On September 10, 2020, the Securities and Exchange Commission (SEC) initiated a civil action (Complaint) against Defendants RRBB Asset Management, LLC and Carl S. Schwartz (Schwartz). The Complaint alleges that Mr. Schwartz, part-owner of the registered investment adviser (RIA) firm RRBB Asset Management, LLC (RRBB), engaged in a purported cherry-picking scheme.

Specifically, as alleged by the SEC, Mr. Schwartz, who was the “only person at RRBB with the authority to determine trades and allocations” allegedly “disproportionately allocated profitable trades to accounts held by a new client, a high net-worth couple, who was one of RRBB’s largest and most lucrative clients in terms of assets under management, while allocating less profitable trades to RRBB’s other clients.” As alleged in the SEC’s Complaint, this practice, commonly referred to in the securities industry as “cherry-picking,” amounts to an impermissible allocation of trades from a RIA’s omnibus trading account in violation of various securities laws, including the antifraud provisions of Rule 10b-5 of the Securities Exchange Act of 1934 (Exchange Act).

With offices in Maplewood, New Jersey, RRBB is organized as a New Jersey LLC and has been providing investment advisory services since 2011. The principal owners of RRBB are Mr. Schwartz and a direct entity owner, accounting firm Rosenberg Rich Baker Berman & Co. P.A. As an RIA governed by the SEC, RRBB is held to a fiduciary standard in connection with the services it provides its clientele, including both discretionary and non-discretionary portfolio management services.

According to the SEC’s Complaint, Mr. Schwarz was the only person at RRBB who provided investment advice to clients, and moreover, “was solely responsible for RRBB’s trades and allocations.” As an investment adviser, Schwarz and RRBB owed a fiduciary duty to their clients, “including an affirmative duty of utmost good faith and full disclosure of all material facts, as well as a duty to avoid misleading” RRBB clients. Through allegedly cherry-picking certain favorable trades to accounts held by the new, favored client, Mr. Schwarz allocated a disproportionate number of unfavorable trades to other, disfavored accounts, according to the SEC. These disfavored accounts included certain accounts held by an elderly widow, an account in the name of her late-husband’s estate, and an account connected to a certain charitable foundation.

Investors who have suffered losses with RRBB Asset Management, LLC may contact our office by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost and confidential consultation to learn more about their legal rights. The attorneys at Giarrusso Law Group LLC have extensive experience with handling all manner of claims on behalf of investors who have been victimized by securities fraud or related misconduct.