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SEC Charges Adviser with Compliance Violations Relating to Valuation of Mutual Fund Assets.

June 3, 2022

File No. 3-20877

Jun. 3, 2022 - The Securities and Exchange Commission today announced settled charges against Puerto Rico-based registered investment adviser AlphaCentric Advisors LLC for compliance violations in its role as adviser to the AlphaCentric Income Opportunities Fund (the "Fund").

According to the order, AlphaCentric failed to implement its policies and procedures related to the valuation of securities held by the Fund and failed to adopt and implement policies reasonably designed to oversee the Fund's portfolio manager. First, the order finds that from May 2015 through July 2015, AlphaCentric failed to implement policies requiring it to assist with the process for determining the fair value of Fund holdings. According to the order, the portfolio manager had purchased small "odd-lot" bonds and the Fund valued those holdings at higher prices provided by a pricing service for larger "round-lot" bonds. Second, the order finds that from January 2017 to February 2019, AlphaCentric failed to adopt and implement policies to oversee the Fund's portfolio manager when the portfolio manager improperly placed bids on bonds the Fund already held in order to increase the prices the Fund relied on to value its holdings.

The SEC's order finds that AlphaCentric willfully violated Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder. AlphaCentric has agreed, without admitting or denying the SEC's findings, to a cease-and-desist order, a censure, and a civil penalty in the amount of $300,000.

The SEC's investigation was conducted by Ariana Torchin and Rahul Kolhatkar and supervised by Jeremy Pendrey, all of the Enforcement Division's Asset Management Unit in the San Francisco Regional Office. Brian Fitzpatrick and John Farinacci, Asset Management Unit industry specialists, assisted with the investigation.

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