(Article from Registered Funds Regulatory Update, October 2023)
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The SEC recently settled charges against Elsa Doyle, a former portfolio manager at a registered investment adviser, for, directly or indirectly, causing five money market funds, four of which were registered investment companies, to engage in 27 unlawful pre-arranged cross trades.
The Order found that, from May 2020 until March 2022, Doyle effected the cross trades by instructing a third-party broker-dealer to sell the securities from one fund and then to purchase the same securities back through the same broker-dealer on behalf of another fund. Doyle also showed a trader she worked with how she effected the cross trades by interpositioning a broker-dealer and then directed the trader to conduct additional cross trades between funds in the same manner. During this period, the adviser had policies and procedures governing cross trades, which permitted such trades but only if certain conditions were met. However, none of the required conditions were met despite the fact that Doyle attended annual compliance trainings.
Doyle’s cross trades cost the funds approximately $39,000. According to the Order, Doyle caused the funds to violate Sections 17(a)(1) and 17(a)(2) of the Investment Company Act and Rule 17a-7 thereunder, which prohibit affiliated persons from engaging in cross trades subject to certain conditions. Without admitting or denying the findings, Doyle consented to a cease-and-desist order and a $30,000 civil monetary penalty.
In the Matter of Elsa M. Doyle, SEC Admin. File No. 3-21705 (Sept. 22, 2023), available at: https://www.sec.gov/files/litigation/admin/2023/ia-6429.pdf.