A portfolio manager from a Boulder, Colo., firm has been fined $355,000 by the SEC for forging documents and misleading the firm’s chief compliance officer to conceal his failure to report personal trades, the SEC announced Tuesday.
Carl Johns of Louisville, Colo., also has been barred from the securities industry for five years and ordered to cease and desist his illegal activities. From 1999 until January 2011 when he resigned, Johns worked for Boulder Investment Advisers in various capacities including portfolio manager.
The SEC found that he failed to pre-clear or report 640 securities trades in his personal accounts as required under the federal securities laws and concealed the trades in quarterly and annual trading reports.
Johns tried to conceal his misconduct by creating false documents that purported to be pre-trade approvals, and misled the firm’s chief compliance officer in her investigation into his improper trading, the SEC says.
The actions not only violated the Investment Company Act but also the code of ethics of the firm, the SEC says. Johns was ordered to pay $231,000 in disgorgement, $23,000 in interest and $100,000 in penalty. He agreed to the terms of the sanction without admitting guilt.
According to the SEC, Johns physically altered brokerage statements, trade confirmations and pre-clearance approvals before submitting them to the firm along with these reports. For example, he manually deleted securities holdings listed on his brokerage statements before submitting them in order to avoid disclosing securities purchases that were not pre-cleared, the SEC says.
The SEC’s order further finds that Johns created several documents that purported to be pre-clearance requests approved by the firm’s CCO, who had never actually reviewed or approved such trades. Johns created these false pre-clearance approvals to cover up instances in his annual report when securities transactions were not pre-cleared.