Faulty Investment Models

The Securities and Exchange Commission charged four distinct Transamerica entities for misconduct involving faulty investment models. Amid the charges, the SEC ordered the entities to refund $97 million to misled retail investors.

According to the SEC’s order, investors put billions of dollars into mutual funds. Unfortunately for the investors, the money fell under the purview of flawed investment strategies and faulty models developed by investment adviser AEGON USA Investment Management LLC (AUIM).

AUIM is one of the affiliated investment advisers for Transamerica Asset Management Inc. (TAM), Transamerica Financial Advisors Inc. and its affiliated broker-dealer Transamerica Capital Inc. Together, the financial advisory entities claimed they would use AUIM’s quantitative models to drive investment decisions.

Inexperienced Junior Analyst

However, the SEC says that an inexperienced junior AUIM analyst developed the models, and they contained numerous errors. Therefore, the financial models did not work as promised.