Former investment advisor James Burleson has been barred from the industry after settling charges with the Securities and Exchange Commission (SEC) over an alleged cherry-picking scheme that, according to regulators, cost his clients more than $3.2 million while netting him $1.8 million in personal gains.
For wealth advisors and RIAs, the case is a sobering reminder of how lapses in fiduciary duty and oversight can destroy client trust and damage the credibility of the profession.
The SEC alleged that Burleson, who ran Burleson & Company, an RIA based in Petaluma, Calif., engaged in a multi-year fraud between August 2020 and October 2022. The core of the scheme, regulators said, revolved around the misuse of an omnibus trading account. By commingling his own assets with those of clients, Burleson allegedly allocated profitable trades to himself while assigning losing trades to his clients—often after the market had closed and outcomes were known.
In total, regulators said, Burleson executed more than 750 options trades in this manner. The results were striking: trades allocated to his personal account generated returns of 26.5%, while trades assigned to clients suffered returns of -5.1%. The SEC noted that “the probability that such wildly divergent returns occurred by chance is less than one in a million.” In other words, the pattern was no accident, but rather a deliberate and systematic strategy to enrich himself at the expense of those he was obligated to serve.
Burleson settled the case without admitting or denying wrongdoing. Under the terms announced this week, he agreed to pay nearly $2.3 million in disgorgement and penalties and accepted an industry bar, with the option to apply for re-entry after five years. His attorneys did not respond to requests for comment.
For advisors, the allegations highlight the critical importance of transparency and accountability in trade allocations. Block and omnibus accounts can be efficient tools for managing multiple clients’ trades, but they come with inherent risks if not paired with rigorous compliance protocols. Regulators expect firms to have strong systems in place to ensure fair and timely allocations. Delayed trade assignment, as described in the SEC’s complaint, creates clear opportunities for abuse.
Burleson’s firm once reported nearly half a billion dollars in assets under management, according to its most recent Form ADV filing from March 2023. By May of that year, Burleson sold the practice to another advisor, shortly before the SEC moved forward with its enforcement action. The case underscores not only the consequences for individuals but also the reputational risk such misconduct poses to firms, successor practices, and the advisory industry as a whole.
For fiduciaries, the lesson is clear: the duty to act in the best interest of clients must extend to every trade, every allocation, and every operational decision. Options trading in particular requires heightened oversight because of its complexity, volatility, and potential for conflicts of interest. Advisors exercising discretionary authority over client accounts should adopt policies that prevent any appearance of self-dealing, including:
-
Real-time allocation systems. Technology can assign trades automatically and remove any ability to adjust allocations after execution.
-
Independent monitoring. Compliance teams or third-party consultants should regularly review allocation data to detect anomalies in performance patterns across accounts.
-
Clear disclosures. Clients deserve transparency about how their trades are aggregated, executed, and allocated. Omnibus accounts should be explained in detail, including safeguards to protect fairness.
-
Segregation of personal assets. Advisors trading personally should do so through separate accounts to avoid any risk of commingling with client funds.
The SEC has pursued several cherry-picking cases in recent years, reflecting a continued focus on protecting retail investors from abuses that are difficult for them to detect. Unlike overt theft, cherry-picking schemes often unfold quietly and only come to light after regulators examine trade records in detail. For that reason, proactive compliance is critical. Advisors cannot assume regulators will overlook irregularities, nor can they rely on the idea that clients won’t notice performance disparities.
Equally important is the broader reputational dimension. Investors rely on advisors for trust, not just technical expertise. A case like Burleson’s does more than penalize one individual; it shakes confidence in the profession as a whole. At a time when markets are already fraught with volatility and investors seek steady guidance, any perception of advisor misconduct amplifies skepticism and puts additional pressure on all RIAs to demonstrate their integrity.
The SEC’s action reinforces the principle that fiduciary responsibility is not a vague standard but a concrete obligation enforced through data, compliance, and accountability. Advisors who maintain rigorous controls, prioritize fairness, and consistently communicate with clients are better positioned not only to avoid regulatory scrutiny but also to differentiate themselves in a crowded marketplace.
Burleson’s story ends with penalties, a bar, and lasting reputational damage. For the wealth management community, it serves as another reminder that client trust is the most valuable—and most fragile—asset an advisor holds. Preserving it requires systems, safeguards, and above all, a commitment to place clients first in every trade and every decision.
