SEC administrative law judge bars investment manager for misrepresenting GIPS compliance

Abstract

Purpose

To explain an administrative law judge (ALJ) decision, along with a censure, fine, and industry disbarment, against an investment adviser for misleading advertising and false claims of compliance with Global Investment Performance Standards (GIPS).

Design/methodology/approach

Explains the background to GIPS, the investment adviser’s GIPS violations, the significance of the case, and lessons to be learned by investment advisors on compliance with GIPS standards.

Findings

The decision is particularly significant because the ALJ issued such severe sanctions based solely on false claims of GIPS compliance notwithstanding the fact that all reported performance returns were accurate and no investors relied on or were harmed by the false claims of compliance.

Practical implications

The Zavanelli case should serve to put firms on notice that persistent noncompliance with the GIPS standards can have serious consequences and that all marketing materials should be subject to effective review and approval policies and procedures prior to distribution or publication to ensure compliance with the GIPS standards.

Originality/value

Practical guidance from experienced financial services lawyers.

Citation

S. Caccese, M., Y. Charton, D. and A. Grossetti, P. (2014), "SEC administrative law judge bars investment manager for misrepresenting GIPS compliance", Journal of Investment Compliance, Vol. 15 No. 3, pp. 38-40. https://doi.org/10.1108/JOIC-07-2014-0027