SEC Pursues Fund Portfolio Manager for Falsifying Investment Committee Meeting Minutes
The SEC has instituted enforcement proceedings against a mutual fund portfolio manager who the SEC alleges created false investment committee meeting notes in response to an SEC exam request. According to the SEC Order, the portfolio manager delivered notes of investment committee meetings purported to have occurred over the course of 5 years. The SEC alleges that the committee meetings never took place, as evidenced by notes of a meeting that occurred before the portfolio manager was employed. The SEC indicates that the fund’s proxy statements included disclosure that the fund’s investment committee met twice per year. The SEC alleges violations of Section 34(b)’s anti-fraud prohibitions because the portfolio manager is alleged to have made untrue statements in fund records required to be kept pursuant to the recordkeeping rule (31a-1).
OUR TAKE: Noteworthy is the SEC applying the anti-fraud rules to every document required to be kept under the recordkeeping rules. This course of enforcement combined with the proposed expansion of the recordkeeping rule sweeps almost all investment activities under the anti-fraud rules.