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Transamerica Settles SEC Misconduct Case for $97 Million

September 14, 2018 Blog

Transamerica Corporation (“Transamerica”) is a conglomerate of investment firms and life insurance providers serving retirement savers and other individual investors in the United States. Recently, the Securities and Exchange Commission (SEC) entered into a settlement with four Transamerica entities to settle allegations of investment fraud for more than $97 million. According to the SEC’s press release announcing the settlement:

“[I]nvestors put billions of dollars into mutual funds and strategies using the faulty models developed by [the four Transamerica entities which] claimed that investment decisions would be based on [their proprietary] quantitative models. The SEC’s order finds that the models, which were developed solely by an inexperienced, junior [] analyst, contained numerous errors, and did not work as promised. The SEC found that when [the Transamerica entities] learned about the errors, they stopped using the models without telling investors or disclosing the errors.”

The press release also quotes C. Dabney O’Riordan, Co-Chief of the SEC Enforcement Division’s Asset Management Unit, as stating, “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.”

In addition to the allegations against the four Transamerica entities generally, the SEC asserted allegations against several senior officers of these companies as well. These allegations included:

  • Failing to take reasonable steps to ensure that the entities’ financial models worked as intended; and,
  • Failing to ensure that appropriate compliance mechanisms were in place to prevent use of the faulty models.

The Transamerica entities neither admitted nor denied the SEC’s allegations, but agreed to a total settlement of $97.6 million which includes $53.3 million in disgorgement, $8 million in interest and a $36.3 million penalty.

Investment Fraud Involving Major Advisory Firms is Not Uncommon

While Hollywood often portrays investment fraud scams as fly-by-night operations perpetrated by savvy criminals, many cases of investment fraud involve misconduct by major advisory firms like Transamerica. Despite the vast regulations and broad oversight designed to ensure transparency within the financial services industry, fraud is still alarmingly common, and every year many investors lose their entire life’s savings to overconcentration, mismanagement and other forms of fraud.

Many cases of investment fraud involve complex investments such as hedge funds, structured investment products and other special-purpose investments. But, frauds involving ordinary stocks and bonds are common as well. In fact, one need not look further than the Puerto Rico financial crisis to see that even traditionally-reliable investments such as municipal bonds are subject to manipulation by some of the most well-known names in the investment market.

Are You Concerned About Investment Fraud? Schedule an Appointment at Zamansky, LLC

If you are concerned about investment fraud and would like to discuss your legal rights with an attorney, we encourage you to contact us for a free, no-obligation initial consultation. To speak with one of our highly-experienced investment fraud attorneys in confidence, please call (212) 742-1414 or request an appointment online today.