When AUIM and TAM learned about the errors, they stopped using the models. However, AUIM and TAM did not disclose this error to their investors.
“Investors were repeatedly misled about the quantitative models being used to manage their investments, which subjected them to significant hidden risks and deprived them of the ability to make informed investment decisions,” said C. Dabney O’Riordan, co-chief of the SEC Enforcement Division’s asset management unit.
Without admitting or denying the SEC’s findings, the four Transamerica entities agreed to settle the SEC’s charges and pay nearly $53.3 million in disgorgement, $8 million in interest and a $36.3 million penalty, and will create and administer a fair fund to distribute the entire $97.6 million to affected investors.
In separate orders, the SEC also found that AUIM’s former Global Chief Investment Officer Bradley Beman and AUIM’s former Director of New Initiatives Kevin Giles each caused some of AUIM’s violations. Specifically, the commission found that Beman did not take reasonable steps to make sure the mutual funds’ models worked as intended and that Beman and Giles both contributed to AUIM’s compliance failings related to the development and use of models.
