The co-founder of Axa Rosenberg Group agreed to pay $2.5 million and be barred from the securities industry for life for failing to tell investors that there was an error in the computer code of the investment model he developed and the firm used to manage client assets.
The co-founder of Axa Rosenberg Group LLC agreed to pay $2.5 million and be barred from the securities industry for life for failing to tell investors that there was an error in the computer code of the investment model he developed and the firm used to manage client assets, regulators said.
The Securities and Exchange Commission said Barr M. Rosenberg learned in June 2009 of the error but instructed others not to reveal it or to fix it immediately. In March 2010, he told SEC examination staff about the error after he was told about an expected exam. Clients, who ended up losing $217 million, weren't told for another month, the SEC said.
In a previous settlement, Axa Rosenberg Group, which is an institutional money manager, and its affiliated investment advisers agreed to pay $217 million to investors and a $25 million penalty, the commission said.
“Rosenberg chose concealment over candor and, in doing so, selfishly served his interests over those of his clients,” said Robert Khuzami, director of the SEC's enforcement division.
The error in the computer code of the quantitative investment model disabled a component that managed risk and caused the model to perform unexpectedly, the SEC said in its administrative order.
Mr. Rosenberg's attorney, Jonathan Bass, said his client is distressed by the events that occurred.
“He never acted with any intention to cause harm to Axa Rosenberg's clients or to gain any advantage or benefit for himself,” said Mr. Bass, an attorney with Coblentz Patch Duffy & Bass LLP. “He is relieved that the matter is now concluded.”
