A recent SEC settlement order against AEGON USA Investment Management, LLC (AUIM) and three Transamerica entities highlights the potential perils of using quantitative models to manage client assets. The respondents allegedly deployed models without properly validating them and made numerous misrepresentations about those models in fund offering documents and marketing materials. In parallel proceedings, the SEC also took aim at two senior AUIM managers who allegedly negligently caused certain of the other respondents’ violations. Although the models in question were used to manage mutual funds, the principles enunciated in the settlement orders are equally applicable to private fund managers that develop and deploy quantitative trading strategies. This article details the alleged misconduct and the terms of the respective settlements. See our three‑part series on quantitative investing: “Dispelling Myths and Misconceptions” (Aug. 9, 2018); “Regulatory Action, Guidance and Risk” (Aug. 23, 2018); and “Special Risks and Considerations” (Sep. 6, 2018).