The securities regulator described some inputs in SBB Research’s valuation model as a “financial steroid” that artificially increasing the value of the notes.” Its other inputs “acted like a masking agent smoothing fake gains by spreading them over the notes multi-year term.”
In 2014, the SEC found that SBB Research’s wrongdoing—misstated its historical performance and overcharged investors approximately $1.4 million in fees.” Instead of disclosing their misconduct, the defendants attempted to conceal it from investors and the firm’s auditor.
SBB Research, Barnett and Aven violated the antifraud provisions of the federal securities laws, according to the SEC in its complaint.
The securities regulator is asking the U.S. District Court for the Northern District of Illinois to prohibit the defendants from engaging or participating in any investment management firm and to pay appropriate civil penalties.
In a statement, Daniel Michael, Chief of the SEC Division of Enforcement’s Complex Financial Instruments Unit, commented, “Investors rely on investment advisers to accurately value assets and disclose fund performance. As alleged in the SEC’s complaint, SBB, Barnett, and Aven intentionally manipulated valuation models to deceive current and prospective investors.”
