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SEC Charges North Carolina Investment Adviser with Misleading Fund Board

On August 21, the SEC announced charges against Chariot Advisors LLC and Elliot L. Shifman, former owner of the firm, for misleading a fund’s board of directors about their ability to conduct algorithmic currency trading so that the firm’s contract to manage the fund would be approved.

The SEC alleges that Chariot Advisors and Shifman misled the fund board about the “nature, extent, and quality of services that the firm could provide as he touted the competitive benefits of algorithmic trading in two presentations before the board.” The SEC alleges that Chariot Advisors in fact did not “devise or otherwise possess any algorithms capable of engaging in the currency trading.” This was particularly significant for the board, because “in the absence of an operating history the directors focused instead on Chariot Advisors’ reliance on models when the board evaluated the advisory contract.” The complaint further alleges that after the fund was launched, the firm did not use an algorithm model in the fund’s currency trading as represented to the board, but instead hired an individual trader who used his discretion on trade selection and execution. The complaint alleges that Shifman had interviewed the trader and understood that the trader was not using the model described to the board.

The SEC’s press release states that case “arises out of an initiative by the SEC Enforcement Division’s Asset Management Unit to focus on the ‘15(c) process.’”   

To read the SEC’s press release and find a link to the proceeding, click here.