346 
 
In the Matter of 
 
SEACREST WEALTH 
MANAGEMENT, LLC 
 
Respondent. 
 
 
 
 
ORDER INSTITUTING ADMINISTRATIVE 
AND CEASE-AND-DESIST PROCEEDINGS, 
PURSUANT TO SECTION 8A OF THE 
SECURITIES ACT OF 1933 AND 
SECTIONS 203(e) AND 203(k) OF THE 
INVESTMENT ADVISERS ACT OF 1940, 
MAKING FINDINGS, AND IMPOSING 
REMEDIAL SANCTIONS AND A CEASE-
AND-DESIST ORDER  
   
 
I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 
public interest that public administrative and cease-and-desist proceedings be, and hereby are, 
instituted pursuant to Section 8A of the Securities Act of 1933 (“Securities Act”) and Sections 
203(e) and 203(k) of the Investment Advisers Act of 1940 (“Advisers Act”) against SeaCrest 
Wealth Management, LLC (“SeaCrest” or “Respondent”). 
 
II. 
 
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the findings 
herein, except as to the Commission’s jurisdiction over it and the subject matter of these 
proceedings, which are admitted, Respondent consents to the entry of this Order Instituting 
Administrative Cease-and-Desist Proceedings, Pursuant to Section 8A of the Securities Act of 
1933 and Sections 203(e) and 203(k) of the Investment Advisers Act of 1940, Making Findings, 
and Imposing Remedial Sanctions and a Cease-And-Desist Order (“Order”), as set forth below. 
  

 
 2 
 
III. 
 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that: 
 
Summary 
 
 SeaCrest is a New York-based investment adviser registered with the Commission. From at 
least June 2019 to August 2022 (the “Relevant Period”), Eric Cobb, an investment adviser 
representative associated with SeaCrest, engaged in a fraudulent “cherry-picking” scheme, in 
which he disproportionately allocated profitable trades to certain personal and family accounts he 
controlled, and disproportionately allocated unprofitable trades to the accounts of unrelated 
advisory clients.  He executed his scheme by buying the securities in an omnibus or “block” 
account, waiting to allocate those trades to his client accounts until the following day, at which 
time he would see whether the price of the traded securities had increased or decreased.  In 
addition, Cobb routinely placed certain of his clients in unsuitable, highly volatile and highly risky 
securities that were contrary to their indicated risk tolerances. 
 SeaCrest failed to implement policies and procedures reasonably designed to prevent 
violations of the federal securities laws, and it failed reasonably to supervise Cobb.  In addition, 
SeaCrest’s Form ADV brochures negligently included statements about its practices and 
procedures that were false or misleading in light of SeaCrest’s compliance and supervision failures.  
Respondent 
 
1. SeaCrest is a Delaware limited liability company with its principal place of 
business in Purchase, New York.  SeaCrest has been registered as an investment adviser with the 
Commission since May 12, 2008.  While its compliance was centralized under its Chief 
Compliance Officer (“CCO”) in New York, SeaCrest has a decentralized business model, and most 
recently has 26 offices around the country where it conducts investment advisory business.  
SeaCrest currently provides services to over 3,500 accounts with approximately $1.2 billion in 
assets under management on a discretionary basis and 324 accounts with approximately $80 
million in assets under management on a non-discretionary basis. 
  
 
1
  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any 
other person or entity in this or any other proceeding.  
 

 
 3 
 
Other Relevant Individual 
2. Cobb (CRD # 2623064), age 52, resides in Spartanburg, South Carolina. He was 
associated with SeaCrest from approximately March 2016 through August 1, 2022.  Cobb has been 
employed at various securities firms since 1996 until he was terminated by SeaCrest in or around 
August 1, 2022.  He previously held series 7, 63, and 65 securities licenses, which have expired.  
 
Background 
 
Cobb’s Cherry-Picking Scheme 
 
3. From at least June 2019 to August 2022 (the “Relevant Period”), Cobb managed 
advisory client accounts on a discretionary basis.  Cobb’s client accounts consisted of accounts that 
he controlled and that were held in his own name, jointly with his wife, and in the names of certain 
family members (together, the “Favored Accounts”), as well as client accounts unrelated to him 
(the “Disfavored Accounts”).  Cobb used an omnibus or master account (“Master Account”) to 
place aggregated securities transactions, or “block” trades, on behalf of the accounts he managed.  
During the Relevant Period, Cobb used the Master Account to purchase securities in block trades 
on behalf of both the Favored and Disfavored Accounts.  Most of the transactions entered by Cobb 
were entered as block trades and subsequently allocated to client accounts (approximately $43 
million) while only a minority of the money was used in non-block trades to purchase securities 
directly into client accounts (approximately $9 million).  
 
4. Cobb reviewed and agreed to SeaCrest’s policies and procedures during the 
Relevant Period.  The policies and procedures required that block trades be allocated in a fair and 
equitable manner, including that investment adviser representatives not favor certain accounts over 
other accounts, and that investment adviser representatives must give individual investment advice 
to each participating account.  The compliance manual further required the allocation method be 
specified in writing before entering an aggregated order.   
 
5. During the Relevant Period, Cobb routinely waited until the day following his entry 
of block trades (or later) to allocate those trades to client accounts, at which time Cobb was able to 
see whether the prices of the securities he traded the day before had gone up or gone down.  Cobb 
then disproportionately assigned “winning trades” (i.e., trades where the price of the securities 
increased as of the time of allocation) to the Favored Accounts, while disproportionately assigning 
“losing trades” (i.e., trades where the price of the securities decreased as of the time of allocation) 
to the Disfavored Accounts.  Specifically, during the Relevant Period, Cobb allocated block trades 
for particular securities to the Favored Accounts on 286 occasions, with a dollar-weighted win rate 
of approximately 75%.
2
  But during that same period, Cobb allocated block trades for particular 
securities to the Disfavored Accounts on 742 occasions, with a dollar-weighted win rate of 
 
2
  A dollar-weighted win or loss rate takes into consideration the amount of the investment. The calculation is: 
total money invested in winning trades/total money invested.   
 

 
 4 
approximately only 47%.  Prior to receiving a warning from SeaCrest in May 2020, nearly all of 
Cobb’s block trades—well over 90%—were allocated the following day.  After receiving the 
warning, Cobb continued to allocate some of his block trades the following day, although more 
allocations were done on the same day as the trades were executed.   
 
6. These disproportionate allocations were not random, but rather reflected Cobb’s 
knowing or reckless favoritism: The average return measured at time of allocation for the Favored 
Accounts based on the foregoing was approximately 4.7%, while the average return at time of 
allocation for the Disfavored Accounts was approximately 0.1%.  The likelihood that Cobb would 
have earned these returns for the Favored Accounts in the absence of cherry-picking, with trade 
allocations determined by chance, is less than 1%. 
 
7. As a result of this cherry-picking scheme, Cobb directed ill-gotten gains of at least 
$130,129 to the Favored Accounts, including approximately $108,604 directly to Cobb.  This sum 
represents the difference in unrealized profits received by the Favored Accounts at the time of 
allocation, and the unrealized profits the Favored Accounts would have received if Cobb had not 
favored them over the Disfavored Accounts.   
 
Cobb’s Unsuitable Trading 
 
8. During the Relevant Period, Cobb also engaged in a pattern of unsuitable trading in 
at least four client accounts.  These clients identified their investment objectives to Cobb as either 
preserving capital or moderate capital appreciation.  Despite this, Cobb, who had discretionary 
trading authority over his client’s accounts, routinely placed these clients in highly speculative and 
risky securities designed for day trading. 
 
9. For instance, Cobb regularly placed these clients in highly-leveraged exchange 
traded funds (“ETFs”).
3
  As a result of their highly-leveraged nature, these ETFs often experience 
larger price moves over the course of the trading day.  The prospectuses for these ETFs contained 
numerous warnings, including in bold typeface, highlighting their volatility and investment risks.  
For instance, one ETF prospectus warned that its “ETFs are not suitable for all investors and 
should be utilized only by sophisticated investors who understand leverage risk and the 
consequences of seeking daily leveraged investment results and intend to actively monitor and 
manage their investment.”   
 
10. At least 10 of these leveraged ETFs ‘reset’ daily, meaning that they were designed 
to achieve their stated objectives on a daily basis.  Due to the effect of compounding, their 
performance over longer periods of time can differ significantly from the performance (or inverse 
 
3
  Leveraged ETFs are riskier than traditional ETFs in that they seek to deliver multiples of the short-term 
performance (e.g., daily) of the index or benchmark they track.  FINRA Regulatory Notice 09-31, published in June 
2009, warned that leveraged ETFs “are highly complex financial instruments that are typically designed to achieve 
their stated objectives on a daily basis” and that they “are typically unsuitable for retail investors who plan to hold them 
for longer than one trading session, particularly in volatile markets.” 
 

 
 5 
of the performance) of their underlying index or benchmark during the same period of time.  As 
many of their notices cautioned, leveraged ETFs typically are not suitable for retail clients who 
plan to hold them for more than one trading session, particularly in volatile markets.   A number of 
the leveraged ETFs Cobb placed his clients in—including the two he most frequently placed his 
clients in—had daily reset periods and Cobb often held the ETFs for periods much longer than a 
single day. 
 
11. During the Relevant Period, Cobb traded extensively in these risky ETFs.  At least 
80% of the purchases made in Cobb’s block account —$34 million—were in these risky leveraged 
ETFs, with many of these purchases made in accounts for the four clients.  
 
12. At the outset of any client relationships, Cobb, who had discretionary authority over 
his clients’ accounts, had a duty to conduct a suitability analysis and provide suitable investment 
advice for each client based on each clients’ investment profile.  Cobb, however, did not conduct 
sufficient, if any, analysis to determine that these leveraged ETF investments were in the best 
interest of his advisory clients, nor did he conduct sufficient, if any, periodic or ongoing analysis to 
make sure the recommendations were consistent with clients’ current objectives.  In addition, while 
he did not discuss the risks of these leveraged ETFs and, with regard to the leveraged ETFs, their 
holding periods with those clients, he kept his clients invested in these products on a long-term 
basis, while the prospectuses recognized they were mainly for short term use.   
SeaCrest Failed to Implement Its Policies and Procedures 
13. Registered investment advisers are required to adopt and implement written policies 
and procedures reasonably designed to prevent violations of the Advisers Act and the rules adopted 
by the Commission under the Act.  During the Relevant Period, SeaCrest’s compliance manual 
included a policy for “Trade Aggregation and Allocation.”  This policy required aggregated 
securities transactions in participating client accounts be “allocated in a fair and equitable manner.”  
SeaCrest’s compliance manual further specified the conditions upon which an investment adviser 
representative may combine purchase and sale orders, including: “not favor[ing] any advisory 
Account over any other managed Account;” and “the relevant allocation methods are specified in 
writing before entering an aggregated order.”  SeaCrest’s policies and procedures further 
specifically required that the compliance department ensure that investment adviser representatives 
did not engage in any unfair trading practices, such as “favor[ing] any advisory Account over any 
other managed Account.”  Further, SeaCrest’s policies and procedures required its CCO to review 
the adequacy of SeaCrest’s trading practices, including asset allocation strategies and trade 
allocations.   
 
14. In addition, during the Relevant Period, SeaCrest’s compliance manual included a 
policy entitled “Suitability.”  This policy stated that SeaCrest “has a fiduciary duty to provide 
investment advice to each Client that is suitable to that particular Client” and is responsible for 
making “a reasonable inquiry into the Client’s investment objectives, financial situation, 
investment experience, and tolerance for risk.”  The compliance manual further required 
investment adviser representatives to ensure that suitability determinations remained current to the 
clients’ current needs and objectives and that trades were placed consistent with those objectives.  

 
 6 
The compliance manual required the compliance department to review these suitability decisions 
made by investment adviser representatives. 
 
15. SeaCrest failed reasonably to implement its written policies and procedures 
described above with regard to allocation of trades.  Despite SeaCrest’s policies requiring that 
block order allocations be done via a “fair and equitable” method, during the Relevant Period, 
Cobb waited to allocate shares of the same stock, purchased via block trading, until the following 
day, once the price of the stock moved up or down, to the advantage of the Favored Accounts and 
to the disadvantage of the Disfavored Accounts that he managed on a discretionary basis, as 
described above.  Further, despite SeaCrest requiring the specific allocation method be specified in 
writing prior to entering the allocation order, there is no record of Cobb’s written allocation 
method.  Cobb’s allocations were not reviewed by the CCO or a designee, as required by 
SeaCrest’s policies and procedures.  
 
16. In addition, during the Relevant Period, SeaCrest’s custodian sent SeaCrest at least 
twelve alerts about possible unallocated block trading by Cobb.  The employee receiving the alerts 
never elevated the issue to the firm’s CCO.  Further, SeaCrest never conducted its own 
independent compliance review of Cobb’s trade allocations, as required by SeaCrest’s policies and 
procedures, until after SeaCrest’s custodian brought the issue of potential cherry-picking directly to 
SeaCrest’s CCO in May 2020.   
 
17. SeaCrest also failed to implement its policies and procedures related to suitability.  
As described above, at the time that Cobb made the unsuitable recommendations, he failed to take 
into consideration his clients’ age, investment objectives, risk tolerance, investment time horizons, 
financial needs, and financial condition.  At no time during the Relevant Period did SeaCrest 
conduct reviews to identify trades in products inconsistent with the clients’ stated risk tolerance 
and investment objectives, as required by SeaCrest’s policies and procedures.   
SeaCrest Made Misleading Statements 
18. As an investment adviser registered with the Commission, SeaCrest is required to 
file a Form ADV with the Commission and to update it at least annually.  Form ADV filings 
include Part 2A, which provides information to clients and prospective clients about investment 
advisers.  Registered investment advisers are required to deliver Part 2A to their clients at the 
beginning of the advisory relationship and to provide clients with an updated Part 2A whenever 
material changes are made. 
 
19. During the Relevant Period, SeaCrest filed amendments to its Form ADV brochure 
at least annually with the Commission which contained an Item 12.B entitled “Aggregating and 
Allocating Trades” which said that trades would be allocated by the close of each business day in 
an equitable manner: 
SeaCrest will execute its transactions through the Custodian as 
authorized by the Client. SeaCrest may aggregate orders in a block trade 
or trades when securities are purchased or sold through Custodian for 

 
 7 
multiple (discretionary) accounts. If a block trade cannot be executed in 
full at the same price or time, the securities actually purchased or sold by 
the close of each business day must be allocated in a manner that is 
consistent with the initial pre-allocation or other written statement.  This 
must be done in a way that does not consistently advantage or disadvantage 
particular Clients’ accounts. 
20. The Form ADV brochures also discussed the advisers’ fiduciary requirement to “act 
in  the  best  interest  of  its  Clients” which “can  be  violated  if  personal  trades  are  made  with  more 
advantageous terms than client trades.”  And, while allowing [investment adviser representatives] to 
purchase or sell the same securities at the same time as their clients, “[a]t no time will SeaCrest, or 
any [investment adviser representative], transact in any security to the detriment of the Client.” 
21. In addition, SeaCrest’s Form ADV brochures during the Relevant Period also 
discussed suitability.  With regard to suitability the firm’s Form ADV brochures stated that: 
“[investment adviser representatives] will work with each client to determine their tolerance for 
risk as part of the portfolio construction process” and further highlighted the risks associated with 
investing in leveraged ETFs.   
22. Contrary to statements in its Form ADV brochures, SeaCrest failed to ensure 
trade day allocations, or confirm that the initial pre-trade allocation designation was consistent 
with allocations executed by Cobb or ensure that Cobb properly determined his client’s risk 
profiles and tolerance for investing in securities, such as leveraged ETFs.  
Violations 
23. As a result of the conduct described above, SeaCrest willfully violated Section 
17(a)(2) of the Securities Act, which prohibits fraudulent conduct in the offer or sale of securities.  
24. As a result of the conduct described above, SeaCrest willfully violated Sections 
206(2) and 206(4) of the Advisers Act, which prohibit fraudulent conduct by an investment 
adviser, and Rule 206(4)-7 promulgated thereunder, which requires advisers to adopt and 
implement written policies and procedures reasonably designed to prevent violation of the 
Advisers Act and the rules that the Commission has adopted under the Act.  
 
25. As a result of the conduct described above, SeaCrest failed reasonably to supervise 
Cobb within the meaning of Section 203(e)(6) of the Advisers Act. 
 
SeaCrest’s Remedial Efforts And Cooperation 
 
26. In determining to accept SeaCrest’s Offer, the Commission considered the 
voluntary remedial acts undertaken by SeaCrest and SeaCrest’s voluntary cooperation with the 
Commission staff in its investigation of this matter. 
 
 

 
 8 
IV. 
 In view of the foregoing, the Commission deems it appropriate and in the public interest to 
impose the sanctions agreed to in Respondent SeaCrest’s Offer. 
 
 Accordingly, pursuant to Section 8A of the Securities Act and Sections 203(e) and 203(k) 
of the Advisers Act, it is hereby ORDERED that: 
 
 A. Respondent SeaCrest cease and desist from committing or causing any violations 
and any future violations of Section 17(a)(2) of the Securities Act, and Sections 206(2), and 206(4) 
of the Advisers Act and Rule 206(4)-7 promulgated thereunder.  
 
B. Respondent SeaCrest is censured.  
  
 C. Respondent SeaCrest shall pay civil penalties of $375,000 to the Securities and 
Exchange Commission.  Payment shall be made in the following installments: $93,750 within 10 
days of the entry of this Order; $93,750 within 120 days of the entry of this Order; $93,750 within 
240 days of the entry of this Order; and any remaining amount outstanding within 360 days of the 
entry of this Order. Payments shall be applied first to post order interest, which accrues pursuant to 
31 U.S.C. § 3717.  Prior to making the final payment set forth herein, Respondent shall contact the 
staff of the Commission for the amount due.  If Respondent fails to make any payment by the date 
agreed and/or in the amount agreed according to the schedule set forth above, all outstanding 
payments under this Order, including post-order interest, minus any payments made, shall become 
due and payable immediately at the discretion of the staff of the Commission without further 
application to the Commission. 
 
 Payment must be made in one of the following ways:   
 
(1) Respondent may transmit payment electronically to the Commission, which 
will provide detailed ACH transfer/Fedwire instructions upon request;  
 
(2) Respondent may make direct payment from a bank account via Pay.gov 
through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
 
(3) Respondent may pay by certified check, bank cashier’s check, or United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to:  
 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
 

 
 9 
Payments by check or money order must be accompanied by a cover letter identifying 
SeaCrest as a Respondent in these proceedings, and the file number of these proceedings; a copy of 
the cover letter and check or money order must be sent to Sheldon L. Pollock, Division of 
Enforcement, Securities and Exchange Commission, 100 Pearl Street, Suite 20-100, New York, 
New York 10004-2616. 
 
 E.  Regardless of whether the Commission in its discretion orders the creation of a 
Fair Fund for the penalties ordered in this proceeding, amounts ordered to be paid as civil money 
penalties pursuant to this Order shall be treated as penalties paid to the government for all 
purposes, including all tax purposes.  To preserve the deterrent effect of the civil penalty, 
Respondent agrees that in any Related Investor Action, it shall not argue that it is entitled to, nor 
shall it benefit by, offset or reduction of any award of compensatory damages by the amount of any 
part of Respondent’s payment of a civil penalty in this action (“Penalty Offset”).  If the court in 
any Related Investor Action grants such a Penalty Offset, Respondent agrees that it shall, within 30 
days after entry of a final order granting the Penalty Offset, notify the Commission’s counsel in 
this action and pay the amount of the Penalty Offset to the Securities and Exchange Commission.  
Such a payment shall not be deemed an additional civil penalty and shall not be deemed to change 
the amount of the civil penalty imposed in this proceeding.  For purposes of this paragraph, a 
“Related Investor Action” means a private damages action brought against Respondent by or on 
behalf of one or more investors based on substantially the same facts as alleged in the Order 
instituted by the Commission in this proceeding. 
 
 
 By the Commission. 
 
 
 
Vanessa A. Countryman 
        Secretary 
 
 
 

UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES ACT OF 1933 

Release No. 11338 / December 12, 2024 

 

INVESTMENT ADVISERS ACT OF 1940 

Release No. 6788 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-22346 

 

In the Matter of 

 

SEACREST WEALTH 

MANAGEMENT, LLC 

 

Respondent. 

 

 

 

 

ORDER INSTITUTING ADMINISTRATIVE 

AND CEASE-AND-DESIST PROCEEDINGS, 

PURSUANT TO SECTION 8A OF THE 

SECURITIES ACT OF 1933 AND 

SECTIONS 203(e) AND 203(k) OF THE 

INVESTMENT ADVISERS ACT OF 1940, 

MAKING FINDINGS, AND IMPOSING 

REMEDIAL SANCTIONS AND A CEASE-

AND-DESIST ORDER  

   

 

I. 

 

 The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 

public interest that public administrative and cease-and-desist proceedings be, and hereby are, 

instituted pursuant to Section 8A of the Securities Act of 1933 (“Securities Act”) and Sections 

203(e) and 203(k) of the Investment Advisers Act of 1940 (“Advisers Act”) against SeaCrest 

Wealth Management, LLC (“SeaCrest” or “Respondent”). 

 

II. 

 

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the findings 

herein, except as to the Commission’s jurisdiction over it and the subject matter of these 

proceedings, which are admitted, Respondent consents to the entry of this Order Instituting 

Administrative Cease-and-Desist Proceedings, Pursuant to Section 8A of the Securities Act of 

1933 and Sections 203(e) and 203(k) of the Investment Advisers Act of 1940, Making Findings, 

and Imposing Remedial Sanctions and a Cease-And-Desist Order (“Order”), as set forth below. 

  



 

 2 

 

III. 

 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that: 

 

Summary 

 

 SeaCrest is a New York-based investment adviser registered with the Commission. From at 

least June 2019 to August 2022 (the “Relevant Period”), Eric Cobb, an investment adviser 

representative associated with SeaCrest, engaged in a fraudulent “cherry-picking” scheme, in 

which he disproportionately allocated profitable trades to certain personal and family accounts he 

controlled, and disproportionately allocated unprofitable trades to the accounts of unrelated 

advisory clients.  He executed his scheme by buying the securities in an omnibus or “block” 

account, waiting to allocate those trades to his client accounts until the following day, at which 

time he would see whether the price of the traded securities had increased or decreased.  In 

addition, Cobb routinely placed certain of his clients in unsuitable, highly volatile and highly risky 

securities that were contrary to their indicated risk tolerances. 

 SeaCrest failed to implement policies and procedures reasonably designed to prevent 

violations of the federal securities laws, and it failed reasonably to supervise Cobb.  In addition, 

SeaCrest’s Form ADV brochures negligently included statements about its practices and 

procedures that were false or misleading in light of SeaCrest’s compliance and supervision failures.  

Respondent 

 

1. SeaCrest is a Delaware limited liability company with its principal place of 

business in Purchase, New York.  SeaCrest has been registered as an investment adviser with the 

Commission since May 12, 2008.  While its compliance was centralized under its Chief 

Compliance Officer (“CCO”) in New York, SeaCrest has a decentralized business model, and most 

recently has 26 offices around the country where it conducts investment advisory business.  

SeaCrest currently provides services to over 3,500 accounts with approximately $1.2 billion in 

assets under management on a discretionary basis and 324 accounts with approximately $80 

million in assets under management on a non-discretionary basis. 

  

 
1  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any 

other person or entity in this or any other proceeding.  

 



 

 3 

 

Other Relevant Individual 

2. Cobb (CRD # 2623064), age 52, resides in Spartanburg, South Carolina. He was 

associated with SeaCrest from approximately March 2016 through August 1, 2022.  Cobb has been 

employed at various securities firms since 1996 until he was terminated by SeaCrest in or around 

August 1, 2022.  He previously held series 7, 63, and 65 securities licenses, which have expired.  

 

Background 

 
Cobb’s Cherry-Picking Scheme 

 

3. From at least June 2019 to August 2022 (the “Relevant Period”), Cobb managed 

advisory client accounts on a discretionary basis.  Cobb’s client accounts consisted of accounts that 

he controlled and that were held in his own name, jointly with his wife, and in the names of certain 

family members (together, the “Favored Accounts”), as well as client accounts unrelated to him 

(the “Disfavored Accounts”).  Cobb used an omnibus or master account (“Master Account”) to 

place aggregated securities transactions, or “block” trades, on behalf of the accounts he managed.  

During the Relevant Period, Cobb used the Master Account to purchase securities in block trades 

on behalf of both the Favored and Disfavored Accounts.  Most of the transactions entered by Cobb 

were entered as block trades and subsequently allocated to client accounts (approximately $43 

million) while only a minority of the money was used in non-block trades to purchase securities 

directly into client accounts (approximately $9 million).  

 

4. Cobb reviewed and agreed to SeaCrest’s policies and procedures during the 

Relevant Period.  The policies and procedures required that block trades be allocated in a fair and 

equitable manner, including that investment adviser representatives not favor certain accounts over 

other accounts, and that investment adviser representatives must give individual investment advice 

to each participating account.  The compliance manual further required the allocation method be 

specified in writing before entering an aggregated order.   

 

5. During the Relevant Period, Cobb routinely waited until the day following his entry 

of block trades (or later) to allocate those trades to client accounts, at which time Cobb was able to 

see whether the prices of the securities he traded the day before had gone up or gone down.  Cobb 

then disproportionately assigned “winning trades” (i.e., trades where the price of the securities 

increased as of the time of allocation) to the Favored Accounts, while disproportionately assigning 

“losing trades” (i.e., trades where the price of the securities decreased as of the time of allocation) 

to the Disfavored Accounts.  Specifically, during the Relevant Period, Cobb allocated block trades 

for particular securities to the Favored Accounts on 286 occasions, with a dollar-weighted win rate 

of approximately 75%.2  But during that same period, Cobb allocated block trades for particular 

securities to the Disfavored Accounts on 742 occasions, with a dollar-weighted win rate of 

 
2  A dollar-weighted win or loss rate takes into consideration the amount of the investment. The calculation is: 

total money invested in winning trades/total money invested.   

 



 

 4 

approximately only 47%.  Prior to receiving a warning from SeaCrest in May 2020, nearly all of 

Cobb’s block trades—well over 90%—were allocated the following day.  After receiving the 

warning, Cobb continued to allocate some of his block trades the following day, although more 

allocations were done on the same day as the trades were executed.   

 

6. These disproportionate allocations were not random, but rather reflected Cobb’s 

knowing or reckless favoritism: The average return measured at time of allocation for the Favored 

Accounts based on the foregoing was approximately 4.7%, while the average return at time of 

allocation for the Disfavored Accounts was approximately 0.1%.  The likelihood that Cobb would 

have earned these returns for the Favored Accounts in the absence of cherry-picking, with trade 

allocations determined by chance, is less than 1%. 

 

7. As a result of this cherry-picking scheme, Cobb directed ill-gotten gains of at least 

$130,129 to the Favored Accounts, including approximately $108,604 directly to Cobb.  This sum 

represents the difference in unrealized profits received by the Favored Accounts at the time of 

allocation, and the unrealized profits the Favored Accounts would have received if Cobb had not 

favored them over the Disfavored Accounts.   

 

Cobb’s Unsuitable Trading 

 

8. During the Relevant Period, Cobb also engaged in a pattern of unsuitable trading in 

at least four client accounts.  These clients identified their investment objectives to Cobb as either 

preserving capital or moderate capital appreciation.  Despite this, Cobb, who had discretionary 

trading authority over his client’s accounts, routinely placed these clients in highly speculative and 

risky securities designed for day trading. 

 

9. For instance, Cobb regularly placed these clients in highly-leveraged exchange 

traded funds (“ETFs”).3  As a result of their highly-leveraged nature, these ETFs often experience 

larger price moves over the course of the trading day.  The prospectuses for these ETFs contained 

numerous warnings, including in bold typeface, highlighting their volatility and investment risks.  

For instance, one ETF prospectus warned that its “ETFs are not suitable for all investors and 

should be utilized only by sophisticated investors who understand leverage risk and the 

consequences of seeking daily leveraged investment results and intend to actively monitor and 

manage their investment.”   

 

10. At least 10 of these leveraged ETFs ‘reset’ daily, meaning that they were designed 

to achieve their stated objectives on a daily basis.  Due to the effect of compounding, their 

performance over longer periods of time can differ significantly from the performance (or inverse 

 
3  Leveraged ETFs are riskier than traditional ETFs in that they seek to deliver multiples of the short-term 

performance (e.g., daily) of the index or benchmark they track.  FINRA Regulatory Notice 09-31, published in June 

2009, warned that leveraged ETFs “are highly complex financial instruments that are typically designed to achieve 

their stated objectives on a daily basis” and that they “are typically unsuitable for retail investors who plan to hold them 

for longer than one trading session, particularly in volatile markets.” 

 



 

 5 

of the performance) of their underlying index or benchmark during the same period of time.  As 

many of their notices cautioned, leveraged ETFs typically are not suitable for retail clients who 

plan to hold them for more than one trading session, particularly in volatile markets.   A number of 

the leveraged ETFs Cobb placed his clients in—including the two he most frequently placed his 

clients in—had daily reset periods and Cobb often held the ETFs for periods much longer than a 

single day. 

 

11. During the Relevant Period, Cobb traded extensively in these risky ETFs.  At least 

80% of the purchases made in Cobb’s block account —$34 million—were in these risky leveraged 

ETFs, with many of these purchases made in accounts for the four clients.  

 

12. At the outset of any client relationships, Cobb, who had discretionary authority over 

his clients’ accounts, had a duty to conduct a suitability analysis and provide suitable investment 

advice for each client based on each clients’ investment profile.  Cobb, however, did not conduct 

sufficient, if any, analysis to determine that these leveraged ETF investments were in the best 

interest of his advisory clients, nor did he conduct sufficient, if any, periodic or ongoing analysis to 

make sure the recommendations were consistent with clients’ current objectives.  In addition, while 

he did not discuss the risks of these leveraged ETFs and, with regard to the leveraged ETFs, their 

holding periods with those clients, he kept his clients invested in these products on a long-term 

basis, while the prospectuses recognized they were mainly for short term use.   

SeaCrest Failed to Implement Its Policies and Procedures 

13. Registered investment advisers are required to adopt and implement written policies 

and procedures reasonably designed to prevent violations of the Advisers Act and the rules adopted 

by the Commission under the Act.  During the Relevant Period, SeaCrest’s compliance manual 

included a policy for “Trade Aggregation and Allocation.”  This policy required aggregated 

securities transactions in participating client accounts be “allocated in a fair and equitable manner.”  

SeaCrest’s compliance manual further specified the conditions upon which an investment adviser 

representative may combine purchase and sale orders, including: “not favor[ing] any advisory 

Account over any other managed Account;” and “the relevant allocation methods are specified in 

writing before entering an aggregated order.”  SeaCrest’s policies and procedures further 

specifically required that the compliance department ensure that investment adviser representatives 

did not engage in any unfair trading practices, such as “favor[ing] any advisory Account over any 

other managed Account.”  Further, SeaCrest’s policies and procedures required its CCO to review 

the adequacy of SeaCrest’s trading practices, including asset allocation strategies and trade 

allocations.   

 

14. In addition, during the Relevant Period, SeaCrest’s compliance manual included a 

policy entitled “Suitability.”  This policy stated that SeaCrest “has a fiduciary duty to provide 

investment advice to each Client that is suitable to that particular Client” and is responsible for 

making “a reasonable inquiry into the Client’s investment objectives, financial situation, 

investment experience, and tolerance for risk.”  The compliance manual further required 

investment adviser representatives to ensure that suitability determinations remained current to the 

clients’ current needs and objectives and that trades were placed consistent with those objectives.  



 

 6 

The compliance manual required the compliance department to review these suitability decisions 

made by investment adviser representatives. 

 

15. SeaCrest failed reasonably to implement its written policies and procedures 

described above with regard to allocation of trades.  Despite SeaCrest’s policies requiring that 

block order allocations be done via a “fair and equitable” method, during the Relevant Period, 

Cobb waited to allocate shares of the same stock, purchased via block trading, until the following 

day, once the price of the stock moved up or down, to the advantage of the Favored Accounts and 

to the disadvantage of the Disfavored Accounts that he managed on a discretionary basis, as 

described above.  Further, despite SeaCrest requiring the specific allocation method be specified in 

writing prior to entering the allocation order, there is no record of Cobb’s written allocation 

method.  Cobb’s allocations were not reviewed by the CCO or a designee, as required by 

SeaCrest’s policies and procedures.  

 

16. In addition, during the Relevant Period, SeaCrest’s custodian sent SeaCrest at least 

twelve alerts about possible unallocated block trading by Cobb.  The employee receiving the alerts 

never elevated the issue to the firm’s CCO.  Further, SeaCrest never conducted its own 

independent compliance review of Cobb’s trade allocations, as required by SeaCrest’s policies and 

procedures, until after SeaCrest’s custodian brought the issue of potential cherry-picking directly to 

SeaCrest’s CCO in May 2020.   

 

17. SeaCrest also failed to implement its policies and procedures related to suitability.  

As described above, at the time that Cobb made the unsuitable recommendations, he failed to take 

into consideration his clients’ age, investment objectives, risk tolerance, investment time horizons, 

financial needs, and financial condition.  At no time during the Relevant Period did SeaCrest 

conduct reviews to identify trades in products inconsistent with the clients’ stated risk tolerance 

and investment objectives, as required by SeaCrest’s policies and procedures.   

SeaCrest Made Misleading Statements 

18. As an investment adviser registered with the Commission, SeaCrest is required to 

file a Form ADV with the Commission and to update it at least annually.  Form ADV filings 

include Part 2A, which provides information to clients and prospective clients about investment 

advisers.  Registered investment advisers are required to deliver Part 2A to their clients at the 

beginning of the advisory relationship and to provide clients with an updated Part 2A whenever 

material changes are made. 

 

19. During the Relevant Period, SeaCrest filed amendments to its Form ADV brochure 

at least annually with the Commission which contained an Item 12.B entitled “Aggregating and 

Allocating Trades” which said that trades would be allocated by the close of each business day in 

an equitable manner: 

SeaCrest will execute its transactions through the Custodian as 

authorized by the Client. SeaCrest may aggregate orders in a block trade 

or trades when securities are purchased or sold through Custodian for 



 

 7 

multiple (discretionary) accounts. If a  block trade cannot be executed in 

full at the same price or time, the securities actually purchased or sold by 

the close of each business day must be allocated in a manner that is 

consistent with the initial pre-allocation or other written statement.  This 

must be done in a way that does not consistently advantage or disadvantage 

particular Clients’ accounts. 

20. The Form ADV brochures also discussed the advisers’ fiduciary requirement to “act 

in the best interest of its Clients” which “can be violated if personal trades are made with more 

advantageous terms than client trades.”  And, while allowing [investment adviser representatives] to 

purchase or sell the same securities at the same time as their clients, “[a]t no time will SeaCrest, or 

any [investment adviser representative], transact in any security to the detriment of the Client.” 

21. In addition, SeaCrest’s Form ADV brochures during the Relevant Period also 

discussed suitability.  With regard to suitability the firm’s Form ADV brochures stated that: 

“[investment adviser representatives] will work with each client to determine their tolerance for 

risk as part of the portfolio construction process” and further highlighted the risks associated with 

investing in leveraged ETFs.   

22. Contrary to statements in its Form ADV brochures, SeaCrest failed to ensure 

trade day allocations, or confirm that the initial pre-trade allocation designation was consistent 

with allocations executed by Cobb or ensure that Cobb properly determined his client’s risk 

profiles and tolerance for investing in securities, such as leveraged ETFs.  

Violations 

23. As a result of the conduct described above, SeaCrest willfully violated Section 

17(a)(2) of the Securities Act, which prohibits fraudulent conduct in the offer or sale of securities.  

24. As a result of the conduct described above, SeaCrest willfully violated Sections 

206(2) and 206(4) of the Advisers Act, which prohibit fraudulent conduct by an investment 

adviser, and Rule 206(4)-7 promulgated thereunder, which requires advisers to adopt and 

implement written policies and procedures reasonably designed to prevent violation of the 

Advisers Act and the rules that the Commission has adopted under the Act.  

 

25. As a result of the conduct described above, SeaCrest failed reasonably to supervise 

Cobb within the meaning of Section 203(e)(6) of the Advisers Act. 

 

SeaCrest’s Remedial Efforts And Cooperation 

 

26. In determining to accept SeaCrest’s Offer, the Commission considered the 

voluntary remedial acts undertaken by SeaCrest and SeaCrest’s voluntary cooperation with the 

Commission staff in its investigation of this matter. 

 

 

https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=c1afa5ab9c5ad8c2a06f4f9a7f2d5fb5&term_occur=999&term_src=Title:17:Chapter:II:Part:275:275.206(4)-7


 

 8 

IV. 

 In view of the foregoing, the Commission deems it appropriate and in the public interest to 

impose the sanctions agreed to in Respondent SeaCrest’s Offer. 

 

 Accordingly, pursuant to Section 8A of the Securities Act and Sections 203(e) and 203(k) 

of the Advisers Act, it is hereby ORDERED that: 

 

 A. Respondent SeaCrest cease and desist from committing or causing any violations 

and any future violations of Section 17(a)(2) of the Securities Act, and Sections 206(2), and 206(4) 

of the Advisers Act and Rule 206(4)-7 promulgated thereunder.  

 

B. Respondent SeaCrest is censured.  

  

 C. Respondent SeaCrest shall pay civil penalties of $375,000 to the Securities and 

Exchange Commission.  Payment shall be made in the following installments: $93,750 within 10 

days of the entry of this Order; $93,750 within 120 days of the entry of this Order; $93,750 within 

240 days of the entry of this Order; and any remaining amount outstanding within 360 days of the 

entry of this Order. Payments shall be applied first to post order interest, which accrues pursuant to 

31 U.S.C. § 3717.  Prior to making the final payment set forth herein, Respondent shall contact the 

staff of the Commission for the amount due.  If Respondent fails to make any payment by the date 

agreed and/or in the amount agreed according to the schedule set forth above, all outstanding 

payments under this Order, including post-order interest, minus any payments made, shall become 

due and payable immediately at the discretion of the staff of the Commission without further 

application to the Commission. 

 

 Payment must be made in one of the following ways:   

 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request;  

 

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  

 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to:  

 

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

 

http://www.sec.gov/about/offices/ofm.htm


 

 9 

Payments by check or money order must be accompanied by a cover letter identifying 

SeaCrest as a Respondent in these proceedings, and the file number of these proceedings; a copy of 

the cover letter and check or money order must be sent to Sheldon L. Pollock, Division of 

Enforcement, Securities and Exchange Commission, 100 Pearl Street, Suite 20-100, New York, 

New York 10004-2616. 

 

 E.  Regardless of whether the Commission in its discretion orders the creation of a 

Fair Fund for the penalties ordered in this proceeding, amounts ordered to be paid as civil money 

penalties pursuant to this Order shall be treated as penalties paid to the government for all 

purposes, including all tax purposes.  To preserve the deterrent effect of the civil penalty, 

Respondent agrees that in any Related Investor Action, it shall not argue that it is entitled to, nor 

shall it benefit by, offset or reduction of any award of compensatory damages by the amount of any 

part of Respondent’s payment of a civil penalty in this action (“Penalty Offset”).  If the court in 

any Related Investor Action grants such a Penalty Offset, Respondent agrees that it shall, within 30 

days after entry of a final order granting the Penalty Offset, notify the Commission’s counsel in 

this action and pay the amount of the Penalty Offset to the Securities and Exchange Commission.  

Such a payment shall not be deemed an additional civil penalty and shall not be deemed to change 

the amount of the civil penalty imposed in this proceeding.  For purposes of this paragraph, a 

“Related Investor Action” means a private damages action brought against Respondent by or on 

behalf of one or more investors based on substantially the same facts as alleged in the Order 

instituted by the Commission in this proceeding. 

 

 

 By the Commission. 

 

 

 

Vanessa A. Countryman 

        Secretary 

 

 

 


	B._Failure_to_Conduct_Annual_Reviews