By Emily Flitter
Dec 14 (Reuters) - The U.S. Securities and Exchange
Commission on Friday filed civil charges against a Los
Angeles-based hedge fund manager and his investment advisory
firm for running a 'cherry-picking' scheme, according to a press
release from the agency.
The SEC charged Peter Eichler, Jr. and his fund Aletheia
with violating fiduciary duties to clients by steering
profitable trades into Aletheia's own accounts and into the
accounts of preferred clients, as well as failing to inform
investors in a timely manner when the firm ran into financial
"Aletheia and Eichler had an obligation to treat all clients
with equal fairness, but instead they cherry-picked winners and
losers and unfairly disadvantaged investors in two hedge funds
to profit themselves," said Michele Wein Layne, director of the
SEC's Los Angeles office.
Eichler's lawyer did not immediately respond to a request
According to the SEC's complaint, filed in federal court in
California, Eichler traded options for Aletheia and also ran an
investment advisory service through the firm. Eichler structured
the firm so that options trades for the investment advisory
service weren't allocated to a specific account until after they
The SEC alleged Eichler used the delay to separate winning
trades from losing trades and put them in specific accounts held
by Eichler and a few of his employees and special clients.
The $1.4 billion fund Aletheia is in bankruptcy proceedings.
The state of California suspended its corporate status in
October over $2 million in unpaid taxes and fines, according to
The tax bill and the cost of dealing with long-running
lawsuits against the firm destroyed its business, but Eichler
did not disclose this to investors until just before it filed
for bankruptcy in November - another breach of fiduciary duty,
the SEC's complaint said.
The case is SEC vs. Aletheia Research and Management and
Peter J. Eichler, Jr. in United States District Court, Central
District of California, CV12-10692.
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