The charges are the agency's first under Rule 38a-1(c) of the Investment Company Act.
The Securities and Exchange Commission has banned a Colorado portfolio manager for five years for misleading and obstructing a chief compliance officer.
The charges are the agency's first under Rule 38a-1(c) of the Investment Company Act.
An SEC investigation found that Carl Johns of Boulder Investment Advisers failed to pre-clear or report several hundred securities trades in his personal accounts, concealed those trades in his quarterly and annual trading reports, then constructed false documents to mislead the firm's chief compliance officer during her investigation of his improper trading.
From 2006 to 2010, the SEC alleges that Mr. Johns failed to pre-clear or report approximately 640 trades, including at least 90 involving securities held or acquired by funds under his firm's management — a practice expressly restricted by the firms code of ethics.
According to the SEC, Mr. Johns manually deleted from his brokerage statement those transactions that weren't pre-cleared before filing them with the chief compliance officer.
“Securities industry professionals have an obligation to adhere to compliance policies, and they certainly must not interfere with the chief compliance officers who enforce those policies,” Julie Lutz, the acting co-director of the SEC's Denver regional office, said in a statement. “Johns set out to cover up his compliance failures by creating false documents and misleading his firm's CCO.”
Without admitting or denying the SEC's charges, Mr. Johns agreed to pay disgorgement of $231,168, prejudgment interest of $23,889, and a penalty of $100,000. He also was banned from the securities industry for five years.
Mr. Johns' lawyer, John McDermott of Brownstein Hyatt Farber Schreck LLP, was not available for comment.
