The SEC charged a portfolio manager at a registered investment company ("RIC") with diverting at least $1.95 million from a fund he managed to his personal brokerage account.
The SEC alleged that the portfolio manager carried out at least 265 prearranged options transactions between the RIC and his personal brokerage account. According to the SEC Complaint, the transactions were entered into at prices that proved "disadvantageous to the fund and advantageous to him." The SEC alleged further that the portfolio manager traded call options from his personal account at or near the national best bid or national best offer while placing orders for the RIC at matching prices. The portfolio manager then profited by executing third-party trades that were closer to the midpoint of the national best bid and offer spread.
The SEC is seeking disgorgement plus interest and penalties, as well as injunctive relief.
In a parallel action, the portfolio manager pleaded guilty to criminal charges brought by the U.S. Attorney Office for the District of Massachusetts.
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