A Lyme investment adviser accused of bilking clients out of more than $2 million has agreed to pay nearly $800,000 in fines and penalties and never work in the securities industry again.

Noah L. Myers, 41, principal at Essex-based MiddleCove Capital LLC, was accused in November by the Securities and Exchange Commission of engaging in a so-called cherry-picking scheme between October 2008 and February 2011. The SEC released an order Wednesday indicating that Myers and the commission had settled the case by revoking MiddleCove's registration as an investment adviser, permanently barring Myers from the securities industry and imposing fines and penalties totaling $788,118.

Any money received by the SEC would be available to MiddleCove clients who lost money in the cherry-picking scheme. Clients will not have to apply for compensation; the SEC will give it out on a pro-rata basis once money is collected.

"Myers realized ill-gotten gains of approximately $460,000," according to the SEC's final report on the case.

The fraudulent practice for which Myers was cited involved the commingling of his and clients' accounts as he made bets in risky investments known as exchange-traded funds, then allocated most of the favorable outcomes to his account while assigning losses to clients.

"Many of these clients were retired and ... had limited willingness or ability to accept significant investment risk," according to the SEC report.

Myers' clients lost major chunks of their retirement nest eggs, according to the SEC. One 84-year-old woman saw her account drained of more than $14,000 thanks to bad bets on highly leveraged financial instruments, despite describing herself as a conservative investor. Two other investors, both in their 70s, lost a total of more than $140,000 on the same type of investments.

Myers' trades were profitable 95 percent of the time, the SEC said, an outcome whose likelihood was only 1 in 10 million. Myers' trading outcomes compared to the results of clients were a 1 in a trillion chance, according to SEC statisticians.

Myers was previously a senior vice president and senior portfolio management director at Smith Barney in Essex, a company later bought out by Citigroup Global Markets. According to the SEC, Myers did little trading in his own accounts until after founding his own company in February 2008.

Myers had been a registered representative of Purshe Kaplan Sterling Investments Inc. in Albany, N.Y., but the company said it terminated the relationship last April because Myers had been uncooperative in an internal investigation.

According to the SEC, MiddleCove managed up to $129 million in assets, and as recently as September of last year it had about 350 clients. When one of the company's managers departed last year, however, the portfolio was cut in half.

According to a summary of the SEC case, a compliance officer for Charles Schwab & Co. Inc. was the first one to flag Myers' trading habits as a potential problem. A MiddleCove employee, asked by Schwab to investigate the trading patterns, found that Myers was cherry-picking.

"All four of MiddleCove's employees confronted Myers about his trade allocation in mid-December 2010," according to the SEC.

Myers subsequently agreed to change his trading methods to differentiate his trades from those of his clients. But the same employee who had initially confronted his boss soon discovered Myers cherry-picking again, according to SEC documents, and threatened to report him if he did not re-allocate trades in favor of his clients.

"After this confrontation, Myers stopped cherry-picking and did relatively little trading in his own accounts," the SEC said.

l.howard@theday.com