SEC Charges AXA Rosenberg Entities for Concealing Error in Quantitative Investment Model: Firms Agree to Pay More Than $240 Million to Settle SEC Charges

The SEC charged three AXA Rosenberg entities with securities fraud for concealing a significant error in the computer code of the quantitative investment model that they use to manage client assets. The error caused $217 million in investor losses.

AXA Rosenberg Group LLC, AXA Rosenberg Investment Management LLC, and Barr Rosenberg Research Center LLC have agreed to settle the SEC's charges by paying $217 million to harmed clients plus a $25 million penalty, and hiring an independent consultant with expertise in quantitative investment techniques who will review disclosures and enhance the role of compliance personnel.

"Through this settlement, the SEC is sending a message to quantitative investment firms," said Bradley J. Bondi, a partner at Cadwalader and former legal counsel to SEC Commissioners Troy Paredes and Paul Atkins. "If they find an error that harms investors, they need to promptly correct the error and disclose the error to investors."

Document Number

SEC Press Release 2011-37

Date

February 3, 2011

Cross References

SEC Order,

Administrative Proceeding: File No. 3-14224

Reuters Article: UPDATE 3-AXA units to pay $242 mln for trading model glitch (February 3, 2011)

Securities Act § 17(a)(2)

Advisers Act § 206(2)

Advisers Act § 206(4)

Advisers Act Rule 206(4)-7