The SEC's case against F-Squared Investments has closed. The case against F-Squared's ex-chief has not.

Today the regulatory agency unveiled a $35-million settlement with the mutual fund subadvisor (F-Squared supports some Virtus [profile] mutual funds) and self-described "manufacturer of next-generation investment indexes". Yet the settlement does not include F-Squared's co-founder and former CEO, Howard Present, who left the firm and its board last month, three months after the SEC sent F-Squared a Wells Notice. The SEC filed charges today, against Present, in the United States District Court for the District of Massachusetts.

MFWire could not immediately reach Samuel Winer, a partner at Foley & Lardner who represents Present, for comment on the charges or settlement.

F-Squared's new CEO, Laura Dagan, made the following statement:

We are pleased to put this matter behind us so that we can focus on our clients and continue to invest to ensure that our compliance, research, analytics and operational teams are best-in-class.

The case involves what the SEC describes as "false performance advertising" about F-Squared's flagship offering, the AlphaSector indexes. The accusations involve advertising and representations made between October 2008 and September 2013, about AlphaSector's performance between April 2001 and September 2008; the SEC says the strategy was actually hypothetical during that period, so the performance was backtested, not actual, and inflated to boot.

Unlike many settlements where the accused neither affirms nor denies the accusations, under this one F-Squared, in the SEC's words, "acknowledged that its conduct violated federal securities laws." The settlement includes disgorgement of $30 million, a penalty of $5 million, and the requirement for F-Squared to hire an "independent compliance consultant."

On a conference call with reporters, Andrew Ceresney, director of the SEC's enforcement division, confirmed that the settlement concludes the SEC's investigation of F-Squared itself. Yet he declined to comment on whether or not any other parties, besides Present himself, are targeted in the investigation and confirmed that the overall investigation continues.

"We were able to reach terms with the firm that were acceptable to the firm and the SEC," Ceresney told reporters, adding that the SEC was not able to reach such an agreement with Present.

Ceresney described F-Squared as "the market's largest active ETF strategist." 

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