April 28, 2020 - The Securities and Exchange Commission announced today that Semper Capital Management, L.P., a registered investment adviser based in New York, agreed to pay $503,228 to settle charges that it misled investors about the performance of its Semper MBS Total Return Fund (SEMMX), a registered open-end investment company, and caused the overvaluation of certain of the fund's securities.

According to the SEC's order, Semper caused the overvaluation of smaller-sized bond positions known as "odd lots" purchased by SEMMX, from the fund's launch in July 2013 until May 2014. The overvaluation of odd lot positions was responsible for a substantial portion of SEMMX's performance during this period and resulted in the overstating of SEMMX's net asset value. The SEC's order also finds that in SEMMX's 2013 and 2014 annual reports to investors, Semper failed to disclose that SEMMX's investment performance had been materially improved by the overvaluation of odd lot bond positions. Instead, Semper misleadingly attributed the performance to, among other things, Semper's purchase of non-agency mortgage backed securities that rose towards fundamental values during the periods in question.

The SEC's order finds that Semper willfully violated Section 206(4) of the Investment Advisers Act of 1940 and Rules 206(4)-7 and 206(4)-8 thereunder and Section 34(b) of the Investment Company Act of 1940, and that Semper caused SEMMX's uncharged violation of Rule 22c-1 thereunder. Without admitting or denying the findings in the SEC's order, Semper agreed to a cease-and-desist order, a censure, and to pay disgorgement of fees totaling $103,228 plus interest of $25,000 and a $375,000 penalty.

The SEC's investigation was conducted by Zachary B. Sturges of the New York office and Brian Fitzpatrick of the Asset Management Unit.