A registered investment adviser and exempt reporting adviser will combine to pay more than $2 million for allegedly misleading investors about their short fund strategy and related recordkeeping violations.
Dallas-based registered investment adviser Anson Funds Management and Toronto-based exempt reporting adviser Anson Advisors were fined $1.25 million and $1 million, respectively, by the Securities and Exchange Commission for issuing misleading statements about securities that Anson Funds held short positions on, the SEC said in an administrative proceeding Tuesday.
The details: From 2018-23, Anson Funds declined to disclose to its investors its short position strategy involved working with a short position publisher to issue “bearish” reports and social media posts about certain securities, the SEC alleged.
Compliance considerations: Anson Funds adopted compliance policies and procedures requiring it to “‘clearly articulate’” its investment strategies in the private placement memorandums for the pooled investment vehicles it managed, per the SEC’s order. The policies and procedures required the firm to provide “‘disclosure as to how funds are to be invested, what factors will influence investment performance, and what risks are associated with the account’s principal investment strategy.’”
Investors would have found that agreement with the short position publisher to be material, and that information was not available to them through other means, the SEC said.
Anson Funds was also accused of violating the agency’s books-and-records requirements with its payment arrangement with the short position publisher. Anson Funds agreed to pay the publisher a portion of the trading profits generated by the scheme but instead paid the publisher through an intermediary for “research” the publisher did not perform, the SEC alleged.
Those payments were not properly recorded, leading to the alleged violations of the SEC’s recordkeeping rule and the fund’s own compliance policies and procedures.
Company response: In an emailed statement, an Anson Funds spokesperson said the firm is “pleased to have reached the settlement and put the matter behind us.”
The statement noted the settlement with the SEC faulted the firm for insufficient disclosures in its fund documents but did not find it engaged in inappropriate trading or breached its fiduciary duty to investors.
“We will continue to be focused on delivering strong returns for our limited partners and further building our long track record of success moving forward,” the statement read.
No comments yet