Kenneth Peter Krueger of Newport Beach California is a former Canterbury Consulting Inc. stockbroker who has been fined $80,000.00 and barred by Securities and Exchange Commission (SEC) from acting as an investment adviser or broker or associating with brokerage firms or investment advisories according to an Order Instituting Administrative and Cease and Desist Proceedings containing findings that he took part in a fraudulent investment scheme. In the Matter of Kenneth Peter Krueger Administrative Proceeding No. 3-18266 (Oct. 26, 2017).
According to the Order, between January 2, 2013 and November 19, 2014, during the time that Krueger was employed with Canterbury Consulting Incorporated, he engaged in a fraudulent cherry-picking scheme which enabled him to favor his accounts over his customers in the course of his allocation of trades in accounts. The SEC stated that purchases and sales of securities were effected by Krueger via an omnibus trading account, enabling him to buy large securities blocks and allocate trades to forty-two advisory client and customer discretionary trading accounts that were not profitable or had been less profitable then the trades that Krueger allocated to his own account.
Particularly, securities had been traded through an omnibus trading account owned by Canterbury Consulting Incorporated that was held at the firm’s primary brokerage. Evidently, Krueger was the sole individual through the firm which was allowed to utilize the firm’s omnibus account. Block trades in securities were reportedly placed by Krueger in the omnibus account, where certain portions of the trades had been inappropriately allocated by him to his discretionary and personal accounts.
Evidently, Krueger knew that he had disproportionately allocated unprofitable trades in discretionary trading accounts while benefiting himself in the process. The Order stated that when the value of a security had appreciated on the day it had been purchased, it was sold by Krueger that day, where he inappropriately assigned an abnormal amount of trades that had been profitable to his personal trading account. However, when the value of a security had not appreciated on the day it had been purchased, the proceeds had been inappropriately assigned to discretionary accounts by Krueger.
The Order stated that eighty-seven percent of profitable trades each day had been assigned by Krueger to his personal account while only thirteen percent of profitable trades had been assigned to discretionary accounts. The Order also revealed that more than ninety-nine percent of trades which had experienced losses on the first day had been assigned by Krueger to the discretionary trading accounts.
Krueger’s scheme reportedly enabled him to rake in $309,651.00 in illicit gains, which had included the advisory fees and commissions generated from customers. Consequently, Krueger’s conduct was found by SEC to be violative of Securities Exchange Act of 1934 Section 10(b), Securities Act of 1933 Section 17(a)(1), SEC Rule 10b-5(a), 10b-5(c), and Investment Advisors Act of 1940 Sections 206(1) and 206(2).
Financial Industry Regulatory Authority (FINRA) Public Disclosure confirms that Krueger was fired by Canterbury Consulting on November 3, 2016 based upon an internal review concerning Krueger’s business activities.
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