The Securities and Exchange Commission (‘‘SEC’’)
recently announced that it settled charges against a registered
investment adviser (the ‘‘Adviser’’) for allegedly
mismarking thinly-traded, over-the-counter debt securities
and, as a result, causing the Adviser’s funds to have
inflated performance numbers and net asset values.
The mismarking conduct was orchestrated by two former
portfolio managers (‘‘PMs’’), who were convicted
of or pleaded guilty to the conduct in 2016 and 2017.
The SEC alleged, among other things, that the Adviser
missed certain red flags and that the Adviser’s valuation
practices were inconsistent with the description of
those practices in its written policies and procedures.