Ex-F-Squared CEO Still Battling SEC, Firm Dealing With Fallout from Securities Fraud Charges

F-Squared Investments Inc. has laid off 40 workers-that’s one-fourth of its staff-as it continues to deal with the ongoing asset losses in the wake of the securities fraud charges filed against it by the U.S. Securities and Exchange Commission last year. During a routine examination, the regulator discovered that the asset management company allegedly had deceived investors by claiming its performance history was based on a real trading record going as far back as 2001 when F-Squared had just back-tested its algorithm. F-Squared is the biggest marketer of index products using ETFs (exchange-traded funds).

The SEC accused the firm of falsely promoting its AlphaSector investment strategy and its supposed excellent track record as based on its investment performance for real clients instead of the backtesting. Due to a calculation error, the results were inflated by 350%.

F-Squared settled the SEC charges for $35 million and the firm’s new CEO, Laura P. Dagan, said that F-squared has been putting more effort into compliance and its main product line. However, in the last several months, investors have withdrawn billions of dollars from F-squared strategies while several brokerage firms refuse to let advisers put more funds into the strategies.

Meantime, Howard B. Present, F-Squared’s ex-chief executive, is still dealing with civil charges filed by the Commission. Both the SEC and Present will battle it out in Boston federal court soon. His lawyers have made court filing statements arguing that their client behaved in “good faith” while at the helm of F-Squared and any alleged misrepresentations or statements that were purportedly misleading or false, as well omissions, were not done on purpose. The regulator wants to clawback millions of dollars of Present’s earnings.

Our ETF fraud lawyers are here to help investors recoup their losses. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Ex-F-Squared CEO’s conduct ‘did not cause loss or harm to anyone’: lawyers
, Investment News, March 24, 2015

Read the SEC Order (PDF)

More Blog Posts:
Investment Adviser Fraud Cases Lead to Civil Charges, Criminal Convictions, and Investor Losses, Stockbroker Fraud Blog, January 21, 2015
Exchange-Traded Fund Strategist F-Squared to Pay $35M to Settle Charges that It Misled Investors, Stockbroker Fraud Blog, December 24, 2014

SEC to Reject BlackRock Inc. Proposal for Nontransparent Exchange-Traded Fund, Institutional Investor Securities Blog, October 23, 2014