Two investment advisers have been ordered to pay over $7 million to settle charges of defrauding clients and misusing investor funds. The Securities and Exchange Commission (SEC) announced the settlement in conjunction with six other global regulators.
The two advisers, named as Martin Currie Inc. and Martin Currie Investment Management Ltd., are accused of improperly using assets from three mutual funds for their own purposes, including covering expenses and funding undisclosed payments to brokers.
The Securities and Exchange Commission alleges that the advisers violated their fiduciary duties and failed to disclose the use of investor funds for personal gain. The settlement includes a $3.5 million civil penalty, disgorgement of over $2.7 million in ill-gotten gains, and prejudgment interest of over $1 million.
The investigation was conducted by The Securities and Exchange Commission in collaboration with regulators in the UK, Ireland, Hong Kong, Singapore, and Australia, and the settlement is the largest coordinated global enforcement action to date.
Background of Martin Currie
Martin Currie is a well-established asset management firm that was founded in Edinburgh, Scotland in 1881. The firm manages over $20 billion in assets for institutional and retail clients around the world, and has offices in several countries, including the UK, US, and Asia.
In 2013, Martin Currie was acquired by Legg Mason, a large global asset management firm based in the US. At the time of the acquisition, Martin Currie was managing over $13 billion in assets.
The SEC investigation
The investigation into Martin Currie began in 2016, after The Securities and Exchange Commission received a tip-off from a whistleblower. The SEC alleges that the two investment advisers used assets from three mutual funds managed by Martin Currie for personal gain.
The advisers are accused of improperly using the assets to pay for expenses such as travel, entertainment, and office rent, as well as to fund undisclosed payments to brokers. The SEC alleges that the advisers failed to disclose these uses of investor funds to clients and regulators.
In addition, the advisers are accused of violating their fiduciary duties by failing to act in the best interests of their clients. The SEC alleges that the advisers favored certain clients over others, and failed to disclose conflicts of interest.
The settlement announced by the SEC includes a $3.5 million civil penalty, disgorgement of over $2.7 million in ill-gotten gains, and prejudgment interest of over $1 million. The settlement also requires Martin Currie to adopt a series of remedial measures, including enhanced compliance and training programs.
In a statement, the SEC’s Enforcement Director, Andrew Ceresney, said: “This case is a reminder that investment advisers have a fiduciary duty to act in the best interests of their clients, and must provide full and fair disclosure of all conflicts of interest.”
The coordinated global enforcement action is significant, as it demonstrates the increasing cooperation between regulators around the world in investigating and prosecuting financial crimes. The six regulators involved in the action include the UK Financial Conduct Authority, the Central Bank of Ireland, the Hong Kong Securities and Futures Commission, the Monetary Authority of Singapore, the Australian Securities and Investments Commission, and the Ontario Securities Commission in Canada.
Implications for investors
The case highlights the importance of due diligence and research when selecting an investment adviser. Investors should look for advisers with a strong track record of performance, transparent fees, and a clear commitment to acting in the best interests of their clients.
Investors should also be aware of the risks associated with mutual funds and other investment vehicles, and should carefully review the disclosures provided by their advisers. It is important to understand the investment strategy, fees, and risks associated with any investment before making a decision to invest.
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