The SEC accuses an asset management company of fraud on an options trading system


The Securities and Exchange Commission (SEC) has charged Allianz Global Investors US (AGI US) and three former senior portfolio managers with a fraudulent options trading scheme.

© Shutterstock

The SEC said the company and portfolio managers were hiding the downside risks of this complex options trading strategy they called “Structured Alpha.” AGI US marketed and sold the strategy to approximately 114 institutional investors, including pension funds for teachers, clergy, bus drivers, engineers and other individuals. Together, these groups invested approximately $11 billion in Structured Alpha and paid defendants more than $550 million in fees. AGI US has agreed to pay billions of dollars in fines, including more than $1 billion to settle charges against the SEC and more than $5 billion in restitution to victims.

“Allianz Global Investors has admitted defrauding investors for several years, concealing losses and downside risks from a complex strategy and failing to implement key risk controls,” the SEC Chairman said. , Gary Gensler. “The victims of this misconduct include teachers, clergy, bus drivers and engineers, whose pensions are invested in institutional funds to support their retirement. This case demonstrates once again that even the most sophisticated institutional investors, such as pension funds, can be victims of wrongdoing. Unfortunately, we have recently seen a series of cases in which derivatives and complex products have harmed investors in all market sectors. »

The SEC complaint, filed in Manhattan Federal District Court, alleges that Structured Alpha’s lead portfolio manager, Gregoire P. Tournant, orchestrated the scheme to mislead investors. With the help of co-lead portfolio manager Trevor L. Taylor and portfolio manager Stephen G. Bond-Nelson, Tournant manipulated numerous financial reports and other information provided to investors to conceal the extent of the real risk. of Structured Alpha and the actual performance of the funds, the SEC alleges.

The SEC said defendants reduced losses under a stock market crash scenario in a risk report sent to investors from minus 42.1505489755747% to minus 4.1505489755747% by simply removing the number 2. In a In another example, the SEC said the defendants “smoothed” the performance data submitted. to investors by cutting one-day losses from minus 18.2607085709004% to minus 9.2607085709004%, halving the number 18.

When the 2020 COVID-related stock market crash happened, he revealed that AGI US and the defendants misled investors about the fund’s level of risk, as the fund suffered catastrophic losses and investors lost billions. The complaint further alleges that Tournant, Taylor and Bond-Nelson then made several efforts to conceal their wrongdoing from the SEC, including false testimony and meetings at vacant construction sites to discuss sending their assets to the stranger.

“From January 2016 to at least March 2020, the defendants lied about almost every aspect of a very complex investment strategy that they marketed to institutional investors, including pension funds managing savings- retirement of ordinary Americans. While they were able to solicit over $11 billion in investments by the end of 2019 and earn over $550 million in fees as a result of their lies, they lost over $5 billion in investment funds. investors when the market volatility of March 2020 revealed the true risk of their products,” said Gurbir S. Grewal, director of the SEC’s Division of Enforcement. “After the Structured Alpha Funds crash, the defendants continued their pattern of deception by lying to SEC staff, and their fraud would have gone unnoticed were it not for the persistence of SEC attorneys who pieced together the entire story. extent of the enormous fraud.”

AGI US admitted that its conduct violated federal securities laws and agreed to a cease and desist order, censure and payment of $315.2 million in restitution, $34 million in interest before judgment and a civil penalty of $675 million.

In addition, the SEC is seeking permanent injunctions, reimbursement plus interest and sanctions against Tournant, Taylor and Bond-Nelson. In addition, the complaint targets an officer and bar administrator against Tournant. Taylor and Bond-Nelson have accepted entry of partial judgments against them in which they consent to injunctive relief with monetary relief to be determined by the court in the future. Taylor and Bond-Nelson also agreed to associative bars and penny stock.

Additionally, AGI US is not permitted to provide advisory services to US-registered investment funds for the next 10 years, with a brief period to transfer such services to another investment adviser.

In parallel criminal proceedings, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges for similar conduct against AGI US, Tournant, Taylor and Bond-Nelson. AGI US, Taylor and Bond-Nelson have agreed to plead guilty.


Comments are closed.