Former Fund Portfolio Manager Charged for Failing to Disclose Conflict of Interest

Who may be interested: Investment Advisers, Boards of Directors to Investment Companies. 

Quick Take: A former portfolio manager for a registered closed-end fund settled charges with the SEC for failing to disclose a conflict of interest arising from the portfolio manager’s relationship with a portfolio company in which the fund he managed had made significant investments. 

The SEC recently charged a portfolio manager for failing to disclose a conflict of interest arising from requests for favors the portfolio manager made to a portfolio company in which the registered closed-end fund he managed had invested. The SEC’s order found that while the fund considered making loans to the portfolio company and thereafter while overseeing the loans, the portfolio manager made several requests to the portfolio company to assist his daughter in advancing her acting career and the portfolio company in turn helped the daughter obtain a small role in a film. The portfolio manager did not disclose the conflict of interest to the board of trustees of the fund or to the legal and compliance departments at the adviser.

The SEC’s order found that as a result of the conduct described above, the portfolio manager had violated Section 206(2) of the Advisers Act. To settle the charges, without admitting or denying the findings, the portfolio manager agreed to pay a civil penalty of $250,000, to cease and desist from further violations, and to be censured. 

The SEC’s Press Release can be found here.

The Order can be found here.

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