Quantcast
The MFWire
Manage Email Alerts | Sponsorships | About MFWire | Who We Are

Subscribe to MFWire.com's News Alerts [click]

Rating:SEC Smites Part of a $604B-AUM Multinational Not Rated 0.0 Email Routing List Email & Route  Print Print
Friday, September 20, 2024

SEC Smites Part of a $604B-AUM Multinational

Reported by Neil Anderson, Managing Editor

U.S. regulators are going after a $A938.3-billion-AUM (about $603.51 billion, as of March 31) multinational asset manager, accusing a U.S. subsidiary of overvaluing certain assets and making cross trades that disadvantaged some mutual funds over four years. The firm has settled the charges for $79.8 million.

Yesterday, Eric Bustillo, director of the Miami regional office of the U.S. Securities and Exchange Commission (SEC), unveiled charges against by Macquarie Investment Management Business Trust (MIMBT), a U.S. subsidiary of Macquarie Asset Management [profile], accusing MIMBT of compliance, disclosure, and antifraud violations of the Investment Company Act of 1940 (the '40 Act) and the Investment Advisers Act of 1940 (the Other '40 Act). The charges focus on the use of MIMBT's now-defunct Absolute Return Mortgage-Backed Securities Strategy (ARMBS strategy) as a slice of the holdings of 11 retail mutual funds, four private investment funds, and five other unregistered investment vehicles. Bustillo also revealed that MIMBT has settled the charges, without admitting to or denying the regulatory agency's findings.

"Our business is built on the principles of integrity and accountability. This legacy matter is not consistent with how we do business," the Macquarie AM team writes in a statement on the settlement. "We have already undertaken and are focused on completing additional remedial steps to address the issues identified in the investigation, with clients the priority. We also continue to invest in our risk culture to ensure we discharge our fiduciary duties to the highest standard."

The SEC's 12-page order on the charges and settlement confirms that the ARMBS strategy in question was launched by an MIMBT predecessor in 2007 and that strategy was discontinued in April 2021 after the SEC's investigation began. The order also confirms that MIMBT served as investment advisor or subadvisor to each of the twenty affected advisory accounts, including the 11 mutual funds. However, the order does not identify those funds or any of the other advisory accounts.

The SEC's charges focus on the period from January 2017 through April 2021. SEC investigators, led by Crystal Ivory and Christine Lynch of the agency's Miami office, accused the MIMBT team of overvaluing about 4,900 collateralized mortgage obligations (CMO) position — mostly small, "largely illiquid," "odd lots" — by using third-party pricing meant instead for large, institutional CMO positions, thus leading to overstated NAVs and performance.

The investigators also accuse of MIMBT of executing internal cross trades of those overvalued CMO positions, trying to minimize trading losses from institutional redemption requests by having the mutual funds instead absorb the trading losses. In the order, the SEC team notes that none of the affected mutual funds even held more than seven percent of their assets in the relevant CMO positions.

"It is alarming that a fiduciary took advantage of retail mutual funds it advised and executed unlawful cross trades to mitigate its overvaluation of fund assets," Bustillo states. "Utilizing a third-party pricing service does not negate an investment adviser's obligation to value assets accurately."

As part of the settlement, MIMBT agreed to pay the SEC about $7.6 million in disgorgement, $2.2 million in interest, and $70 million in civil penalties, within 10 days (i.e. by September 29). Also as part of the settlement, MIMBT agreed to be censured, and to cease and desist from further violations.

As for what's next, the SEC can then either distribute the settlement money or send it to the U.S. Treasury. Meanwhile, the SEC team also describes the investigation as ongoing. Yet the Macquarie AM team states that "the settlement resolves the investigation concerning MIMBT."

"MIMBT will remediate clients impacted by the valuation and trading activity at issue in the investigation," the Macquarie AM team writes. 

Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE

0.0
 Do You Recommend This Story?



GO TO: MFWire
Return to Top
 News Archives
2024: Q4Q3Q2Q1
2023: Q4Q3Q2Q1
2022: Q4Q3Q2Q1
2021: Q4Q3Q2Q1
2020: Q4Q3Q2Q1
2019: Q4Q3Q2Q1
2018: Q4Q3Q2Q1
2017: Q4Q3Q2Q1
2016: Q4Q3Q2Q1
2015: Q4Q3Q2Q1
2014: Q4Q3Q2Q1
2013: Q4Q3Q2Q1
2012: Q4Q3Q2Q1
2011: Q4Q3Q2Q1
2010: Q4Q3Q2Q1
2009: Q4Q3Q2Q1
2008: Q4Q3Q2Q1
2007: Q4Q3Q2Q1
2006: Q4Q3Q2Q1
2005: Q4Q3Q2Q1
2004: Q4Q3Q2Q1
2003: Q4Q3Q2Q1
2002: Q4Q3Q2Q1
 Subscribe via RSS:
Raw XML
Add to My Yahoo!
follow us in feedly


  1. MFDF webinar - BDC Board Service 101, December 10
  2. WE Boston - Give Back Event, December 10
  3. IMEA Distribution Council webinar - Unlocking Your Competitive Edge: Driving Results Through Net Promoter Excellence, December 10
  4. WE New York - End of Year Celebration, December 11
  5. MFDF webinar - ETF Product Trends: Board Implications, December 11
  6. Nicsa webinar - The Virtues of Corporate Culture, December 11
  7. MFDF webinar - Visually Mapping Board Composition: Skills Matrices in Fund Board Rooms, December 18
  8. IMEA webinar - Driving Equity: The FARE Journey and Its Impact on Financial Services, December 19
  9. MFDF webinar - 2024 Fair Valuation Pricing Survey: Building and Strengthening the Valuation Operating Model, January 7, 2025
  10. MFDF webinar - 15(c) White Paper Webinar Series: Part 2 – Board Processes, January 9, 2025
  11. MFDF webinar - AI and Fund Compliance, January 21, 2025
  12. MFDF In Focus - In Focus: Small Boards' Use of Skills Matrices, January 22, 2025
  13. MFDF 2025 Directors' Institute, January 27 - 29, 2025
  14. FSI OneVoice 2025, January 27 - 29, 2025
  15. 2025 ICI Innovate, February 3 - 5, 2025
  16. MFDF Director Discussion Series - Open Forum, February 10, 2025
  17. MFDF Director Discussion Series - Open Forum, February 11, 2025
  18. MFDF 2025 Fund Governance & Regulatory Insights Conference, March 6 - 7, 2025
  19. MFDF Director Discussion Series - Open Forum, April 2, 2025
  20. Envestnet Elevate 2025, April 9 - 10, 2025
  21. MFDF Director Discussion Series - Open Forum, April 15, 2025
  22. The 36th Sub-Advised Funds Forum, April 29 - 30, 2025
  23. Morningstar Investment Conference 2025, June 25 - 26, 2025
  24. MFDF Director Discussion Series - Open Forum, July 9, 2025




©All rights reserved to InvestmentWires, Inc. 1997-2024
14 Wall Street | 20th Floor | New York, NY 10005 | P: 212-331-8968 | F: 212-331-8998
Privacy Policy :: Terms of Use