Petaluma financial adviser accused of cherry-picking scheme.

Federal authorities have accused a Petaluma financial adviser of defrauding clients out of millions of dollars in a “sampling” scheme.

James Burleson, 57, Petaluma resident and majority owner and principal of Petaluma-based Burleson & Company, LLC, defrauded his clients between August 2020 and October 2022, according to charges filed Nov. 21 by the Securities and Exchange Commission. year causing them to lose over $3 million and him pocketing $1.8 million.

Burleson said Tuesday he could not comment on the legal case.

During this period, Burleson’s firm had more than 200 clients This is stated in the press release of the SECand authorities allege he fraudulently benefited from their investments by moving profitable trades to his own account and unprofitable trades to client accounts, i.e. “cherry picking.”

According to SEC complaintBurleson made risky options in his firm’s “block” account — a collective trading account that included several clients — and then often waited until the markets closed to see if the trades were profitable for himself or his clients.

He then distributed the profitable trading options to his account, resulting in over $1.8 million in profit with a return of 26.5%. On the contrary, it distributed loss-making options to client accounts, resulting in losses of over $3.2 million for a return of -5.1%.

“The probability that such wildly varying returns occurred by chance is less than one in a million,” the complaint said.

According to the complaint, his firm managed more than $450 million in assets as of March 2023, which it sold to another adviser by May of that year. Burleson was an SEC Registered Investment Adviser from 2006 until May 2023.

He managed his clients’ brokerage accounts at Charles Schwab & Co., Inc., including his personal account. In March 2021, Schwab representatives notified Burleson that they had “identified potential preferred options” for his account and suggested that he seek additional guidance, SEC officials said.

Burleson replied that it “wouldn’t be a big deal” to trade directly in his personal account, but he continued to trade through the firm’s block account with some adjustments, according to the complaint.

Again, Schwab officials noted that he continued this preferential trade in October 2022, and by November of that year they had terminated the relationship with the Petaluma firm.

“For many of his clients, Burleson was given the authority to transact on behalf of the client without prior authorization,” the complaint states.

“This scheme was inherently deceptive as it is virtually impossible for customers to detect cherry picking on their own. Clients typically cannot see how their advisor allocates trades and rely on their advisor to fulfill their fiduciary duties to act in their best interests and put their financial interests ahead of their own,” the complaint states.

“Thus, each time Burleson allocated a deal based on the performance of a security, it was an inherently deceptive act in furtherance of the scheme.”

The SEC’s complaint, filed in U.S. District Court in San Francisco, calls for a jury trial. The initial case management conference is scheduled for February 21, 2025.

An online search shows that Burleson & Company has offices at 201 1st St. in downtown Petaluma.

Burleson is listed as a member board of directors for the Sonoma-Marin Fair, where he has worked since 2006 and where he previously was held the position of president of the board. He too included in the commission on the Petaluma Rotary Club Foundation website.

AND State news release for 2018 stated that Burleson was the Treasurer of the Rotary Club of Petaluma and a member of the Finance Board of the Parish of St. Vincent de Paul.

On the Forbes list Burleson 59th for “Best in State” wealth advisors in 2023 based on the period June 2021 through June 2022. According to Forbes, the typical net worth of a relationship at the time ranged from $2 million to $10 million.

Staff writer Jennifer Sawhney can be reached at 707-521-5346 or [email protected]. On X (Twitter) @sawhney_media.