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Lafayette investment advisers cited in SEC complaint

Posted: 1:07 PM, Sep 26, 2018
Updated: 2018-09-26 15:15:11-04

A Lafayette-based investment company, World Tree Financial, has been accused in federal filings of a “cherry-picking” scheme that made big profits for the executives and their friends, but cost other clients money.

The complaint, filed last week by the Securities and Exchange Commission in Lafayette’s federal courthouse, accused the company as well as CEO Wesley Kyle Perkins and his wife and the company’s chief compliance officer, Priscilla Gilmore Perkins, of carrying out the “cherry-picking” scheme between 2011 and 2015.

“They allocated “cherry-picked” winning trades to Perkins’ accounts and to accounts held by some clients, while
allocating losing trades to the accounts held by a disfavored client. In doing so, they breached the fiduciary duties they owed their clients – Perkins took profits for himself and others, while at the same time causing substantial losses for the disfavored client,” the complaint states. “Through this scheme, World Tree and Perkins misled the clients who received the better trades into thinking World Tree and Perkins were better at
managing their money than they really were.”

We left a message on a voice mail for World Tree Financial Wednesday afternoon, but have not received a response.

The complaint, which you can read for yourself by clicking here:  World-Tree-SEC-Complaint , alleges that both individuals and their company violated several federal laws that govern how investments are made and investment advisers must conduct themselves.

The allegation is that Wesley Perkins, who oversaw all the firm’s trading, would allocate profitable trades to his accounts and his friends’ accounts, and allocate loser trades to the “disfavored” accounts. According to the complaint, the company would trade through an omnibus trading account held at a brokerage firm, and then allocate purchased to individual clients’ accounts afterward, “generally after the market closed.” That means Perkins was waiting to see if there was a gain on the security’s price during that day, the complaint states.

The SEC also accuses the company of lying to its clients about this.

“The firm’s brochures and other disclosures claimed the trades were being fairly and equitably allocated among the client accounts,” the complaint alleges. “The firm also claimed that Perkins and (Priscilla) Gilmore (Perkins) were not trading in the same securities as World Tree’s clients. These claims were false – Perkins was cherry-picking trades, and he and Gilmore were trading in the same securities as their clients.”

The complaint alleges that World Tree, as of March 2018, was managing more than $54 million for 161 clients. During the time period of the alleged cherry-picking scheme, the firm handled between $40 million and $70 million in client assets, the complaint alleges.

The complaint estimates that the favored accounts saw about $16 million in increased value on trades, while at the same time the disfavored accounts posted losses of $4.46 million.

It also alleges that the brokerage firm handling trades for World Tree terminated its relationship with the company “because it suspected the firm was engaging in cherry-picking.” The broker quit World Tree after asking for documentation of client account allocations – which World Tree allegedly never produced, the complaint states.

According to the complaint, the couple co-founded the company in 2009, and married in 2017. Perkins is a 60 percent owner, and his wife is 40 percent owner. All of the company’s advisory clients are individuals, and none of them are “high net worth individuals,” the complaint states.

In the complaint, the SEC asks that the court to issue a permanent order forbidding World Tree, the Perkinses and any of their employees from violating federal securities laws; to order them to repay all the money their clients lost, including interest; to order them to pay civil penalties; and to oversee the case to be sure the defendants do as the court orders.

World Tree Financial / KATC