SEC v. Douglas MacWright; and Highlander Capital Management, LLC, No. 2:23-cv-20609, District of New Jersey (Sept. 25, 2023) — Complaint

Zachary T. Carlyle
Jeffrey E. Oraker
Attorney for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
Denver Regional Office
Byron Rogers Federal Office Building
1961 Stout Street, Suite 1700
Denver, CO 80294-1961
(303) 844-1000
[email protected]
[email protected]

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

SECURITIES AND EXCHANGE COMMISSION,

                                                        Plaintiff,

                          -against-

DOUGLAS MACWRIGHT and
HIGHLANDER CAPITAL MANAGEMENT, LLC

                                                        Defendants.

COMPLAINT

23-cv-20609

JURY TRIAL DEMANDED

Plaintiff Securities and Exchange Commission (“Commission”), 1961 Stout Street, Suite
1700, Denver, CO 80294-1961, for its Complaint against Defendants Douglas MacWright
(“MacWright”), of Short Hills, NJ, and Highlander Capital Management, LLC (“HCM”), 533
Milburn Avenue, Short Hills, NJ 07078, alleges as follows:
SUMMARY
1. 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

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more than $1 million, to a preferred account in the name of an entity that he and his family
members controlled (the “Preferred Account”).
2. 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”).
3. 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.
4. Between April 22, 2015 and June 30, 2022 (the “Relevant Period”), the Preferred
Account received over $1 million in illicit profits through the scheme.
VIOLATIONS
5. By virtue of the foregoing conduct and as alleged further herein, Defendants
MacWright and HCM violated Section 10(b) of the Securities Exchange Act of 1934 (“Exchange
Act”) [15 U.S.C. § 78j(b)], Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§ 240.10b-5(a) and

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(c)],  and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 (“Advisers Act”)
[15 U.S.C. §§ 80b-6(1) and (2)].  In addition, Defendant HCM violated, and MacWright aided
and abetted HCM’s violation of, Section 206(4) of the Advisers Act [15 U.S.C. §§ 80b-6(4)] and
Rule 206(4)-7 thereunder [17 CFR § 275.206(4)-7].
6. Unless Defendants are restrained and enjoined, they will engage in the acts,
practices, transactions, and courses of business set forth in this Complaint or in acts, practices,
transactions, and courses of business of similar type and object.
NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT
7. The Commission brings this action pursuant to the authority conferred upon it by
Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)] and Sections 209(d) and 209(e) of the
Advisers Act [15 U.S.C. §§ 80b-9(d) and 80b-9(e)].
8. The Commission seeks a final judgment: (a) permanently enjoining Defendants
from violating the federal securities laws and rules this Complaint alleges they violated, pursuant
to Sections 21(d)(1) and (d)(5) of the Exchange Act [15 U.S.C. §§ 78u(d)(1), 78u(d)(5)] and
Section 209(d) of the Advisers Act [15 U.S.C. § 80b-9(d)]; (b) ordering Defendant MacWright to
disgorge all ill-gotten gains received as a result of the violations alleged herein and to pay
prejudgment interest thereon, pursuant to Sections 21(d)(3), 21(d)(5), and 21(d)(7) of the
Exchange Act [15 U.S.C. §§ 78u(d)(3), 78u(d)(5), and 78u(d)(7)]; (c) ordering Defendants to pay
civil money penalties pursuant to Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)]
and Section 209(e) of the Advisers Act [15 U.S.C. § 80b-9(e)]; and (d)   ordering any other and
further relief the Court may deem just and proper.
JURISDICTION AND VENUE
9. This Court has jurisdiction over this action pursuant to Section 27 of the

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Exchange Act [15 U.S.C. § 78aa] and Section 214 of the Advisers Act [15 U.S.C. § 80b-14].
10. Defendants, directly and indirectly, have made use of the means or
instrumentalities of interstate commerce or of the mails in connection with the acts, practices,
transactions, and courses of business alleged herein.
11. Venue lies in this District under Section 27 of the Exchange Act [15 U.S.C.
§ 78aa], and Section 214 of the Advisers Act [15 U.S.C. § 80b-14]. Defendants are found in,
inhabit, and transact business in the District of New Jersey, and certain of the acts, practices,
transactions, and courses of business alleged in this Complaint occurred within this District,
including the securities trades and related trade allocations MacWright directed HCM and the
Broker to execute in the course of his fraudulent scheme.
DEFENDANTS
12. MacWright, age 67, was, during the Relevant Period, an investment adviser
representative at, and owner of, HCM. He was also, during the Relevant Period, a registered
representative at, and owner of, the Broker.
13. HCM is a New Jersey limited liability corporation with its principal place of
business in Short Hills, New Jersey. HCM has been registered with the Commission as an
investment adviser since 1996.
FACTS
I. BACKGROUND
14. “Cherry-picking” occurs when an investment adviser disproportionately allocates to
one or more preferred accounts securities that have performed well, and/or disproportionately
allocates to one or more non-preferred accounts securities that have performed poorly.
15. “Block” trades placed in “average price accounts” are used to aggregate purchases
or sales of securities for multiple accounts into a single trade. If used properly, block trades allow

5
investment advisers to give all clients who are purchasing or selling securities the same average
price. For example, if an investment adviser places a large order, this order may be executed at
several different prices. An average price account, which is an account maintained by a broker-
dealer for placing block or aggregated trades, allows the investment adviser to aggregate the
executions into a single average price, ensuring the same execution price for all clients receiving
a portion of the order.
II. THE CHERRY-PICKING SCHEME
A. The Preferred and Non-Preferred Accounts
16. The Preferred Account is held at the Broker and MacWright had discretionary
trading authority over the Account. The entity that owned the Preferred Account, and therefore
received the profits from the scheme, was owned by MacWright, other entities controlled by
MacWright, and family members of MacWright. During the Relevant Period, MacWright
indirectly received, through the Broker, commissions from the owner of the Preferred Account in
connection with the trading.
17. The Non-Preferred Accounts were accounts held by individuals and entities for
which MacWright served as an investment adviser. During the Relevant Period, MacWright
managed certain advisory client accounts at HCM and acted as an investment adviser for certain
entities that held accounts at the Broker. MacWright had authorization to make trading decisions
on behalf of these clients who owned the Non-Preferred Accounts, and he was entitled to receive
and/or did receive compensation from the clients for serving as an investment adviser. The Non-
Preferred Accounts were harmed by the scheme.
B. The Mechanics of the Cherry-Picking Scheme
18. During the Relevant Period, MacWright used the Average Price Account to trade
securities, such as stocks, often as block trades, and those trades were later allocated to the

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Preferred Account or later allocated to the Non-Preferred Accounts.
19. During that time, MacWright repeatedly opened a securities position in the
Average Price Account and waited to provide allocation instructions until he observed whether the
trade was profitable in the time following execution. MacWright disproportionately allocated
profitable trades to the Preferred Account, and he disproportionately allocated unprofitable trades
to the Non-Preferred Accounts. Specifically, for profitable trades, MacWright regularly closed the
trading position, thereby realizing a same-day profit, and then allocated the trades and the profits to
the Preferred Account. I f the price decreased in value during that day, MacWright generally
caused the position to be allocated to one or more Non-Preferred Accounts.
20. HCM’s written policies and procedures required that written order tickets include
instructions for how the shares in a block trade were to be allocated before the order was entered
into the trading system. MacWright did not follow this requirement and provided allocation
instructions for these trades only after the trades were executed.
21. During the Relevant Period, the trades that MacWright allocated to the Preferred
Account increased in value 98.6% of the time on the trade day. In contrast, the trades that
MacWright allocated to the Non-Preferred Accounts increased in value only 19.2% of the time on
the trade day.
22. Because of MacWright’s cherry-picking scheme, his allocations to the Preferred
Account were almost always profitable in the short term, with first-day returns of 0.83%, while
allocations to the Non-Preferred Accounts were generally unprofitable in the short term, with first-
day returns of negative 1.03%. The likelihood that MacWright would have earned these returns for
himself in the absence of cherry-picking, with trade allocations determined by chance, is less than
one in a billion.

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C. The Cherry-Picking was Profitable to the Preferred Account, and Harmed
the Non-Preferred Accounts.
23. Because of MacWright’s cherry-picking scheme, the Preferred Account obtained
illicit profits of more than $1 million (after accounting for the relatively small losses associated
with the positions allocated to the Non-Preferred accounts owned by MacWright and MacWright’s
family members, as well as MacWright’s ownership interests in the Non-Preferred accounts of
entities he partially owned) and thereby harmed the Non-Preferred Accounts, which
disproportionately received trades that had declined in value on the first day of trading.
D. The Defendants’ Cherry-Picking Scheme Breached the Fiduciary Duties
Owed to Advisory Clients.
24. As investment advisers, Defendants owed a fiduciary duty to their clients. By
carrying out the cherry-picking scheme, the Defendants breached their fiduciary duties and failed
to act in their clients’ best interests.
E. The Defendants Acted with Scienter and Negligently.
25. Throughout the Relevant Period, MacWright was responsible for the trading in the
Average Price Account that was part of the scheme and he personally made the trades and made or
directed trade allocations to the Preferred and Non-Preferred Accounts. MacWright knew or was
reckless in not knowing, and should have known, that he was engaging in numerous deceptive acts
by directly or indirectly allocating the profitable trades to the Preferred Account and allocating the
non-profitable trades to the Non-Preferred Accounts.
26. Throughout the Relevant Period, MacWright was the owner of, and an investment
adviser representative of, HCM and he controlled the relevant trading for HCM’s clients through
the Average Price Account. Accordingly, his mental state and negligence can be imputed to HCM.

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III. HCM AND MACWRIGHT FAILED TO IMPLEMENT APPROPRIATE
WRITTEN POLICIES AND PROCEDURES.
27. As a SEC-registered investment adviser, HCM is required to adopt and implement
written policies and procedures reasonably designed to prevent violations of the Advisers Act and
rules adopted thereunder.
28. HCM’s written policies and procedures manual contained policies and procedures
with respect to “Trading” at HCM, including the aggregation and the allocation of trades, and the
manual stated that MacWright had responsibility for the implementation and monitoring of those
trading policies and procedures. As an investment adviser representative of HCM, MacWright was
also required to follow those policies and procedures.
29. HCM’s manual stated that its “allocation procedures must be fair and equitable to
all clients with no particular group or client(s) being favored or disfavored over any other clients”
and prohibited “any allocation of trades in a manner that [HCM]’s proprietary accounts, affiliated
accounts, or any particular client(s) or group of clients receive more favorable treatment than other
client accounts.” Furthermore, HCM manual stated that HCM had “adopted a clear written policy
for the fair and equitable allocation of transactions, (e.g., pro-rata allocation, rotational allocation,
or other means), which is disclosed in [HCM’s Form ADV, Part 2 A (“Brochure”)].”
30. HCM’s Brochure, which is contained in Part II of HCM’s Form ADV that is filed
with the Commission and contains representations to investors, stated that “[p]rior to entry of an
aggregated order, a written order ticket must be completed which identifies each client account
participating in the order and the proposed allocation of the order, upon completion, to those
clients” and that “[i]f the order will be allocated in a manner other than that stated in the initial
statement of allocation, a written explanation of the change must be provided to and approved by
the Chief Compliance Officer no later than the morning following the execution of the aggregate

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trade.” The Brochure also stated that “[n]o client or account will be favored over another.”
31. During the Relevant Period, HCM failed to appropriately implement these written
policies and procedures, thereby violating Section 206(4) of the Advisers Act and Rule 206(4)-7
thereunder. As described above, MacWright’s trading favored the Preferred Account over the Non-
Preferred Accounts and he did not complete written order tickets with the proposed allocation of
the orders prior to entering block trades into the Average Price Account.
32. MacWright aided and abetted HCM’s violations of Section 206(4) of the Advisers
Act and Rule 206(4)-7 thereunder. MacWright was aware of the written policies and procedures
and was responsible for implementing them. As described above, MacWright failed to ensure that
HCM implemented the policies and procedures, thereby substantially assisting HCM’s violations
of Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder.
33. Throughout the Relevant Period, MacWright engaged in conduct that violated
HCM’s written policies and procedures and therefore knew or was reckless in not knowing that
HCM failed to appropriately implement the written policies and procedures, thereby violating
Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder. Accordingly, MacWright
knowingly or recklessly provided substantial assistance to HCM’s violation of Section 206(4) of
the Advisers Act and Rule 206(4)-7 thereunder.
FIRST CLAIM FOR RELIEF
Violations of Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) Thereunder
(MacWright and HCM)

34. The Commission re-alleges and incorporates by reference here the allegations in
paragraphs 1 through 33.
35. Defendants, directly or indirectly, in connection with the purchase or sale of
securities and by the use of means or instrumentalities of interstate commerce, or the mails, or the

10
facilities of a national securities exchange, knowingly or recklessly have (i) employed one or more
devices, schemes, or artifices to defraud, and/or (ii) engaged in one or more acts, practices, or
courses of business which operated or would operate as a fraud or deceit upon other persons.
36. By reason of the foregoing, Defendants, directly or indirectly, have violated and,
unless enjoined, will again violate Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and
Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§ 240.10b-5(a) and (c)].
SECOND CLAIM FOR RELIEF
Violations of Sections 206(1) and (2) of the Advisers Act
(MacWright and HCM)

37. The Commission re-alleges and incorporates by reference here the allegations in
paragraphs 1 through 36.
38. At all relevant times, Defendants were investment advisers under Section 202(11)
of the Advisers Act [15 U.S.C. § 80b-2(11)].
39. Defendants by use of the mails or any means or instrumentality of interstate
commerce, directly or indirectly have: (i) knowingly or recklessly employed one or more devices,
schemes, or artifices to defraud any client or prospective client, and/or (ii) knowingly, recklessly,
or negligently engaged in one or more transactions, practices, and courses of business which
operated or would operate as a fraud or deceit upon any client or prospective client.
40. By reason of the foregoing, Defendants, directly or indirectly, have violated and,
unless enjoined, will again violate Sections 206(1) and (2) of the Advisers Act [15 U.S.C. §§ 80b-
6(1) and 80b-6(2)].
THIRD CLAIM FOR RELIEF
Violations of Section 206(4) of the Advisers Act and Rule 206(4)-7 Thereunder
(HCM)

41. The Commission re-alleges and incorporates by reference here the allegations in

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paragraphs 1 through 40.
42. At all relevant times, Defendant HCM was an investment adviser under Section
202(11) of the Advisers Act [15 U.S.C. § 80b-2(11)].
43. Defendant HCM by use of the mails or any means or instrumentality of interstate
commerce, directly or indirectly has provided investment advice to clients without adopting and
implementing written policies and procedures reasonably designed to prevent violation, by it and
its supervised persons, of the Act and the rules that the Commission has adopted under the Act.
44. By reason of the foregoing, Defendants HCM, directly or indirectly, has violated
and, unless enjoined, will again violate Sections 206(1) and (2) of the Advisers Act [15 U.S.C. §§
80b-6(1) and 80b-6(2)].
FOURTH CLAIM FOR RELIEF
Aiding and Abetting Violations of Section 206(4) of the Advisers Act and
Rule 206(4)-7 Thereunder
(MacWright)

45. The Commission re-alleges and incorporates by reference here the allegations in
paragraphs 1 through 44.
46. Defendant HCM, which is an investment adviser under Section 202(11) of the
Advisers Act [15 U.S.C. § 80b-2(11)], by use of the mails or any means or instrumentality of
interstate commerce, directly or indirectly has provided investment advice to clients without
adopting and implementing written policies and procedures reasonably designed to prevent
violation, by it and its supervised persons, of the Act and the rules that the Commission has
adopted under the Act.
47. As a result of the conduct alleged herein, Defendant MacWright aided and abetted
HCM’s violations of Section 206(4) of the Advisers Act [15 U.S.C. §§ 80b-6(4)] and Rule
206(4)-7 thereunder [17 CFR § 275.206(4)-7] by knowing or recklessly providing substantial

12
assistance to Defendant HCM.
48. By reason of the foregoing, Defendant MacWright, directly or indirectly, aided
and abetted and, unless enjoined, will again aid and abet violations of Section 206(4) of the
Advisers Act [15 U.S.C. §§ 80b-6(4)] and Rule 206(4)-7 thereunder [17 CFR § 275.206(4)-7].
PRAYER FOR RELIEF
 WHEREFORE, the Commission respectfully requests that the Court enter a Final
Judgment:
I.
Permanently enjoining: (i) Defendants MacWright and HCM and their agents, servants,
employees and attorneys and all persons in active concert or participation with any of them from
violating, directly or indirectly, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule
10b-5 thereunder [17 C.F.R. § 240.10b-5] and Sections 206(1) and 206(2) of the Advisers Act
[15 U.S.C. §§ 80b-6(1) and (2)]; (ii) Defendant HCM and its agents, servants, employees and
attorneys and all persons in active concert or participation with it from violating, directly or
indirectly, Section 206(4) of the Advisers Act [15 U.S.C. § 80b-6(4)] and Rule 206(4)-7
thereunder [17 CFR § 275.206(4)-7]; and (iii) Defendant MacWright from aiding and abetting
violations of Section 206(4) of the Advisers Act [15 U.S.C. § 80b-6(4)] and Rule 206(4)-7
thereunder [17 CFR § 275.206(4)-7];
II.
Ordering Defendant MacWright to disgorge all ill-gotten gains that he received directly
or indirectly, with pre-judgment interest thereon, as a result of the alleged violations under
Sections 21(d)(3), 21(d)(5), and 21(d)(7) of the Exchange Act [15 U.S.C. §§ 78u(d)(3),
78u(d)(5), and 78u(d)(7)];

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III.
Ordering Defendants to pay civil monetary penalties pursuant to Section 21(d)(3) of the
Exchange Act [15 U.S.C. § 78u(d)(3)] and Section 209(e) of the Advisers Act [15 U.S.C. §
80b(9)(e)]; and
IV.
Granting any other and further relief this Court may deem just and proper.

Dated:  Denver, Colorado
September 25, 2023
s/ Zachary T. Carlyle
Zachary T. Carlyle
Jeffrey E. Oraker
Attorneys for Plaintiff
U.S. SECURITIES AND EXCHANGE COMMISSION
Denver Regional Office
Byron Rogers Federal Office Building
1961 Stout Street, Suite 1700
Denver, CO 80294-1961
(303) 844-1108
[email protected]
[email protected]

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LOCAL RULE 11.2 CERTIFICATION

Pursuant to Local Rule 11.2, I certify that the matter in controversy alleged against the
Defendant in the foregoing Complaint is not the subject of any other civil action pending in any
court, or of any pending arbitration or administrative proceeding.

s/ Zachary T. Carlyle
Zachary T. Carlyle
Jeffrey E. Oraker
Attorneys for Plaintiff
U.S. SECURITIES AND EXCHANGE COMMISSION
Denver Regional Office
Byron Rogers Federal Office Building
1961 Stout Street, Suite 1700
Denver, CO 80294-1961
(303) 844-1108
[email protected]
[email protected]

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DESIGNATION OF AGENT FOR SERVICE

 Pursuant to Local Civil Rule 101.1(f), because the Securities and Exchange Commission
does not have an office in this district, the undersigned hereby designates the United States
Attorney’s Office for the District of New Jersey to receive service of all notices or papers in this
action at the following address:
 United States Attorney's Office
 District of New Jersey
 Attention:  J. Andrew Ruymann
 Assistant U.S. Attorney
 402 East State Street, Room 430
 Trenton, NJ 08608

s/ Zachary T. Carlyle
Zachary T. Carlyle
Jeffrey E. Oraker
Attorneys for Plaintiff
U.S. SECURITIES AND EXCHANGE
COMMISSION
Denver Regional Office
Byron Rogers Federal Office Building
1961 Stout Street, Suite 1700
Denver, CO 80294-1961
(303) 844-1108
[email protected]
[email protected]

Zachary T. Carlyle 
Jeffrey E. Oraker  
Attorney for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
Denver Regional Office 
Byron Rogers Federal Office Building 
1961 Stout Street, Suite 1700 
Denver, CO 80294-1961 
(303) 844-1000 
[email protected] 
[email protected]  
 

UNITED STATES DISTRICT COURT 
DISTRICT OF NEW JERSEY 

 
SECURITIES AND EXCHANGE COMMISSION, 
 
                                                        Plaintiff, 
 
                          -against- 
 
DOUGLAS MACWRIGHT and 
HIGHLANDER CAPITAL MANAGEMENT, LLC 
 
                                                        Defendants. 
 
 

 
 
COMPLAINT 

 
23-cv-20609 

 
 

JURY TRIAL DEMANDED 
 

 
 

 
Plaintiff Securities and Exchange Commission (“Commission”), 1961 Stout Street, Suite 

1700, Denver, CO 80294-1961, for its Complaint against Defendants Douglas MacWright 

(“MacWright”), of Short Hills, NJ, and Highlander Capital Management, LLC (“HCM”), 533 

Milburn Avenue, Short Hills, NJ 07078, alleges as follows: 

SUMMARY 

1. 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 

Case 2:23-cv-20609   Document 1   Filed 09/25/23   Page 1 of 15 PageID: 1



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more than $1 million, to a preferred account in the name of an entity that he and his family 

members controlled (the “Preferred Account”). 

2. 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”).  

3. 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.  

4. Between April 22, 2015 and June 30, 2022 (the “Relevant Period”), the Preferred 

Account received over $1 million in illicit profits through the scheme.  

VIOLATIONS 

5. By virtue of the foregoing conduct and as alleged further herein, Defendants 

MacWright and HCM violated Section 10(b) of the Securities Exchange Act of 1934 (“Exchange 

Act”) [15 U.S.C. § 78j(b)], Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§ 240.10b-5(a) and 

Case 2:23-cv-20609   Document 1   Filed 09/25/23   Page 2 of 15 PageID: 2



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(c)], and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 (“Advisers Act”) 

[15 U.S.C. §§ 80b-6(1) and (2)]. In addition, Defendant HCM violated, and MacWright aided 

and abetted HCM’s violation of, Section 206(4) of the Advisers Act [15 U.S.C. §§ 80b-6(4)] and 

Rule 206(4)-7 thereunder [17 CFR § 275.206(4)-7]. 

6. Unless Defendants are restrained and enjoined, they will engage in the acts, 

practices, transactions, and courses of business set forth in this Complaint or in acts, practices, 

transactions, and courses of business of similar type and object.  

NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT 

7. The Commission brings this action pursuant to the authority conferred upon it by 

Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)] and Sections 209(d) and 209(e) of the 

Advisers Act [15 U.S.C. §§ 80b-9(d) and 80b-9(e)].  

8. The Commission seeks a final judgment: (a) permanently enjoining Defendants 

from violating the federal securities laws and rules this Complaint alleges they violated, pursuant 

to Sections 21(d)(1) and (d)(5) of the Exchange Act [15 U.S.C. §§ 78u(d)(1), 78u(d)(5)] and 

Section 209(d) of the Advisers Act [15 U.S.C. § 80b-9(d)]; (b) ordering Defendant MacWright to 

disgorge all ill-gotten gains received as a result of the violations alleged herein and to pay 

prejudgment interest thereon, pursuant to Sections 21(d)(3), 21(d)(5), and 21(d)(7) of the 

Exchange Act [15 U.S.C. §§ 78u(d)(3), 78u(d)(5), and 78u(d)(7)]; (c) ordering Defendants to pay 

civil money penalties pursuant to Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)] 

and Section 209(e) of the Advisers Act [15 U.S.C. § 80b-9(e)]; and (d) ordering any other and 

further relief the Court may deem just and proper.  

JURISDICTION AND VENUE 

9. This Court has jurisdiction over this action pursuant to Section 27 of the 

Case 2:23-cv-20609   Document 1   Filed 09/25/23   Page 3 of 15 PageID: 3



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Exchange Act [15 U.S.C. § 78aa] and Section 214 of the Advisers Act [15 U.S.C. § 80b-14].  

10. Defendants, directly and indirectly, have made use of the means or 

instrumentalities of interstate commerce or of the mails in connection with the acts, practices, 

transactions, and courses of business alleged herein. 

11. Venue lies in this District under Section 27 of the Exchange Act [15 U.S.C. 

§ 78aa], and Section 214 of the Advisers Act [15 U.S.C. § 80b-14]. Defendants are found in, 

inhabit, and transact business in the District of New Jersey, and certain of the acts, practices, 

transactions, and courses of business alleged in this Complaint occurred within this District, 

including the securities trades and related trade allocations MacWright directed HCM and the 

Broker to execute in the course of his fraudulent scheme. 

DEFENDANTS 

12. MacWright, age 67, was, during the Relevant Period, an investment adviser 

representative at, and owner of, HCM. He was also, during the Relevant Period, a registered 

representative at, and owner of, the Broker. 

13. HCM is a New Jersey limited liability corporation with its principal place of 

business in Short Hills, New Jersey. HCM has been registered with the Commission as an 

investment adviser since 1996. 

FACTS 

I. BACKGROUND  

14. “Cherry-picking” occurs when an investment adviser disproportionately allocates to 

one or more preferred accounts securities that have performed well, and/or disproportionately 

allocates to one or more non-preferred accounts securities that have performed poorly. 

15. “Block” trades placed in “average price accounts” are used to aggregate purchases 

or sales of securities for multiple accounts into a single trade. If used properly, block trades allow 

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investment advisers to give all clients who are purchasing or selling securities the same average 

price. For example, if an investment adviser places a large order, this order may be executed at 

several different prices. An average price account, which is an account maintained by a broker-

dealer for placing block or aggregated trades, allows the investment adviser to aggregate the 

executions into a single average price, ensuring the same execution price for all clients receiving 

a portion of the order.  

II. THE CHERRY-PICKING SCHEME 

A. The Preferred and Non-Preferred Accounts 

16. The Preferred Account is held at the Broker and MacWright had discretionary 

trading authority over the Account. The entity that owned the Preferred Account, and therefore 

received the profits from the scheme, was owned by MacWright, other entities controlled by 

MacWright, and family members of MacWright. During the Relevant Period, MacWright 

indirectly received, through the Broker, commissions from the owner of the Preferred Account in 

connection with the trading. 

17. The Non-Preferred Accounts were accounts held by individuals and entities for 

which MacWright served as an investment adviser. During the Relevant Period, MacWright 

managed certain advisory client accounts at HCM and acted as an investment adviser for certain 

entities that held accounts at the Broker. MacWright had authorization to make trading decisions 

on behalf of these clients who owned the Non-Preferred Accounts, and he was entitled to receive 

and/or did receive compensation from the clients for serving as an investment adviser. The Non-

Preferred Accounts were harmed by the scheme. 

B. The Mechanics of the Cherry-Picking Scheme 

18. During the Relevant Period, MacWright used the Average Price Account to trade 

securities, such as stocks, often as block trades, and those trades were later allocated to the 

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Preferred Account or later allocated to the Non-Preferred Accounts. 

19. During that time, MacWright repeatedly opened a securities position in the 

Average Price Account and waited to provide allocation instructions until he observed whether the 

trade was profitable in the time following execution. MacWright disproportionately allocated 

profitable trades to the Preferred Account, and he disproportionately allocated unprofitable trades 

to the Non-Preferred Accounts. Specifically, for profitable trades, MacWright regularly closed the 

trading position, thereby realizing a same-day profit, and then allocated the trades and the profits to 

the Preferred Account. If the price decreased in value during that day, MacWright generally 

caused the position to be allocated to one or more Non-Preferred Accounts. 

20. HCM’s written policies and procedures required that written order tickets include 

instructions for how the shares in a block trade were to be allocated before the order was entered 

into the trading system. MacWright did not follow this requirement and provided allocation 

instructions for these trades only after the trades were executed. 

21. During the Relevant Period, the trades that MacWright allocated to the Preferred 

Account increased in value 98.6% of the time on the trade day. In contrast, the trades that 

MacWright allocated to the Non-Preferred Accounts increased in value only 19.2% of the time on 

the trade day. 

22. Because of MacWright’s cherry-picking scheme, his allocations to the Preferred 

Account were almost always profitable in the short term, with first-day returns of 0.83%, while 

allocations to the Non-Preferred Accounts were generally unprofitable in the short term, with first-

day returns of negative 1.03%. The likelihood that MacWright would have earned these returns for 

himself in the absence of cherry-picking, with trade allocations determined by chance, is less than 

one in a billion. 

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C. The Cherry-Picking was Profitable to the Preferred Account, and Harmed 
the Non-Preferred Accounts. 

23. Because of MacWright’s cherry-picking scheme, the Preferred Account obtained 

illicit profits of more than $1 million (after accounting for the relatively small losses associated 

with the positions allocated to the Non-Preferred accounts owned by MacWright and MacWright’s 

family members, as well as MacWright’s ownership interests in the Non-Preferred accounts of 

entities he partially owned) and thereby harmed the Non-Preferred Accounts, which 

disproportionately received trades that had declined in value on the first day of trading.  

D. The Defendants’ Cherry-Picking Scheme Breached the Fiduciary Duties 
Owed to Advisory Clients. 

24. As investment advisers, Defendants owed a fiduciary duty to their clients. By 

carrying out the cherry-picking scheme, the Defendants breached their fiduciary duties and failed 

to act in their clients’ best interests. 

E. The Defendants Acted with Scienter and Negligently. 

25. Throughout the Relevant Period, MacWright was responsible for the trading in the 

Average Price Account that was part of the scheme and he personally made the trades and made or 

directed trade allocations to the Preferred and Non-Preferred Accounts. MacWright knew or was 

reckless in not knowing, and should have known, that he was engaging in numerous deceptive acts 

by directly or indirectly allocating the profitable trades to the Preferred Account and allocating the 

non-profitable trades to the Non-Preferred Accounts.   

26. Throughout the Relevant Period, MacWright was the owner of, and an investment 

adviser representative of, HCM and he controlled the relevant trading for HCM’s clients through 

the Average Price Account. Accordingly, his mental state and negligence can be imputed to HCM.  

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III. HCM AND MACWRIGHT FAILED TO IMPLEMENT APPROPRIATE 
WRITTEN POLICIES AND PROCEDURES. 

27. As a SEC-registered investment adviser, HCM is required to adopt and implement 

written policies and procedures reasonably designed to prevent violations of the Advisers Act and 

rules adopted thereunder.  

28. HCM’s written policies and procedures manual contained policies and procedures 

with respect to “Trading” at HCM, including the aggregation and the allocation of trades, and the 

manual stated that MacWright had responsibility for the implementation and monitoring of those 

trading policies and procedures. As an investment adviser representative of HCM, MacWright was 

also required to follow those policies and procedures.  

29. HCM’s manual stated that its “allocation procedures must be fair and equitable to 

all clients with no particular group or client(s) being favored or disfavored over any other clients” 

and prohibited “any allocation of trades in a manner that [HCM]’s proprietary accounts, affiliated 

accounts, or any particular client(s) or group of clients receive more favorable treatment than other 

client accounts.” Furthermore, HCM manual stated that HCM had “adopted a clear written policy 

for the fair and equitable allocation of transactions, (e.g., pro-rata allocation, rotational allocation, 

or other means), which is disclosed in [HCM’s Form ADV, Part 2 A (“Brochure”)].” 

30. HCM’s Brochure, which is contained in Part II of HCM’s Form ADV that is filed 

with the Commission and contains representations to investors, stated that “[p]rior to entry of an 

aggregated order, a written order ticket must be completed which identifies each client account 

participating in the order and the proposed allocation of the order, upon completion, to those 

clients” and that “[i]f the order will be allocated in a manner other than that stated in the initial 

statement of allocation, a written explanation of the change must be provided to and approved by 

the Chief Compliance Officer no later than the morning following the execution of the aggregate 

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trade.” The Brochure also stated that “[n]o client or account will be favored over another.” 

31. During the Relevant Period, HCM failed to appropriately implement these written 

policies and procedures, thereby violating Section 206(4) of the Advisers Act and Rule 206(4)-7 

thereunder. As described above, MacWright’s trading favored the Preferred Account over the Non-

Preferred Accounts and he did not complete written order tickets with the proposed allocation of 

the orders prior to entering block trades into the Average Price Account.  

32. MacWright aided and abetted HCM’s violations of Section 206(4) of the Advisers 

Act and Rule 206(4)-7 thereunder. MacWright was aware of the written policies and procedures 

and was responsible for implementing them. As described above, MacWright failed to ensure that 

HCM implemented the policies and procedures, thereby substantially assisting HCM’s violations 

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

33. Throughout the Relevant Period, MacWright engaged in conduct that violated 

HCM’s written policies and procedures and therefore knew or was reckless in not knowing that 

HCM failed to appropriately implement the written policies and procedures, thereby violating 

Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder. Accordingly, MacWright 

knowingly or recklessly provided substantial assistance to HCM’s violation of Section 206(4) of 

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

FIRST CLAIM FOR RELIEF 
Violations of Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) Thereunder 

(MacWright and HCM) 
 

34. The Commission re-alleges and incorporates by reference here the allegations in 

paragraphs 1 through 33. 

35. Defendants, directly or indirectly, in connection with the purchase or sale of 

securities and by the use of means or instrumentalities of interstate commerce, or the mails, or the 

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facilities of a national securities exchange, knowingly or recklessly have (i) employed one or more 

devices, schemes, or artifices to defraud, and/or (ii) engaged in one or more acts, practices, or 

courses of business which operated or would operate as a fraud or deceit upon other persons. 

36. By reason of the foregoing, Defendants, directly or indirectly, have violated and, 

unless enjoined, will again violate Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and 

Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§ 240.10b-5(a) and (c)]. 

SECOND CLAIM FOR RELIEF 
Violations of Sections 206(1) and (2) of the Advisers Act 

(MacWright and HCM) 
 

37. The Commission re-alleges and incorporates by reference here the allegations in 

paragraphs 1 through 36.  

38. At all relevant times, Defendants were investment advisers under Section 202(11) 

of the Advisers Act [15 U.S.C. § 80b-2(11)]. 

39. Defendants by use of the mails or any means or instrumentality of interstate 

commerce, directly or indirectly have: (i) knowingly or recklessly employed one or more devices, 

schemes, or artifices to defraud any client or prospective client, and/or (ii) knowingly, recklessly, 

or negligently engaged in one or more transactions, practices, and courses of business which 

operated or would operate as a fraud or deceit upon any client or prospective client. 

40. By reason of the foregoing, Defendants, directly or indirectly, have violated and, 

unless enjoined, will again violate Sections 206(1) and (2) of the Advisers Act [15 U.S.C. §§ 80b-

6(1) and 80b-6(2)]. 

THIRD CLAIM FOR RELIEF 
Violations of Section 206(4) of the Advisers Act and Rule 206(4)-7 Thereunder 

(HCM) 
 

41. The Commission re-alleges and incorporates by reference here the allegations in 

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paragraphs 1 through 40.  

42. At all relevant times, Defendant HCM was an investment adviser under Section 

202(11) of the Advisers Act [15 U.S.C. § 80b-2(11)]. 

43. Defendant HCM by use of the mails or any means or instrumentality of interstate 

commerce, directly or indirectly has provided investment advice to clients without adopting and 

implementing written policies and procedures reasonably designed to prevent violation, by it and 

its supervised persons, of the Act and the rules that the Commission has adopted under the Act. 

44. By reason of the foregoing, Defendants HCM, directly or indirectly, has violated 

and, unless enjoined, will again violate Sections 206(1) and (2) of the Advisers Act [15 U.S.C. §§ 

80b-6(1) and 80b-6(2)]. 

FOURTH CLAIM FOR RELIEF 
Aiding and Abetting Violations of Section 206(4) of the Advisers Act and  

Rule 206(4)-7 Thereunder 
(MacWright) 

 
45. The Commission re-alleges and incorporates by reference here the allegations in 

paragraphs 1 through 44.  

46. Defendant HCM, which is an investment adviser under Section 202(11) of the 

Advisers Act [15 U.S.C. § 80b-2(11)], by use of the mails or any means or instrumentality of 

interstate commerce, directly or indirectly has provided investment advice to clients without 

adopting and implementing written policies and procedures reasonably designed to prevent 

violation, by it and its supervised persons, of the Act and the rules that the Commission has 

adopted under the Act.  

47. As a result of the conduct alleged herein, Defendant MacWright aided and abetted 

HCM’s violations of Section 206(4) of the Advisers Act [15 U.S.C. §§ 80b-6(4)] and Rule 

206(4)-7 thereunder [17 CFR § 275.206(4)-7] by knowing or recklessly providing substantial 

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assistance to Defendant HCM.  

48. By reason of the foregoing, Defendant MacWright, directly or indirectly, aided 

and abetted and, unless enjoined, will again aid and abet violations of Section 206(4) of the 

Advisers Act [15 U.S.C. §§ 80b-6(4)] and Rule 206(4)-7 thereunder [17 CFR § 275.206(4)-7]. 

PRAYER FOR RELIEF 

 WHEREFORE, the Commission respectfully requests that the Court enter a Final 

Judgment: 

I. 

Permanently enjoining: (i) Defendants MacWright and HCM and their agents, servants, 

employees and attorneys and all persons in active concert or participation with any of them from 

violating, directly or indirectly, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 

10b-5 thereunder [17 C.F.R. § 240.10b-5] and Sections 206(1) and 206(2) of the Advisers Act 

[15 U.S.C. §§ 80b-6(1) and (2)]; (ii) Defendant HCM and its agents, servants, employees and 

attorneys and all persons in active concert or participation with it from violating, directly or 

indirectly, Section 206(4) of the Advisers Act [15 U.S.C. § 80b-6(4)] and Rule 206(4)-7 

thereunder [17 CFR § 275.206(4)-7]; and (iii) Defendant MacWright from aiding and abetting 

violations of Section 206(4) of the Advisers Act [15 U.S.C. § 80b-6(4)] and Rule 206(4)-7 

thereunder [17 CFR § 275.206(4)-7];  

II. 

Ordering Defendant MacWright to disgorge all ill-gotten gains that he received directly 

or indirectly, with pre-judgment interest thereon, as a result of the alleged violations under 

Sections 21(d)(3), 21(d)(5), and 21(d)(7) of the Exchange Act [15 U.S.C. §§ 78u(d)(3), 

78u(d)(5), and 78u(d)(7)]; 

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III. 

Ordering Defendants to pay civil monetary penalties pursuant to Section 21(d)(3) of the 

Exchange Act [15 U.S.C. § 78u(d)(3)] and Section 209(e) of the Advisers Act [15 U.S.C. § 

80b(9)(e)]; and 

IV. 

Granting any other and further relief this Court may deem just and proper. 

 
Dated: Denver, Colorado 

September 25, 2023 
s/ Zachary T. Carlyle   
Zachary T. Carlyle 
Jeffrey E. Oraker 
Attorneys for Plaintiff 
U.S. SECURITIES AND EXCHANGE COMMISSION 
Denver Regional Office 
Byron Rogers Federal Office Building 
1961 Stout Street, Suite 1700 
Denver, CO 80294-1961 
(303) 844-1108 
[email protected] 
[email protected]  

  

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mailto:[email protected]
mailto:[email protected]


 14 

LOCAL RULE 11.2 CERTIFICATION 
 

Pursuant to Local Rule 11.2, I certify that the matter in controversy alleged against the 

Defendant in the foregoing Complaint is not the subject of any other civil action pending in any 

court, or of any pending arbitration or administrative proceeding.  

 
s/ Zachary T. Carlyle    
Zachary T. Carlyle 
Jeffrey E. Oraker 
Attorneys for Plaintiff 
U.S. SECURITIES AND EXCHANGE COMMISSION 
Denver Regional Office 
Byron Rogers Federal Office Building 
1961 Stout Street, Suite 1700 
Denver, CO 80294-1961 
(303) 844-1108 
[email protected] 
[email protected]  
 
 

 
  

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mailto:[email protected]
mailto:[email protected]


 15 

DESIGNATION OF AGENT FOR SERVICE 
 

 Pursuant to Local Civil Rule 101.1(f), because the Securities and Exchange Commission 

does not have an office in this district, the undersigned hereby designates the United States 

Attorney’s Office for the District of New Jersey to receive service of all notices or papers in this 

action at the following address: 

 United States Attorney's Office 
 District of New Jersey 
 Attention:  J. Andrew Ruymann 
 Assistant U.S. Attorney 
 402 East State Street, Room 430 
 Trenton, NJ 08608 
 

  
 

s/ Zachary T. Carlyle   
Zachary T. Carlyle 
Jeffrey E. Oraker 
Attorneys for Plaintiff 
U.S. SECURITIES AND EXCHANGE 
COMMISSION 
Denver Regional Office 
Byron Rogers Federal Office Building 
1961 Stout Street, Suite 1700 
Denver, CO 80294-1961 
(303) 844-1108 
[email protected] 
[email protected]  
 
 

Case 2:23-cv-20609   Document 1   Filed 09/25/23   Page 15 of 15 PageID: 15

mailto:[email protected]
mailto:[email protected]

	Zachary T. Carlyle
	Jeffrey E. Oraker
	Attorney for Plaintiff
	SECURITIES AND EXCHANGE COMMISSION
	Denver Regional Office
	(303) 844-1000
	[email protected]
	[email protected]
	Plaintiff Securities and Exchange Commission (“Commission”), 1961 Stout Street, Suite 1700, Denver, CO 80294-1961, for its Complaint against Defendants Douglas MacWright (“MacWright”), of Short Hills, NJ, and Highlander Capital Management, LLC (“HCM”)...
	SUMMARY
	1. 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 s...
	2. 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 s...
	3. 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 f...
	4. Between April 22, 2015 and June 30, 2022 (the “Relevant Period”), the Preferred Account received over $1 million in illicit profits through the scheme.
	VIOLATIONS
	5. By virtue of the foregoing conduct and as alleged further herein, Defendants MacWright and HCM violated Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78j(b)], Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§ 240....
	6. Unless Defendants are restrained and enjoined, they will engage in the acts, practices, transactions, and courses of business set forth in this Complaint or in acts, practices, transactions, and courses of business of similar type and object.
	NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT
	7. The Commission brings this action pursuant to the authority conferred upon it by Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)] and Sections 209(d) and 209(e) of the Advisers Act [15 U.S.C. §§ 80b-9(d) and 80b-9(e)].
	8. The Commission seeks a final judgment: (a) permanently enjoining Defendants from violating the federal securities laws and rules this Complaint alleges they violated, pursuant to Sections 21(d)(1) and (d)(5) of the Exchange Act [15 U.S.C. §§ 78u(d)...
	JURISDICTION AND VENUE
	9. This Court has jurisdiction over this action pursuant to Section 27 of the Exchange Act [15 U.S.C. § 78aa] and Section 214 of the Advisers Act [15 U.S.C. § 80b-14].
	10. Defendants, directly and indirectly, have made use of the means or instrumentalities of interstate commerce or of the mails in connection with the acts, practices, transactions, and courses of business alleged herein.
	11. Venue lies in this District under Section 27 of the Exchange Act [15 U.S.C. § 78aa], and Section 214 of the Advisers Act [15 U.S.C. § 80b-14]. Defendants are found in, inhabit, and transact business in the District of New Jersey, and certain of th...
	DEFENDANTS
	12. MacWright, age 67, was, during the Relevant Period, an investment adviser representative at, and owner of, HCM. He was also, during the Relevant Period, a registered representative at, and owner of, the Broker.
	I. BACKGROUND
	14. “Cherry-picking” occurs when an investment adviser disproportionately allocates to one or more preferred accounts securities that have performed well, and/or disproportionately allocates to one or more non-preferred accounts securities that have p...
	15. “Block” trades placed in “average price accounts” are used to aggregate purchases or sales of securities for multiple accounts into a single trade. If used properly, block trades allow investment advisers to give all clients who are purchasing or ...
	II. THE CHERRY-PICKING SCHEME
	A. The Preferred and Non-Preferred Accounts

	16. The Preferred Account is held at the Broker and MacWright had discretionary trading authority over the Account. The entity that owned the Preferred Account, and therefore received the profits from the scheme, was owned by MacWright, other entities...
	17. The Non-Preferred Accounts were accounts held by individuals and entities for which MacWright served as an investment adviser. During the Relevant Period, MacWright managed certain advisory client accounts at HCM and acted as an investment adviser...
	B. The Mechanics of the Cherry-Picking Scheme

	18. During the Relevant Period, MacWright used the Average Price Account to trade securities, such as stocks, often as block trades, and those trades were later allocated to the Preferred Account or later allocated to the Non-Preferred Accounts.
	19. During that time, MacWright repeatedly opened a securities position in the Average Price Account and waited to provide allocation instructions until he observed whether the trade was profitable in the time following execution. MacWright disproport...
	20. HCM’s written policies and procedures required that written order tickets include instructions for how the shares in a block trade were to be allocated before the order was entered into the trading system. MacWright did not follow this requirement...
	21. During the Relevant Period, the trades that MacWright allocated to the Preferred Account increased in value 98.6% of the time on the trade day. In contrast, the trades that MacWright allocated to the Non-Preferred Accounts increased in value only ...
	22. Because of MacWright’s cherry-picking scheme, his allocations to the Preferred Account were almost always profitable in the short term, with first-day returns of 0.83%, while allocations to the Non-Preferred Accounts were generally unprofitable in...
	C. The Cherry-Picking was Profitable to the Preferred Account, and Harmed the Non-Preferred Accounts.

	23. Because of MacWright’s cherry-picking scheme, the Preferred Account obtained illicit profits of more than $1 million (after accounting for the relatively small losses associated with the positions allocated to the Non-Preferred accounts owned by M...
	D. The Defendants’ Cherry-Picking Scheme Breached the Fiduciary Duties Owed to Advisory Clients.

	24. As investment advisers, Defendants owed a fiduciary duty to their clients. By carrying out the cherry-picking scheme, the Defendants breached their fiduciary duties and failed to act in their clients’ best interests.
	E. The Defendants Acted with Scienter and Negligently.

	25. Throughout the Relevant Period, MacWright was responsible for the trading in the Average Price Account that was part of the scheme and he personally made the trades and made or directed trade allocations to the Preferred and Non-Preferred Accounts...
	26. Throughout the Relevant Period, MacWright was the owner of, and an investment adviser representative of, HCM and he controlled the relevant trading for HCM’s clients through the Average Price Account. Accordingly, his mental state and negligence c...
	III. HCM AND MACWRIGHT FAILED TO IMPLEMENT APPROPRIATE WRITTEN POLICIES AND PROCEDURES.
	27. As a SEC-registered investment adviser, HCM is required to adopt and implement written policies and procedures reasonably designed to prevent violations of the Advisers Act and rules adopted thereunder.
	28. HCM’s written policies and procedures manual contained policies and procedures with respect to “Trading” at HCM, including the aggregation and the allocation of trades, and the manual stated that MacWright had responsibility for the implementation...
	29. HCM’s manual stated that its “allocation procedures must be fair and equitable to all clients with no particular group or client(s) being favored or disfavored over any other clients” and prohibited “any allocation of trades in a manner that [HCM]...
	30. HCM’s Brochure, which is contained in Part II of HCM’s Form ADV that is filed with the Commission and contains representations to investors, stated that “[p]rior to entry of an aggregated order, a written order ticket must be completed which ident...
	31. During the Relevant Period, HCM failed to appropriately implement these written policies and procedures, thereby violating Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder. As described above, MacWright’s trading favored the Preferr...
	32. MacWright aided and abetted HCM’s violations of Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder. MacWright was aware of the written policies and procedures and was responsible for implementing them. As described above, MacWright fa...
	33. Throughout the Relevant Period, MacWright engaged in conduct that violated HCM’s written policies and procedures and therefore knew or was reckless in not knowing that HCM failed to appropriately implement the written policies and procedures, ther...
	34. The Commission re-alleges and incorporates by reference here the allegations in paragraphs 1 through 33.
	35. Defendants, directly or indirectly, in connection with the purchase or sale of securities and by the use of means or instrumentalities of interstate commerce, or the mails, or the facilities of a national securities exchange, knowingly or reckless...
	36. By reason of the foregoing, Defendants, directly or indirectly, have violated and, unless enjoined, will again violate Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§ 240.10b-5(a) and (c)].
	SECOND CLAIM FOR RELIEF
	Violations of Sections 206(1) and (2) of the Advisers Act
	(MacWright and HCM)
	37. The Commission re-alleges and incorporates by reference here the allegations in paragraphs 1 through 36.
	38. At all relevant times, Defendants were investment advisers under Section 202(11) of the Advisers Act [15 U.S.C. § 80b-2(11)].
	39. Defendants by use of the mails or any means or instrumentality of interstate commerce, directly or indirectly have: (i) knowingly or recklessly employed one or more devices, schemes, or artifices to defraud any client or prospective client, and/or...
	40. By reason of the foregoing, Defendants, directly or indirectly, have violated and, unless enjoined, will again violate Sections 206(1) and (2) of the Advisers Act [15 U.S.C. §§ 80b-6(1) and 80b-6(2)].
	THIRD CLAIM FOR RELIEF
	Violations of Section 206(4) of the Advisers Act and Rule 206(4)-7 Thereunder
	(HCM)
	41. The Commission re-alleges and incorporates by reference here the allegations in paragraphs 1 through 40.
	42. At all relevant times, Defendant HCM was an investment adviser under Section 202(11) of the Advisers Act [15 U.S.C. § 80b-2(11)].
	43. Defendant HCM by use of the mails or any means or instrumentality of interstate commerce, directly or indirectly has provided investment advice to clients without adopting and implementing written policies and procedures reasonably designed to pre...
	44. By reason of the foregoing, Defendants HCM, directly or indirectly, has violated and, unless enjoined, will again violate Sections 206(1) and (2) of the Advisers Act [15 U.S.C. §§ 80b-6(1) and 80b-6(2)].
	FOURTH CLAIM FOR RELIEF
	Aiding and Abetting Violations of Section 206(4) of the Advisers Act and
	Rule 206(4)-7 Thereunder
	(MacWright)
	45. The Commission re-alleges and incorporates by reference here the allegations in paragraphs 1 through 44.
	46. Defendant HCM, which is an investment adviser under Section 202(11) of the Advisers Act [15 U.S.C. § 80b-2(11)], by use of the mails or any means or instrumentality of interstate commerce, directly or indirectly has provided investment advice to c...
	47. As a result of the conduct alleged herein, Defendant MacWright aided and abetted HCM’s violations of Section 206(4) of the Advisers Act [15 U.S.C. §§ 80b-6(4)] and Rule 206(4)-7 thereunder [17 CFR § 275.206(4)-7] by knowing or recklessly providing...
	48. By reason of the foregoing, Defendant MacWright, directly or indirectly, aided and abetted and, unless enjoined, will again aid and abet violations of Section 206(4) of the Advisers Act [15 U.S.C. §§ 80b-6(4)] and Rule 206(4)-7 thereunder [17 CFR ...
	PRAYER FOR RELIEF
	Dated: Denver, Colorado
	(303) 844-1108
	[email protected]
	[email protected]
	(303) 844-1108
	[email protected]
	[email protected]
	(303) 844-1108
	[email protected]
	[email protected]