SEC Imposes Sanctions for First Time under Rule

The Securities and Exchange Commission has sanctioned a former portfolio manager for forging documents and misleading the firm’s chief compliance officer. The sanctions were pursuant to Rule 38a-1(c) of the Investment Company Act. It was the Commission’s first enforcement action under this rule.

The SEC issued a cease and desist ruling, imposed a five year ban from the securities industry, and ordered a monetary penalty of $350,000 against Carl Johns, a former investment advisor for Boulder Investment Advisers, of Boulder, Colorado. Johns agreed to the sanctions without admitting or denying the allegations.

The SEC’s order alleged that Johns did not obtain pre-trade clearance from Boulder’s chief compliance officer for 640 trades in his personal account between 2006 and 2010. The Investment Company Act required Johns to provide quarterly reports of his personal securities transactions and annual reports of his securities holdings. Moreover, Boulder’s ethics provisions required that he submit his prospective personal trades to the chief compliance officer for clearance. The Commission alleged that he falsified the reports and also falsely certified compliance with the code of ethics.

Subsection (c) of Rule 38a-1 is entitled “Undue Influence Prohibited.” It does not permit one to “coerce, manipulate, mislead, or fraudulently influence the . . . chief compliance officer in the performance of his or her duties. . . .”

To see the SEC’s press release please see the following articles:

SEC Sanctions Colorado-Based Portfolio Manager for Forging Documents and Misleading Chief Compliance Officer and SEC bars Colorado portfolio manager for duping compliance officer.

About Richard Serafini

Welcome to my blog. I am an attorney and practice in the area of corporate trial work. Areas of particular emphasis are white collar defense, securities litigation, health care litigation, internal investigations, RICO, and financial litigation. I will be posting interesting developments in my areas of interest. I hope that you find this blog helpful and informative.