The SEC today announced a settled action against a portfolio manager for forging documents and misleading his investment firm’s chief compliance officer to cover his own failure to report personal trades. This is the first time the SEC has initiated an action against someone for misleading and obstructing a CCO in the performance of the CCO’s duties.
According to the settlement, the portfolio manager, Carl Johns of Louisville, Colorado, “failed to pre-clear or report several hundred securities trades in his personal accounts as required under the federal securities laws and code of ethics at Boulder Investment Advisers.” Johns concealed the trades by altering brokerage statements and documents that he attached to his quarterly and annual trade reports. The settlement notes that Johns tried to conceal his misconduct by creating false documents that claimed to be pre-trade approvals and misled the firm’s CCO in her investigation into his improper trading activities. To settle the charges, Johns agreed to pay more than $350,000 and will be barred from the securities industry for at least five years.
Julie Lutz, Acting Co-Director of the SEC’s Denver Regional Office, commented that “securities industry professionals have an obligation to adhere to compliance policies and they certainly must not interfere with the chief compliance officers who enforce those policies.” The compliance rule, 38a-1(c), prohibits the fund's officers, directors, employees, or its adviser or principal underwriter or any person acting under the direction of these persons, from directly or indirectly taking any action to coerce, manipulate, mislead, or fraudulently influence the fund's chief compliance officer in the performance of compliance responsibilities under the rule.
To read the SEC’s full press release, click here.