The Securities and Exchange Commission (“SEC”) began the first month of the year 2014 with a range of new regulatory charges and fines issued against financial individuals and advising firms, including a portfolio manager formerly associated with a private equity firm. Specifically, Oppenheimer & Co. was charged with fraud for its fund valuation in late January. Brian Williamson was first faced with charges in August 2013, and on January 22, 2014, he agreed to settle the matter. This included paying a $100,000 fine, a cease-and-desist order and being banned from the securities industry for two years for “making misrepresentations about the valuation of a fund consisting of other private equity funds.”
The SEC found that Williamson made “misrepresentations” based on overvaluation, adding a “significant markup” to the largest fund of the overall fund’s value designated by that underlying fund’s manager. Other layers of “misrepresentation” further appeared, with Williamson disseminating prospective client marketing material claiming a “misleading internal rate of return” that purposefully did not include the fund’s fees and other expenditures, as well as making “false…statements to investor consultants” regarding the valuation of the fund and other related information in covering up his misdeeds. As such, the SEC determined that Williamson violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 and Section 206(4) of the Investment Advisers Act of 1940. Williamson’s case serves as a prime cautionary example of the many legal ramifications of misleading investors within the financial industry – a lesson certainly hard to swallow in the wake of another Oppenheimer settlement of $2.8 million less than a year ago in March 2013.
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