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District Court Finds Portfolio Manager Liable for Misstatements on Risk Management Practices

The United States District Court for the Western District of Wisconsin granted partial summary judgment, on the SEC's request, against a portfolio manager who allegedly lied to investors as to the manager's risk management practices.

The Court found that (i) the former mutual fund portfolio manager falsely told investors that he used a modeling software daily to evaluate financial risks, and (ii) the portfolio manager's claims were material because risk management was a determinative factor for potential investors.

The Court held that the portfolio manager's conduct violated Securities Act Sections 17(a)(2) ("Recordkeeping Requirements Relating to Stabilizing Activities") and 17(a)(3) ("Records to Be Made by Certain Exchange Members, Brokers and Dealers"), as well as Advisers Act Rule 206(4)-8 ("Pooled Investment Vehicles").

Primary Sources

  1. SEC Litigation Release: SEC Obtains Partial Summary Judgment against Portfolio Manager for Misrepresenting Risk Management in Mutual Fund
  2. SEC Opinion and Order: Edward S. Walczak (Case 3:20-cv-00076-wmc)

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Tags

Regulated Activities
Disclosures Risk Management
Regulated Entities
Adviser / CTA / CPO
Body of Law
Securities Law
Jurisdiction
US - Federal
Organization
SEC