] has agreed to pay a $100,000 fine to FINRA regarding charges related to alleged inaccuracies in a fund brochure titled Staying Ahead of the Curve
According to the FINRA enforcement document
, a former Hartford distribution arm (which was later sold to another company) was responsible for producing and ensuring the accuracy of the brochure.
In the enforcement document, FINRA made these allegations:
During the Relevant Period, [the Hartford distribution subsidiary formerly known as Hartford Life Distributors, LLC, n/k/a Forethought Distributors] prepared and distributed numerous copies of a brochure called Staying Ahead of the Curve. The brochure discussed features of the Fund as an investment and was provided to downstream selling broker-dealers for use in the marketing and sale of the Fund to those firms' customers. The brochure was
approved for distribution by [Hartford Investment Financial Services Company].
The brochure made statements regarding the Fund that were unwarranted and misleading
in light of changing conditions in the bank loan market. In particular, the brochure
contained misleading statements that the Fund was appropriate for bond investors
concerned about the price stability of their investments, provided the potential for greater
price stability compared with other fixed income investments, and was appropriate for
investors seeking some degree of capital preservation. Given the conditions in the bank
loan market during the Relevant Period, these statements were not accurate.
The Respondents also failed to establish and maintain supervisory procedures and
systems that were reasonably designed to ensure compliance with FINRA rules. Among
other things, the firms' procedures were not reasonably designed to ensure that relevant
information and market data about the Fund was conveyed to the individuals responsible
for updating the Staying Ahead of the Curve Piece and that all statements in such
materials were warranted and were not misleading.
HIFSCO and HLD Failed to Update the Staying Ahead of the Curve Marketing Piece
As Chief Investment Advisor to the Fund, HIFSCO monitored Fund performance and
advised and made recommendations to the Fund's board of directors concerning
investment strategy. In this role, HIFSCO was aware of the Fund's performance and of
the market conditions relating to the Fund. By November 2007, HIFSCO reported to the
Fund's board problems in the loan market that led to a number of large loan issuances
being pulled from the market and that could lead to possible future defaults. HIFSCO
also reported that in the previous quarter, the Fund had experienced significant volatility
in its performance as a result of holding a higher concentration of lower quality loans and
loss of liquidity in the market. Furthermore, the Fund had been required to sell assets to
meet investor outflows.
In early February 2008, as the credit crisis worsened, HIFSCO provided another update
on the Fund to the board. At this time, HIFSCO reported to the board that volatility in
the fixed income markets had continued throughout the previous quarter, and
acknowledged that what had been thought to be a short-term market volatility issue for
the Fund was continuing.
The statements described above that were contained in the Staying Ahead of the Curve
brochure were unwarranted and misleading.
The $100,000 fine paid to Finra settles the charges.
could not immediately reach anyone at The Hartford
Stay ahead of the news ... Sign up for our email alerts now