SEC Bars Poor-Performing Options Trader for Claiming Competence

The SEC barred an options trader from the industry for making false claims about his abilities and competence. According to the SEC, the respondent claimed to be a “competent and capable” options trader while soliciting investors to utilize his proprietary trading program. Unfortunately, according to the SEC, the respondent produced an average loss of 52% in client accounts. Such misleading claims violate the anti-fraud rules, according to the SEC.

OUR TAKE: Any solicitation to provide investment advice or to sell an investment product implicitly includes a claim of competence by the adviser or fund manager. The lesson here may be to avoid any explicit claims of competence when you have had really poor performance. We hope we never see disclosure like, “We make no representations about our competence …”

http://www.sec.gov/litigation/admin/2009/33-9101.pdf