ETF fund manager Simplify Asset Management, Inc. has settled allegations from the U.S. Securities and Exchange Commission (SEC) that the firm breached conflict of interest provisions and disclosure requirements.
The SEC charged that Simplify Asset Management allegedly carried out a couple of conflicted transactions that breached the rules for advisors, along with violating disclosure requirements.
According to the SEC’s order, in 2023, a trust that had an ownership stake in Simplify engaged in a couple of prohibited transactions with an ETF managed by the firm, which generated tax benefits for the trust.
The regulator also alleged that, in 2024, the firm failed to disclose two breaches of leverage restrictions by an ETF it managed to both the fund board and the SEC.
The SEC also said that, between July 2021 and June 2024, seven ETFs failed to provide investors with disclosure that a portion of the dividends distributed to them was a return of fund capital, rather than income — and, it said that the firm caused certain ETFs to fail to adopt adequate compliance policies and procedures.
Without admitting the findings, Simplify settled the case by agreeing to a cease-and-desist order and to pay a civil penalty of US$400,000.