Among recent enforcement actions by the SEC were charges against a former portfolio manager at Oppenheimer & Co. for misleading investors about fund returns, and against an investment advisory firm and its former owner for misleading the board of an investment fund. In addition, the trustees of the pension plan, annuity fund and vacation fund of a union local agreed in a consent judgment to restore more than $2.3 million after a court action brought by the Department of Labor.
Former Oppenheimer Portfolio Manager Misled Investors: SEC
Brian Williamson, formerly a portfolio manager at Oppenheimer & Co., was charged by the SEC with misleading investors about the returns on a fund of funds that he managed.
Oppenheimer & Co. is not affiliated with OppenheimerFunds.
Williamson, who was an Oppenheimer employee from 2005 to 2011, marketed Oppenheimer Global Resource Private Equity Fund I, a fund of funds, to pensions, foundations, endowments and HNW individuals and families. However, in doing so, he provided investors with misleading information about the fund's valuation and performance.
From September to October 2009, he used marketing materials that omitted fees and expenses in the internal rate of return cited for the fund. In October of that year, he also boosted the reported value of the fund's biggest investment, Cartesian Investors-A, from $6 million to approximately $9 million — a far cry from the underlying manager's estimated valuation — and claimed in the marketing materials that that valuation came from the underlying manager.
Other misrepresentations made by Williamson created the impression that the Oppenheimer fund's increased internal rate of return was due to increased performance or third-party valuations, when instead it was Williamson's revised valuation of Cartesian that caused the fund's performance to appear to increase. For example, for the quarter ended June 30, 2009, Williamson's markup of Cartesian raised the reported internal rate of return from approximately 3.8% to 38.3%.
Oppenheimer agreed earlier in the year to pay $2.8 million to settle related charges.
Investment Advisor, Former Owner Charged by SEC with Misleading Board
North Carolina-based Chariot Advisors and Elliott Shifman, its former owner, were charged by the SEC with misleading an investment fund's board of directors about the firm's ability to conduct algorithmic currency trading so they would approve the firm's contract to manage the fund.
In two presentations that he made to the board of the Chariot Absolute Return Currency Portfolio, a fund that was formerly within the Northern Lights Variable Trust fund complex, one in December of 2008 and another in May of 2009, Shifman told directors that his firm would implement the fund's investment strategy by using a portion of the fund's assets to engage in algorithmic currency trading.The Chariot fund's initial investment objective was to achieve absolute positive returns in all market cycles by investing approximately 80% of its assets under management in short-term fixed income securities, and using the remaining 20% of the assets under management to engage in algorithmic currency trading. But Chariot could provide no such thing, and instead, once the firm had the contract, it hired an individual trader who was allowed to use discretion on trade selection and execution.
Shifman had interviewed the trader before he hired her, and knew that she used a technical analysis, rules-based approach for trading that combined market indicators with her own intuition. She traded currencies for the fund until Sept. 30, 2009, when she was terminated for poor trading performance. After that, Chariot brought in a third party who did use algorithmic trading.
The SEC said that the false claims by Chariot and Shifman defrauded the fund by causing misrepresentations and omissions in its registration statement and prospectus that were filed with the SEC and viewed by investors. DOL Wins Return of Funds From Theatrical Stage Employees Trustees
