SEC Charges Chicago-Based Investment Adviser for Unlawful Principal Transactions and Cross Trades
Nov. 21, 2022
File No. 3-21244
November 21, 2022 - The Securities and Exchange Commission today announced settled charges against Chicago-based registered investment adviser Legal & General Investment Management America, Inc. ("LGIMA") for effecting thousands of unlawful principal transactions and cross trades.
According to the SEC's order, from August 2017 through December 2020, LGIMA effected 44,125 principal transactions between advisory client accounts and LGIMA principal accounts without making the required client disclosures or obtaining the required client consent. The SEC's order also finds that during the same time period, LGIMA effected 547 cross trades between certain of LGIMA's registered investment company clients and other LGIMA clients or advisory clients of an LGIMA affiliate, causing those registered investment company clients to violate statutory prohibitions against cross trading. According to the order, LGIMA effected the vast majority of the unlawful trades between May 2019 and December 2020 through an internally-developed automated trade matching program. The order also finds that LGIMA failed to adopt and implement policies and procedures reasonably designed to prevent unlawful principal transactions and caused certain of its registered investment company clients to fail to implement their policies and procedures regarding cross trades.
The SEC's order finds that LGIMA willfully violated Sections 206(3) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder, and caused certain of its registered investment company clients to violate Sections 17(a)(1) and 17(a)(2) of the Investment Company Act of 1940 and Rule 38a-1 thereunder. Without admitting or denying the SEC's findings, LGIMA consented to a cease-and-desist order, a censure, and a $500,000 civil penalty. The order also recognizes LGIMA's self-reporting, cooperation, and remedial efforts, which the SEC considered in determining to accept the company's settlement offer.
The SEC's investigation was conducted by Christian J. Ascunce and Drew M. Dorman and was supervised by Yuri B. Zelinsky and Stacy L. Bogert.