SEC Orders Investment Advisory Firm to pay $21M For Allegedly Retaining Clients’ CDO Fees

Taberna Capital Management has consented to pay $21 million to resolve Securities and Exchange Commission charges alleging that it fraudulently kept fees that belonged to抵押债务义务clients. According to the regulator, the investment advisor retained “exchange fees” related to restructuring transactions, which was not allowed under the CDOs governing documents. The retention of the fees was purportedly not disclosed to investors.

The SEC maintains that these fees belonged to the CDOs and became a conflict interest that was not revealed. According to the agency’s order instituting administrative proceedings, for three years, from ’09 to ’12, the Pennsylvania-based investment advisory firm sought and kept millions of dollars in exchange fees paid by issuers of the securities that the CDOs held when Taberna recommended exchange transactions to clients. The SEC said that those fees actually belonged to the CDOs and that the firm made its misconduct difficult to identify by improperly labeling the fees as third party costs in documents even though these costs were only a small portion of the total exchange fees.

另外，SEC表示，塔比尔纳没有在季度报告中向投资者提及这些费用，也没有以adv的形式识别出这些费用，即使应该指出它们。监管机构说，保留费用在公司与投资者和CDO客户之间建立了利益冲突，即使有时会给Taberna引导发行人进行特定交易所的动机，无论其重组可能最大。

Also facing SEC charges are ex-Taberna managing director Michael Fralin and ex-COO Raphael Licht. Fralin is charged because of his purported responsibility for the exchange negotiations and transaction documents that the agency says did not properly characterize exchange fees as compensation for third-party costs. Licht is accused of helping supervise and approve the firm’s collection of exchange fees and playing a part in putting together and reviewing the Forms ADV that the SEC says were not materially accurate.

Taberna consented to pay $13 million of disgorgement, $2 million of prejudgment interest, and a $6.5 million penalty. The investment advisory firm agreed to refrain from acting as an adviser for three years. Fralin consented to a 5-year industry bar and will pay a $100,000 penalty. Licht’s bar is two years and he will pay a $75 penalty. All three are settling without denying or admitting to the SEC’s order.

SEC执法部门的复杂金融工具部门负责人Michael J. Osnato Jr.表示，CDO经理有责任为客户的最大利益行事，并确保与他们的公平和适当的沟通。

向客户收取不当或过多或不必要的费用的经纪公司或经纪人并不符合该客户的最大利益。这种不当行为可能会造成利益冲突或为公司或注册代表创造利润，同时对投资者的资金产生负面影响。在Shepherd Smith Edwards and Kantas, LTD LLP, ourinvestment advisor fraud law firmis here to help investors recoup their losses brought about by the negligence, carelessness, or wrongdoing of securities industry members.

Read the SEC Order（PDF）