SEC Charges Chicago-Based Investment Adviser with Defrauding CalPERS and Other Clients
The Securities and Exchange Commission today charged the CEO of Chicago-based investment advisory firm Simran Capital Management with lying to the California Public Employees' Retirement System (CalPERS) and other current and potential clients about the amount of money managed by the firm.
Institutional investors such as CalPERS often use assets under management (AUM) as a metric to screen prospective investment advisers soliciting their business. An SEC investigation revealed that while pitching Simran's services, Umesh Tandon falsely certified to CalPERS that his firm satisfied its minimum AUM requirements. After fraudulently obtaining the business from CalPERS, Tandon also falsely inflated Simran's AUM in communications with other potential clients with whom he touted his firm's relationship with CalPERS. Tandon also fraudulently reported an inflated AUM in filings with the SEC, and he later attempted to mislead SEC examiners during a routine examination of Simran.
Tandon, who previously lived in Chicago and now resides in Texas, has agreed to settle the SEC's fraud charges.
"Tandon deliberately undermined the CalPERS screening process by grossly misrepresenting his firm's purported assets under management," said Merri Jo Gillette, Director of the SEC's Chicago Regional Office. "To make matters worse, he then used his association with CalPERS to lure other public institutional investors under false pretenses."
According to the SEC's order instituting settled administrative proceedings against Tandon, he represented to CalPERS in May 2008 that Simran met explicit AUM requirements and managed at least $200 million as of Dec. 31, 2007. In fact, Simran managed approximately $80 million at that time. Evidence indicates that Tandon was aware that Simran did not meet the CalPERS requirements for AUM.
According to the SEC's order, Tandon touted Simran's relationship with CalPERS to other prospective clients from 2008 to 2011, and he instructed other Simran employees to do the same. On more than a dozen occasions, Tandon and Simran employees falsely inflated the firm's AUM in communications with employee retirement systems and other prospective clients. Tandon and Simran also overstated the AUM in at least four of the firm's Form ADVs filed with the SEC. In February 2012, Simran withdrew its SEC registration as an investment adviser and has since ceased operations.
According to the SEC's order, Tandon violated Sections 206(1), 206(2), and 207 of the Investment Advisers Act of 1940. Tandon neither admitted nor denied the findings, and agreed to be barred from the securities industry and pay disgorgement of $20,018, prejudgment interest of $1,680, and a penalty of $100,000.
The SEC's investigation was conducted by Peter K.M. Chan along with Jonathan I. Katz and Andrew O'Brien in the Chicago Regional Office. They were assisted by members of the Chicago Regional Office's examination staff including Susan M. Weis, Jeson G. Patel, and Max J. Gillman.