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In the Matter of Alpha Fiduciary, Inc.
Securities and Exchange Commission
Investment Advisers Act Release No. 4283 (2015)
From 2010 to 2013, Alpha Fiduciary, Inc. (AFI), an investment adviser registered with the Securities and Exchange Commission (SEC), advertised to clients and potential clients the performance of its Global Tactical Multi Asset Class Strategies (GTMACS). Although the performance data in the advertisements was entirely hypothetical and based on the backtesting of model portfolios designed by AFI, the advertisements contained numerous false suggestions that this data represented actual performance. Some of the advertisements also included examples of past investment decisions made by AFI over a two-year period using the GTMACS that resulted in gains but none that resulted in losses. AFI never provided or offered to provide a list of all profitable and unprofitable investment decisions it made during that period. In addition, AFI gave potential clients redacted information about the performance of an existing client’s portfolio without considering whether it was representative of the performance of other AFI client portfolios. The SEC brought an administrative proceeding against AFI for violations of § 206 of the Investment Advisers Act of 1940 (Advisers Act).
Rule of Law
Holding and Reasoning
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