U.S. securities regulators have charged an investment adviser with misleading an investment fund’s board in order to secure the board’s approval to manage the fund.
The U.S. Securities and Exchange Commission (SEC) alleges that the firm, Chariot Advisors LLC, and its former owner, Elliott Shifman, misled the board of the Chariot Absolute Return Currency Portfolio about the firm’s ability to conduct algorithmic currency trading so they would approve its contract to manage the fund. The allegations have not been proven.
The SEC’s enforcement division claims that Shifman misled the fund directors 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 regulator says that, contrary to what the directors were told, the firm did not possess any algorithms capable of engaging in the currency trading; and, after the fund was launched, it did not use an algorithm to perform the fund’s currency trading; instead, it hired an individual trader who was allowed to use discretion on trade selection and execution.
The commission says that the alleged misconduct by Shifman and Chariot Advisors caused misrepresentations and omissions in the Chariot fund’s registration statement and prospectus.
“It is critical that investment advisers provide truthful information to the directors of the registered funds they advise,” said Julie Riewe, co-chief of the enforcement division’s asset management unit. “Both boards and advisers have fiduciary duties that must be fulfilled to ensure that a fund’s investors are not harmed.”