March 3, 1995
TO: COMPLIANCE COMMITTEE No. 14-95
INVESTMENT ADVISER MEMBERS No. 13-95
SEC RULES MEMBERS No. 15-95
RE: SEC SANCTIONS PORTFOLIO MANAGER WITH RESPECT TO PERSONAL
INVESTING ACTIVITIES
______________________________________________________________________________
The Securities and Exchange Commission recently sanctioned a portfolio manager in
connection with his personal investing activities. A copy of the Commissions order is
attached.
The portfolio manager serves in the equity department of a registered investment
adviser, where he manages the portfolios of certain registered investment companies. The
Commission found that the portfolio manager failed to disclose some of his personal securities
transactions. In particular, the Commission found that in or about February 1993, he bought
shares in a private placement offering through a personal account, but did not properly report
the transaction to the adviser within ten days of the end of the quarter. He also engaged in
securities transactions through a personal account between June 1993 and December 31, 1993,
without properly reporting the transactions to the adviser within ten days of the end of the
June 30th, September 30th, and December 31st quarters.
In April 1994, following its review of these transactions, the adviser imposed sanctions
on the portfolio manager. The sanctions included a requirement that he close his brokerage
accounts and refrain from trading except as a portfolio manager. The adviser also placed him
on an 18-month probation period and required him to forfeit options and bonuses of over
$200,000 and refund profits and price benefits of over $5,000 received from trading in certain of
his or his relatives accounts simultaneously with the advisers funds.
The Commission found that the portfolio managers transactions discussed above
violated Section 17(j) and Rule 17j-1(c) under the Investment Company Act of 1940 and Section
204 and Rule 204-2(a)(12) under the Investment Advisers Act of 1940. Without admitting or
denying the Commissions allegations, the portfolio manager consented to an order to cease
and desist from future violations of these provisions, a censure, and the payment of a civil
money penalty in the amount of $20,000.
Thomas M. Selman
Associate Counsel
Attachment