Use of Model Performance

On December 18, 2012, the SEC sanctioned an investment adviser and the principal of the  investment adviser for several violations regarding their model portfolios and distribution of the model portfolios performance.  Reports were generated using a commercial software, but the inputs used by the firm’s staff caused the reports generated to misrepresent the data provided to clients and prospective clients.

Be aware of the inputs used by your staff when creating performance reports or comparison reports using software.  There are specific rules required for distribution of performance and as an adviser you should be aware of them.

To get your attention let me tell you that one of the sanctions was a $200,000 civil money penalty and the investment adviser was censured. To see the full administrative proceeding file http://www.sec.gov/litigation/admin/2012/ia-3516.pdf

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One Response to Use of Model Performance

  1. $200,000 plus censure would certainly get my attention!

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