SEC

Money manager pays $2.5M to settle fraud case

AP News
|
Posted: Sep 22, 2011 3:32 PM
Money manager pays $2.5M to settle fraud case

A former California investment executive is paying $2.5 million to settle federal charges that he hid a computer error that resulted in financial losses for clients. He will also be banned from the securities industry for life.

The Securities and Exchange Commission said Thursday that Barr M. Rosenberg, the co-founder and former chairman of AXA Rosenberg, learned of the coding error in June 2009. But Rosenberg told others to keep it quiet and not fix it immediately, the SEC said.

The error was not disclosed to clients until April 2010. By then, clients lost $217 million.

Rosenberg, 68, was the developer and original programmer of the computer model used to manage clients' investments.

"Rosenberg chose concealment over candor, and in doing so, selfishly served his interest over those of his clients," said Robert Khuzami, the SEC's enforcement director.

Rosenberg's attorney, Jonathan R. Bass, said his client is relieved the matter is concluded.

"He never acted with any intention to cause harm to AXA Rosenberg clients or to gain any advantage or any benefit for himself," Bass said.

The investment firm has paid $242 million to settle civil fraud charges. AXA Rosenberg neither admitted nor denied wrongdoing in settling the case. But it agreed to refrain from future violations of securities laws.

Jeremy Baskin, AXA Rosenberg's global chief executive officer, said in a statement that the firm was "not a party to the settlement" and that "Barr has not been involved with the operations of AXA Rosenberg for quite some time."

"Our focus is on looking forward and delivering returns for our clients," he said.

AXA Rosenberg, based in Orinda, Calif., is owned by French insurance company AXA SA. The company's assets have declined to $29 billion as a June, down from $70 billion in early 2010.