A former Oppenheimer & Co. portfolio manager has been charged by the SEC with misleading high-net-worth investors about the valuation and performance of a fund made up of other private equity funds, the SEC announced today.
Brian Williamson disseminated quarterly reports and marketing materials to prospective investors that said the valuation of the fund’s holdings was based on values received from the portfolio managers of those underlying funds.
Williamson, of Newtown, Pa., actually valued the fund’s largest investment at a significant markup to the manager’s estimated value, the SEC said. He also sent marketing materials reporting an internal rate of return that failed to deduct fees and expenses. As a result, the fund’s reported performance as measured by its internal rate of return was significantly enhanced, the SEC said.
Earlier this year, the SEC charged two investment advisers at Oppenheimer & Co. with misleading investors in a similar fashion about the valuation policies and performance of a private equity fund they managed. Oppenheimer agreed to pay more than $2.8 million to settle the charge.
In the latest case, the SEC has ordered administrative proceedings against Williamson, who was an Oppenheimer employee from 2005 to 2011. Williamson marketed Oppenheimer Global Resource Private Equity Fund I LP to pensions, foundations, endowments and high-net-worth individuals and families.
According to the SEC, Williamson modified the Oppenheimer fund’s marketing materials in October 2009 by increasing the reported value of the fund’s largest investment, Cartesian Investors-A LLC, from $6 million to approximately $9 million.
He also made or approved material misrepresenting the Oppenheimer fund’s increased internal rate of return as being due to increased performance or third party valuations. In fact, it was Williamson’s revised valuation of Cartesian that resulted in a material increase in the Oppenheimer fund’s reported performance. Williamson’s markup of the Cartesian investment increased the reported internal rate of return from approximately 3.8 percent to 38.3 percent, the SEC said.