A hedge fund advisory firm settled charges brought by the SEC for insider trading and mismarking securities to inflate their value. In a separate matter, the firm's CFO agreed to a penalty of $100,000 and a temporary suspension from the securities industry for failure to supervise.
According to the SEC Order, portfolio managers formerly employed by Visium Asset Management LP ("Visium") (i) engaged in insider trading and (ii) fabricated broker quotes to inflate the value of securities held by a hedge fund managed by Visium. While the mismarking scheme was underway, Visium allegedly made "false and misleading disclosures" about its valuation procedures and "made material misstatements in its Form ADV." According to the SEC, Visium also failed to enforce written policies to prevent its employees from engaging in insider trading. The SEC asserted that the mismarking scheme and the insider trading activity generated approximately $3.15 million and $1.6 million, respectively, in fraudulent performance and management fees for Visium.
Visium will pay a disgorgement fee of $4,755,223, with a prejudgment interest of $720,711, to the SEC. Visium also agreed to return all remaining investor funds to investors, and to withdraw its registration as an investment adviser.
Neither Visium nor its CFO Steven Ku admitted to or denied the allegations.
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