Portfolio Manager Fined for Failing to Disclose Conflict of Interest

A former portfolio manager at an investment advising firm settled SEC charges for failing to disclose a conflict of interest.

In the Order, the SEC found that the portfolio manager had recommended extending a lending facility to a film distribution company, while requesting personal benefits from the company including advancing the acting career of a family member. FINRA found that the portfolio manager continued to recommend and even expand the lending facility despite the valuation underperformance of the company. The company was granted a loan for its print and advertising expenses, which it ultimately failed to repay. The investment advising firm terminated the employment of the portfolio manager after learning of the conflict of interest and the failure to disclose it.

The SEC determined that the disclosure failure violated Advisers Act Section 206(2) ("Prohibited transactions by investment advisers"). To settle the charges, the portfolio manager agreed to (i) cease and desist, (ii) a censure and (iii) a civil monetary penalty of $250,000.