May 14, 2018
DOL Releases FAQ on Conflicts of Interest During the Transition Period
WHAT HAPPENED?
On May 9th, 2018, the Securities and Exchange Commission (SEC) announced its’ charges against a registered investment adviser with “inflating the value of private funds it advised by hundreds of millions of dollars.”
According to the SEC, the scheme ran from at least September 2015 through March 2016. The scheme ran on a secret deal where in exchange for sending trades to a broker-dealer, the charged investment firm would receive inflated broker quotes for mortgage-backed securities (MBS). Allegedly, the firm was also using “imputed” mid-point valuations in a way that further inflated the value of the securities. As a result, this practice allegedly increased the value of MBS holdings and inflated returns.
The SEC believes that the defendants overstated the funds’ value to cover up poor fund performance and to interest and retain investors.
WHAT DOES THIS MEAN FOR ME?
The charged investment adviser allegedly failed to report its true performance and, as a result, denied investors the opportunity to make informed investment decisions. The SEC complaint seeks permanent sanctions, the return of allegedly ill-gotten gains with interest and civil penalties.
For more information about how this case relates to you or your firm, please reach out to Fairview directly.
