Registered Investment Adviser Settles Charges for Failing to Disclose Conflict of Interest
June 4, 2018
File No. 3-18526
June 4, 2018 – The Securities and Exchange Commission today announced charges against a New York-based investment adviser for failing to disclose a conflict of interest surrounding its receipt of fees from two affiliated third-party advisers with whom it placed client assets for investment. The adviser, Lyxor Asset Management, Inc. (“Lyxor”) has agreed to settle the charges and will be censured and ordered to pay a civil penalty.
According to the SEC’s Order Instituting Proceedings, Lyxor entered into agreements with two affiliated outside investment advisers (“Third-Party Advisers”) calling for the Third-Party Advisers to make payments to Lyxor based upon the total amount of its clients’ assets Lyxor placed or maintained in funds advised by the Third-Party Advisers. Pursuant to the agreement, Lyxor was entitled to receive $910,469, of which $647,738 was ultimately paid. Lyxor failed to disclose the agreement or the payments, which were in contravention of investment management agreements with two of Lyxor’s clients. Lyxor also lacked policies and procedures reasonably designed to detect and prevent such conflicts, and failed to account on its books and records for the amounts owed and ultimately paid. Lyxor ultimately reimbursed its clients the funds it received pursuant to the agreements, plus interest.
The SEC’s order finds Lyxor willfully violated Sections 204(a), 206(2) and 206(4) of the Advisers Act, and Rules 204-2(a)(2) and 206(4)-7 promulgated thereunder. Without admitting or denying the findings in the SEC’s order, Lyxor consented to the entry of a cease-and-desist order and a censure, and agreed to pay a civil penalty of $500,000.
The SEC’s investigation was conducted by James E. Burt, Prashant Yerramalli, and Sheldon Pollock of the New York Regional Office. The matter was supervised by Lara S. Mehraban. The SEC’s examination that led to the enforcement referral in this matter was conducted by Anthony P. Fiduccia, Igor Rozenblit, Arjuman Sultana, Andrew Weilbacher, Joseph D’Angelo, and Cheryl Blecic.