Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, September 22, 2011

SEC & Quant Manager Settle Fraud Charges

The SEC settled charges of securities fraud against Barr M. Rosenberg, the co-founder of institutional money manager AXA Rosenberg, for concealing a significant error in the computer code of the quantitative investment model that he developed and provided to the firm's entities for use in managing client assets.  According to the SEC's order instituting administrative proceedings, Rosenberg learned of the error in June 2009 but directed others to keep quiet about it and not fix it immediately. Rosenberg denied the existence of any significant errors in the model during an October 2009 board meeting discussion about its performance. AXA Rosenberg disclosed the error to SEC examination staff in late March 2010 after being informed of an impending SEC examination. The error was not disclosed to clients until April 2010, causing them $217 million in losses.

Rosenberg has agreed to settle the SEC's charges by paying a $2.5 million penalty and consenting to a lifetime securities industry bar. The SEC previously charged AXA Rosenberg and its affiliated investment advisers, and they agreed to pay $217 million to harmed clients plus a $25 million penalty.

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