The SEC accused the investment adviser of inadequate and misleading disclosures regarding BSMA’s existence, the movement of traders from BCI to BSMA, the use of the algorithm in BCI, and associated conflicts of interest.
BlueCrest allegedly moved most of its highest-performing traders from BCI to BSMA. It also allegedly assigned many of its most promising newly-hired traders, eligible to trade for either fund, to BSMA.
Additionally, the Commission claimed that BlueCrest failed to disclose that it reallocated the transferred traders’ capital allocations in BCI to a semi-systematic trading system.
The investment adviser failed to disclose certain material facts about the algorithm to BCI’s independent directors. The algorithm generated significantly less profit with greater volatility than the live traders, BlueCrest obtained more of any performance fees generated by the algorithm than by live traders, according to the SEC.
In a statement, SEC Division of Enforcement Director Stephanie Avakian, said, “BlueCrest repeatedly failed to act in the best interests of its investors…” and the “settlement holds” the investment adviser “responsible for its conduct.”
