Adviser Charged with Making Misleading Performance Claims

October 29, 2012

The SEC brought an administrative action against against BTS Asset Management, Inc. (BTS), a registered investment adviser located in Lexington, Massachusetts, finding that, from at least the 1990s to 2010, BTS' advertisements for its High Yield Bond Fund Program ("HYP") claimed that the program had experienced no down years since 1981. The advertisements based this claim on the performance of a model that applied BTS' buy/sell signals to, at various times, a single high yield bond fund, a composite of six high yield bond funds, or a composite of five high yield bond funds.  In 2005, the SEC stated that BTS became aware that, in contrast to the model performance reflected in the advertisements, approximately half of HYP's clients would have experienced a down year in 2004 (with losses of up to 3.3%) based on the application of HYP's buy/sell signals to the funds known by BTS to be held by the clients in the program.  The SEC stated that the fact that, on this basis, a significant percentage of HYP clients likely experienced investment results in 2004 that were materially different (i.e., they had a down year) from the claims made in the advertisements BTS disseminated from 2005 to 2010 rendered those advertisements misleading.
Click here to access the administrative action.


Investment Advisers, Investment Companies