Monday, March 11, 2013
The SEC charged two investment advisers at Oppenheimer & Co. with misleading investors about the valuation policies and performance of a private equity fund they manage. Oppenheimer agreed to pay more than $2.8 million to settle the SEC’s charges. The Massachusetts Attorney General’s office today announced a related action and additional financial penalty against Oppenheimer.
According to the SEC, Oppenheimer Asset Management and Oppenheimer Alternative Investment Management disseminated misleading quarterly reports and marketing materials stating that the fund’s holdings of other private equity funds were valued “based on the underlying managers’ estimated values.” However, the portfolio manager of the Oppenheimer fund actually valued the fund’s largest investment at a significant markup to the underlying manager’s estimated value, a change that made the fund’s performance appear significantly better as measured by its internal rate of return.
According to the SEC’s order instituting settled administrative proceedings, the Oppenheimer advisers marketed Oppenheimer Global Resource Private Equity Fund I L.P. (OGR) to investors from around October 2009 to June 2010. OGR is a fund that invests in other private equity funds, and it was marketed primarily to pensions, foundations, and endowments as well as high net worth individuals and families.
Without admitting or denying the findings, Oppenheimer agreed to pay a $617,579 penalty and return $2,269,098 to those who invested in OGR during the time period when the misrepresentations were made. Oppenheimer consented to a censure and agreed to cease and desist from committing or causing any future violations of the securities laws. The firm is required to retain an independent consultant to conduct a review of its valuation policies and procedures.
Oppenheimer will pay an additional penalty of $132,421 to the Commonwealth of Massachusetts in the related action taken by the Massachusetts Attorney General.