Performance Perspectives Blog

The SEC Takes Action Against Firm Misprepresenting Their Compliance With the GIPS Standards

by | Jun 4, 2014

The SEC has taken action against ZPR Investment Management, a Florida separate-account money manager. InvestmentNews provides a synopsis of what the case involves.

salesmanThe article reports that  “Max E. Zavanelli — a portfolio manager who has compared his success at investing to the legendary Fidelity Investments manager Peter Lynch — misrepresented and omitted important data in newspaper advertisements, its own newsletters and reports for Morningstar.” In addition, “[s]ome of the firm’s performance data falsely implied compliance with the Global Investment Performance Standards.”

GIPS provides guidelines for advertisements, which interestingly don’t have to be followed, provided the firm not reference GIPS. I have not seen the advertisements for which ZPR has been cited, but suspect there was wording that didn’t belong.

Our verification clients are encouraged to allow us to review their marketing materials. In addition, if we find anything that looks suspect, we alert them. The SEC’s job is to protect the public, and so are watchful for any misleading or potentially misleading materials.

Cases like this should serve as a “wakeup call” for all asset managers, to ensure their materials are accurate, complete, and not misleading.

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