Evergreen to pay $40M for misrepresenting mortgage-backed securities
Evergreen Investment Management Co. LLC and Evergreen Investment Services Inc. have agreed to pay $40 million to settle SEC charges related to securities law violations.
Evergreen Investment Management Co. LLC and Evergreen Investment Services Inc. have agreed to pay $40 million to settle SEC charges related to securities law violations.
The Securities and Exchange Commission charged the Boston-based firms with overstating the value of a mutual fund and selectively telling shareholders about the fund’s valuation problems.
The now-defunct Ultra Short Opportunities Fund, invested predominantly in mortgage- backed securities. The SEC found that Evergreen managers inflated the value of the fund by as much as 17%, the SEC said in its statement. The fund ranked as a high performer in its category in 2007 and 2008.
“Had Evergreen properly valued the fund it would have ranked near the bottom of its category during this time,” the SEC said.
“When Evergreen began to address the fund’s value by re-pricing certain holdings, it only disclosed the reasons, and the likelihood for additional re-pricings. to select shareholders,” the SEC said.
Evergreen closed the fund in June 2008, following substantial shareholder redemptions.
“Evergreen neither admits nor denies the findings,” said Evergreen spokeswoman Laura Fay. “But we determined it was in Evergreen’s and our clients’ best interest to resolve the matter and move forward.”
The two firms agreed to pay $33 million to compensate fund shareholders, $4 million in penalties and $3 million in disgorgement of ill-gotten gains.
The charges resulted from an investigation conducted by the SEC with the assistance of Massachusetts Secretary of the Commonwealth William Galvin’s office and the Massachusetts Securities Division.
The state of Massachusetts will receive payment of a $1 million fine as part of the settlement, according to Brian McNiff, spokesman for Mr. Galvin’s office.
Evergreen is a subsidiary of Wells Fargo & Co. of San Francisco.
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