Thursday, July 18, 2019

SEC Charges Portfolio Manager with Mispricing Fund Investments

The Securities and Exchange Commission today announced settled administrative proceedings against Swapnil Rege, a North Brunswick, New Jersey portfolio manager and trader, for mispricing private fund investments, resulting in a large personal bonus.

According to the SEC's order, from June 2016 to April 2017, while employed by the fund's adviser, Rege manipulated the inputs he used to value interest rate swaps and swap options to create the false impression that his investments for the fund were profitable. Rege's conduct, the SEC's order finds, artificially inflated the fund's reported returns and caused the fund to pay too much in fees. Rege took steps to conceal his mispricing from the fund's adviser. Because of Rege's inflated valuations, he received a $600,000 bonus. The order states that the adviser ultimately fired Rege, closed the fund, and returned the excessive management fees to the fund.

"Rege overvalued fund assets to benefit only himself and then tried to cover it up," said C. Dabney O’Riordan, Co-Chief of the SEC Enforcement Division's Asset Management Unit.  "Today the SEC, along with our colleagues at the Commodity Futures Trading Commission, are holding him accountable for his misconduct, which harmed both the fund and its investors."

The SEC's order finds that, based on the above conduct, Rege aided and abetted and caused the adviser's violations of the antifraud provisions of Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. Without admitting or denying the findings in the SEC's order, Rege agreed to a cease-and-desist order, an associational bar and investment company prohibition with a right to apply for reentry after three years, disgorgement of ill-gotten gains of $600,000 plus prejudgment interest, and a civil penalty of $100,000.

The Commodity Futures Trading Commission (CFTC) today also entered a consent order against Rege, involving substantially the same conduct as described in the SEC’s order. The CFTC's order finds that Rege violated the Commodity Exchange Act and imposes a trading ban for a period of at least three years, disgorgement that will be deemed satisfied by the payment of disgorgement under the SEC's order, and an additional penalty of $100,000.

The SEC's investigation in this matter was conducted by Cynthia Storer Baran, Naomi Sevilla, Brian Fitzpatrick, and Robert Baker of the Asset Management Unit, with the assistance of Deena Bernstein of the Boston Regional Office.  The SEC acknowledges and appreciates the assistance and cooperation of the CFTC.



SEC Press Release

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