A Connecticut investment advisor faces up to 25 years in prison after pleading guilty to cherry-picking stocks and defrauding clients of more than $2.7 million.
Jonathan Vincent Glenn, the CEO of Greenwich, Conn.-based firm Glenn Capital, pleaded guilty this week in federal court to one count of securities fraud, one month after he and the firm settled SEC charges regarding the same conduct.
Glenn entered the industry in 1993, with a run of brief stints at the four major wirehouses before founding Glenn Capital in 2018, according to his IAPD profile.
As the firm’s sole advisor, he managed all client accounts, assisting customers with portfolio management services (including asset selection and allocation), according to the DOJ. He’d do so by direct trades in individual accounts or by placing block trades in the firm’s omnibus account and divvying the trades among individual accounts afterward.
Glenn was required to document specific allocations for each block trade before executing it and to allocate block trades to all individual accounts at an average price, but Glenn began cherry-picking, which involves a broker not assigning trades to particular accounts until they know whether it’s profitable. By doing so, a broker can order the profitable trades into certain accounts while leaving other clients holding the bag on the unprofitable ones.
As a part of the guilty plea, Glenn admitted that he moved profitable trades into the accounts for certain clients, including family and his own personal accounts, while shifting unprofitable trades to other clients.
According to the SEC, the probability that the favored accounts would receive those profitable trades by chance was “statistically nearly zero.” In total, Glenn defrauded 49 clients, according to the Justice Department.
During much of this time, Glenn Capital executed its trades through an unnamed broker/dealer, but that business notified the firm in March 2022 that they’d terminated Glenn’s access to the omnibus account and were ending the relationship altogether, due to “concerns” about Glenn’s trading, according to the SEC settlement order. Glenn then asked clients to move their accounts to a separate unnamed broker/dealer, which did not allow advisors to use omnibus accounts.
Glenn was released until his sentencing date, which is scheduled for Dec. 28.