SEC Charges AXA Rosenberg With Fraud

Date: Monday, September 26, 2011
Author: HFN Daily Report

The co-founder of quant fund AXA Rosenberg has agreed to pay $2.5 million to the Securities and Exchange Commission, and is banned for life from the securities industry.

The agency announced Thursday that Barr Rosenberg allegedly concealed a significant error in the computer code of the fund's investment model, which he developed for the firm's managing of client assets.

The SEC charged Rosenberg with securities fraud, alleging that he learned of the technical error in 2009 but directed others to keep quiet about it. Clients were not informed of this error until 11 months later, which resulted in $217 million in losses.

The SEC had previously charged AXA Rosenberg and its affiliated investment advisors in this case, leading to them agreeing to pay back $217 million to affected clients and a $25 million SEC penalty.