On February 7, 2011, the SEC charged Alpine Woods Capital Investors, LLC, a registered investment adviser, and its chief executive officer, Samuel A. Lieber, for failing to (i) disclose the material impact that initial public offerings had on performance of two Alpine funds, (ii) implement policies for IPO allocations and (iii) adequately disclose risks related to IPOs.
The SEC found that two of the newest and smallest mutual funds advised by Alpine, the Alpine Dynamic Financial Services Fund and the Alpine Dynamic Innovators Fund, participated in a disproportionate number of IPOs in 2006 and 2007 as compared to Alpine’s other existing funds. According to the SEC’s order, the two funds’ returns from participating in IPOs materially contributed to the positive performance of those funds during Alpine’s 2007 fiscal year. However, according to the SEC, Alpine failed to disclose to shareholders through the funds’ annual reports and prospectuses and to the funds’ board the extent to which the funds invested in IPOs and the material impact IPO allocations had on fund performance. The SEC also found that Alpine, through Mr. Lieber, failed to implement written policies and procedures reasonably designed to prevent such violations. Alpine agreed to pay a $650,000 civil penalty and Mr. Lieber agreed to pay a $65,000 civil penalty.