(January 30 – 08:00 ET) – A New York-based fund manager, Lance Brofman, and two associated companies, Fundamental Portfolio Advisors and Fundamental Service Corporation, have been fined and barred from the securities industry after an administrative law judge found they misrepresented the nature of a fund’s investments.

Brofman, FPA, and FSC at one time managed the Fundamental U.S. Government Strategic Income Fund, a government bond fund. According to the U.S. Securities and Exchange Commisison, a judge found that Brofman, FPA, and FSC marketed the fund as a safe, stable investment “but invested heavily in volatile inverse floaters that exposed the fund to significant losses when interest rates rose in 1994.”

The SEC says that the judge found that the three parties failed to inform the fund’s board of their soft dollar arrangements, which included payments to a business partner. The judge concluded that, as charged, Brofman, FPA, and FSC violated several antifraud provisions of the securities laws.

Brofman was fined US$250,000, and FPA and FSC were each fined US$500,000. They were ordered to cease and desist from violations of the antifraud provisions. Brofman was barred from the securities industry, and the investment advisor and broker-dealer registrations of FPA and FSC were revoked.
-IE Staff