Aug 27 (Reuters) - The portfolio manager of a Colorado investment advisory firm has been barred from the securities industry for forging documents and misleading his firm’s chief compliance officer to conceal his failure to report hundreds of personal trades, the U.S. Securities and Exchange Commission said on Tuesday.
The sanctions against the manager, Carl Johns, are the first the SEC has imposed for violations of a securities industry rule that prohibits misleading a chief compliance officer or obstructing the officer’s duties, according to an SEC news release.
Johns, of Louisville, Colorado, can reapply to work in the securities industry in five years, according to the settlement he reached with the agency. He neither admitted nor denied the SEC’s findings. A lawyer for Johns did not immediately return a call requesting comment.
Johns was employed by Colorado-based Boulder Investment Advisers, LLC and an affiliate, Rocky Mountain Advisers, LLC. He must also pay a $100,000 fine and $255,000 in profits he earned through the misconduct, according to the settlement. A representative of the two firms did not immediately return a call requesting comment.
The SEC said there were 640 personal securities trades that Johns failed to report to the compliance officer or get advance clearance for as required by federal securities laws and the firms’ code of ethics.
At least 91 of Johns’ trades, made between 2006 and 2010, involved securities held by funds the firm managed or acquired, the SEC said. Johns made the trades despite being aware that a company code of ethics restricted him from trading in securities that were also traded in the funds he helped manage, the SEC said.
Johns concealed the trades in periodic internal reports by altering documents, including trade confirmations and brokerage statements, according to the SEC. He then tried to hide his misconduct by creating documents that purported to be pre-trade approvals. His scheme misled the chief compliance officer, who was investigating Johns’ improper trading, the SEC said.
Johns continued his misconduct after the chief compliance officer found irregularities in his personal securities transaction reports, the SEC said. Johns told the officer that he closed some of the brokerage accounts in question, but he was still using them for trading, the SEC said. He also altered paper copies of brokerage account statements to falsely show that his trading was in compliance, according to the settlement. (Reporting by Stuart Gittleman; Additional reporting by Suzanne Barlyn; Editing by Gary Hill)