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ARTICLE · 23 JUNE 2022

SEC RIA Enforcement Action

Mayer Brown
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On May 17, 2022, the SEC charged a registered investment advisor ("RIA") and three former senior portfolio managers with fraud involving concealment of the downside risks of a complex options trading strategy...

United StatesCorporate/Commercial Law
Bradley Berman
Bradley Berman
Anna T. Pinedo
Anna T. Pinedo
Marc x.w. Leong
Marc x.w. Leong
Nicole Veru
Nicole Veru
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On May 17, 2022, the SEC charged a registered investment advisor ("RIA") and three former senior portfolio managers with fraud involving concealment of the downside risks of a complex options trading strategy (the "Strategy"). Following the COVID-19 market crash in March 2020, the scheme was exposed. The Strategy was sold to 114 institutional investors, including pension funds. The RIA has agreed to pay $1 billion to settle SEC charges and with its parent over $5 billion in victim restitution.

The SEC's complaint alleges the Strategy's lead portfolio manager orchestrated the scheme and, with assistance from other senior portfolio managers, manipulated financial reports and information. They allegedly manipulated information to present lower-than-accurate losses in a market crash scenario and smoothed performance data. Furthermore, the complaint alleges that the lead portfolio manager and other senior portfolio managers made multiple efforts to conceal their conduct

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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