SEC and CFTC Impose Stiff Penalties on Adviser for Failing to Follow Disclosed Risk Management Policies

The SEC and the CFTC both recently announced enforcement actions and settlements, as well as civil suits, arising out of more than $500 million in losses suffered three years earlier by a mutual fund. The regulators jointly imposed various penalties on the fund’s adviser and its CEO. In addition, both regulators filed civil lawsuits against one of the adviser’s senior portfolio managers in federal court. This article explores the circumstances underlying the SEC and CFTC actions against the adviser and the CEO and distills the lessons that fund managers can learn from them. For another enforcement action involving a mutual fund manager, see “Transamerica Entities Fined $97.6 Million for Use of Faulty Quantitative Investment Models and Misleading Disclosures Regarding Quant Mutual Funds” (Oct. 4, 2018).

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