Transamerica hit by SEC penalty (model portfolios didn't work)

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ResearchMed
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Transamerica hit by SEC penalty (model portfolios didn't work)

Post by ResearchMed » Mon Aug 27, 2018 11:55 am

This is interesting:

http://www.investmentnews.com/article/2 ... stmentnews

Apparently, some junior analyst botched the job of developing some investment model portfolio that were used by/for investors.

So Transamerica has to pay almost $100 million back to investors.
Time period is 2011 - 2015.

I don't remember hearing about anything quite like this before.

RM
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Re: Transamerica hit by SEC penalty (model portfolios didn't work)

Post by willthrill81 » Mon Aug 27, 2018 12:00 pm

I think this may be the primary reason for the hefty fine.
The models, which were developed solely by an inexperienced, junior analyst, contained numerous errors, and did not work as promised, according to the SEC. When AUIM and one of the related companies, Transamerica Asset Management Inc., learned about the errors, they stopped using the models without telling investors or disclosing the errors, according to the SEC.
"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," said C. Dabney O'Riordan, co-chief of the SEC Enforcement Division's asset management unit, in a statement.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Transamerica hit by SEC penalty (model portfolios didn't work)

Post by ResearchMed » Mon Aug 27, 2018 12:05 pm

willthrill81 wrote:
Mon Aug 27, 2018 12:00 pm
I think this may be the primary reason for the hefty fine.
The models, which were developed solely by an inexperienced, junior analyst, contained numerous errors, and did not work as promised, according to the SEC. When AUIM and one of the related companies, Transamerica Asset Management Inc., learned about the errors, they stopped using the models without telling investors or disclosing the errors, according to the SEC.
Do you think it really would have been all that much "better" to have disclosed something like, "Excuse us, but... we had this junior intern make up some portfolio models that didn't work the past few years, and we are changing them. SO sorry if your money was invested in these and you lost out for several years."
Oh... "and we appreciate your business!" :annoyed

RM
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Whakamole
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Re: Transamerica hit by SEC penalty (model portfolios didn't work)

Post by Whakamole » Mon Aug 27, 2018 12:05 pm

I wonder if Transamerica told customers that their models were being created by an inexperienced junior analyst when they disclosed their fee structure?

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willthrill81
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Re: Transamerica hit by SEC penalty (model portfolios didn't work)

Post by willthrill81 » Mon Aug 27, 2018 12:08 pm

ResearchMed wrote:
Mon Aug 27, 2018 12:05 pm
willthrill81 wrote:
Mon Aug 27, 2018 12:00 pm
I think this may be the primary reason for the hefty fine.
The models, which were developed solely by an inexperienced, junior analyst, contained numerous errors, and did not work as promised, according to the SEC. When AUIM and one of the related companies, Transamerica Asset Management Inc., learned about the errors, they stopped using the models without telling investors or disclosing the errors, according to the SEC.
Do you think it really would have been all that much "better" to have disclosed something like, "Excuse us, but... we had this junior intern make up some portfolio models that didn't work the past few years, and we are changing them. SO sorry if your money was invested in these and you lost out for several years."
Oh... "and we appreciate your business!" :annoyed

RM
It would still have been bad but likely not as bad as that in addition to a $100 million fine.

Having an "inexperienced, junior analyst" create models with unknown (at the time) errors is not necessarily a legal issue. Deceiving clients about known problems is.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Bfwolf
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Re: Transamerica hit by SEC penalty (model portfolios didn't work)

Post by Bfwolf » Mon Aug 27, 2018 12:12 pm

I wish the article explained how the investigation ever came about in the first place.

lukestuckenhymer
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Re: Transamerica hit by SEC penalty (model portfolios didn't work)

Post by lukestuckenhymer » Mon Aug 27, 2018 3:44 pm

Forwarded to my Plan Administrator :)

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